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This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
The days are getting longer, and the sun will hopefully be shining down on us all summer long. So what’s the best way to help your employees take advantage of the beautiful weather that will also benefit your bottom line?
The cycle to work scheme provides tax benefits and helps attract top talent and it also helps your staff stay healthy and save money – a win all around.
About the scheme
Introduced in 1999 under the Government’s Green Transport plan, the cycle to work scheme is designed to encourage healthier commutes while also reducing pollution.
Employers of all sizes – public, private or nonprofit, can partake in the plan as long as the employees are paid through the PAYE system.
Unfortunately, self-employed or employees on the National Minimum Wage are not able to participate.
The scheme lets a company purchase cycles and cycling equipment for them to loan or sell to their employees, offering savings to both employers and employees alike.
While exact savings will depend on you individual tax band, some employees can expect to save between 32% (basic rate) and 42% (high rate.)
A Cycle to Work scheme is easy for your employees to begin using and the best part is there’s no prior approval required to start one.
Starting up a programme
To start up a Cycle to Work scheme at your company, your business needs to register with the scheme and get approved.
Once your application is accepted, your employees can search for the equipment they want and then sign a hire agreement for a specific time period with an option to own their kit at the end.
Tax benefits
Over the term of the contract, the balance on the equipment can be recuperated through salary sacrifice. This reduction to the employee’s gross salary provides tax and national insurance savings.
It will also lower your own National Insurance contributions and potentially save you 13.8% of the overall salary sacrifice.
The payment plan set up for the bike and gear will usually cover the cost less any VAT. Since you as the employer were responsible for the purchase upfront, you are able to claim back the VAT amount as it qualifies as a business expense.
Health benefits
On top of these fiscal advantages and the environmental benefit, employees who take advantage of the scheme get fitter and healthier which may help to increase productivity and reduce the loss of overhead due to sick days.
Cycling to work not only benefits the body, but the mind. Without having to deal with the stress of commuting, your employees may be late less and enjoy a balanced, stress reduced work life.
In fact, half an hour of cycling has shown to improve reasoning, memory, and planning tasks in some studies.
As you can see there are numerous benefits to a cycle to work scheme, and with very little time and effort on your part, you and your employees can reap them all.
If you’d like other ideas for how to help your business thrive and save money, get in touch with the experts at Dental and Medical Financial services.