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The cycle to work scheme allows your business to provide employees, including directors, with the loan of a bicycle and cycling equipment, but without it counting as a taxable benefit-in-kind. The conditions are that:
All your employees must be offered availability to a bicycle.
They must not own it.
They must mainly use it for commuting.
HMRC takes a relaxed approach to the last condition and doesn’t expect you or your employee to keep any sort of record of usage.
There are now ready-made cycle schemes that you can search online. This works by a scheme provider owning the bicycle and equipment and hiring them out to you as an employer, and in return you make them available to all staff. The provider will even give you the hire contract required to give to your employees.
The price of the bicycle is not capped by the tax exemption; however, the Office of Fair Trading says that any hire agreement for the use of one is covered by the Consumer Credit Act 1974. To prevent each scheme having to apply for a consumer credit licence, they have created a group one which automatically covers the hire or loan of bicycles provided under the scheme where the value is less than £1,000.
As an alternative, if your business buys bicycles and makes them available to employers and directors, without a hire or loan contract, then the exemption applies without the consumer credit problem or price cap. You can reclaim the VAT and the remaining cost if the bicycle qualifies for a capital allowance deduction is equal to 19% of the cost.
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