Electric bikes. Cycle to work scheme. What are the tax implications?
Posted on 11th November 2022 at 17:10
As with all tax matters, it depends on whether you follow the rules and if you do, then there is no taxable benefit for the employee and a potential saving via Super Deductions for the employer.
What are the rules?
The Cycle to Work Scheme is a tax efficient way to encourage employees to travel to and from work by bike. You can use the Cycle to Work scheme for both electric (e-bikes) and normal (push) bikes. There are tax benefits for both the employer and employee.
Under the Cycle to Work Scheme employers purchase bicycles and safety equipment and provide them to employees. If an employer then lends or hires cycles or cyclists’ safety equipment to employees the benefit of this is exempt from tax on employment income if the following conditions are satisfied:
• the cycles or equipment are available generally to all employees of the employer (this does not mean that every employee has to be provided with a bicycle or equipment, just that the offer of cycles or equipment is open to all employees if they wish to take it up) and
• the employees must use the cycle or equipment mainly for qualifying journeys. ‘Qualifying journeys’ means the same as for the works bus exemption (see EIM21850) which includes journeys between home and the workplace. Other use of the cycle, for instance pleasure use or use by members of the employee’s family will not disqualify the exemption provided that the other use is not the main use of the bicycle.
Employees are not expected to keep detailed records of time spent cycling or miles travelled for the purpose of this ‘main use’ test. Accept that the test is satisfied unless there is clear evidence to suggest that less than half of the use of the cycle or equipment is on qualifying journeys. If it is clear that there is substantial use of the cycle for qualifying journeys, do not make special enquiries about the extent of any other use.
The exemption also covers the provision of a voucher for hiring bicycles and equipment.
Electrically assisted pedal cycles (EAPCs) are covered by the above exemption.
If you gift the bike to the employee, this would represent a taxable benefit in kind.
Super deductions will be allowable if the cycle and equipment are purchased by the company, a potential saving of 130% of the cost if the items are purchased new and 100% if secondhand.
The employer can recover the VAT (if registered for VAT). VAT will become due when a bicycle is disposed of and its value should normally be based on the price of a similar item taking into account the age and condition.
What if I am a sole director limited company with no employees?
You simply get your company to purchase and own the bike and it is made available for you to use by the company.
Chart Accountancy can help
The Cycle to work Scheme is not only good news to employees because of the health benefits but also the ability to reduce tax liabilities. If you would like to discuss how you can become tax efficient when riding a bike to work, don't hesitate to get in touch!
For further advice, get in touch with your usual Chart Accountancy contact or email: [email protected]
Tagged as: Electric bikes
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