Cycle to Work Scheme - GOV.UK

1 June 2019 Cycle to work SchemeGuidance for EmployersMoving Britain Ahead The Department for Transport has actively considered the needs of blind and partially sighted people in accessing this document. The text will be made available in full on the Department s website. The text may be freely downloaded and translated by individuals or organisations for conversion into other accessible formats. If you have other needs in this regard please contact the Department. Department for Transport Great Minster House 33 Horseferry Road London SW1P 4DR Telephone 0300 330 3000 Website General enquiries: Crown copyright 2019 Copyright in the typographical arrangement rests with the Crown.

2 You may re-use this information (not including logos or third-party material) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or e-mail: Where we have identified any third-party copyright information you will need to obtain permission from the copyright holders concerned. 3 Contents 1. Introduction 4 Why Cycle to work ? 4 What this guidance does 5 2. Options for Cycling to work 6 Overview 6 Loan schemes 6 Pooled schemes 6 3. How a salary sacrifice Scheme works 7 Overview 7 4. The salary sacrifice Scheme 8 Overview 8 Eligibility 9 Equipment included 10 Inclusivity and adapted cycles 10 5.

3 Consumer hire agreement, authorisation and exemption 11 Overview 11 6. Cycle to work Scheme providers 14 Overview 14 7. Frequently Asked Questions 16 Annex A: What Equipment is included in a salary sacrifice Scheme ? 18 Annex B: Technical guidance for a salary sacrifice Scheme 19 Annex C: Valuing cycles at the Scheme end 23 Annex D: Further contacts for advice 24 4 1. Introduction Why Cycle to work ? The Government s ambition that cycling and walking are the natural choices for shorter journeys, or as part of a longer journey, was clearly set out in the Cycling and Walking Investment Strategy published in 20171. If we can increase levels of active travel, such as cycling, the benefits are substantial.

4 For individuals, it means cheaper travel and better health. For businesses, it means increased productivity and increased footfall in shops. And for society as a whole it means lower congestion, better air quality, and vibrant, attractive places and communities. The health benefits of cycling are well understood. Illness as an outcome of physical inactivity costs the NHS up to 1 billion per annum, with further indirect costs calculated at billion2. We want to make sure that Cycle to work schemes continue to attract new cyclists and are as inclusive as possible so that people travelling to work have the opportunity to realise the benefits that cycling affords. The Scheme has involved over 40,000 employers across the country, and has contributed to help more than million commuters to Cycle to 1 2 NICE Report (2013) 3 Source: Cycle to work Alliance 2019 5 What this guidance does This document offers guidance to employers on Cycle to work schemes .

5 These are employee benefit schemes that enable employees to hire cycles for active travel and/or cyclist s safety equipment from the employer, or from a third party, in return for a deduction from their earnings known as salary sacrifice . For a definition of cycles for active travel and safety equipment see Annex A. If the Scheme meets the relevant criteria it can provide financial benefits to both employers and employees. This guidance updates and clarifies the guidance last published in 2011 by the Department for Transport. It may also be of help to Scheme providers. The guidance reflects the tax and legal position at the time of publication. Employers and Scheme providers should check the current position (see Annex B for technical details).

6 This guidance has been developed by the Department for Transport, HM Treasury, HM Revenue and Customs (HMRC) and the Financial Conduct Authority (FCA). 6 2. Options for Cycling to work Overview This document primarily concerns Cycle to work schemes using the salary sacrifice process. It sets out how such schemes typically operate, and what is needed to ensure that the tax and National Insurance benefits can apply. It also sets out whether the associated hire agreement may be regulated or exempt. There are also other ways in which you, as an employer, can encourage cycling to work and for active travel. Some of these other options are described briefly below. Of course, any Scheme will only reap the full benefits of cycling if there are suitable facilities to support those who choose to Cycle to work .

7 These include secure, safe and accessible Cycle parking at their place of work and good quality shower, changing and locker amenities for staff who want them. Loan schemes One alternative option is to provide a loan to an employee to purchase a Cycle for active travel and/or safety equipment. This is similar to offering an advance of salary to employees for purchasing rail season tickets. Loan schemes , including on an interest-free basis, may be subject to regulation by the FCA. Whether a loan Scheme meets the criteria to be exempt from regulation will depend upon the nature and duration of the loan. If in doubt, you should consider seeking legal advice. If the loan is not exempt, you will need FCA authorisation4.

8 Pooled Another alternative is the workplace pool Cycle model. This is a tried and tested option for supporting staff in their commuting and for inter-site and business trip travel which is not currently being well served by public transport. At its simplest, you can purchase a suitable fleet of cycles for active travel and make them available to employees either on a one-to-one or a pool basis. work place schemes should focus on attracting people who currently travel on less sustainable and less active modes, such as their cars, between local meetings or work sites. Cycles for active travel should be easily accessible both in terms of position, close to where they are needed and are securely stored and maintained.

9 4 Article 60B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544. 7 3. How a salary sacrifice Scheme works Overview Salary sacrifice is where your employee agrees to give up part of their pre-tax salary in exchange for a benefit from their employer, in this case, the hire of a Cycle for active travel and/or safety equipment. See figure 1 below. Figure 1 Flow diagram of how salary sacrifice works (Image courtesy of the Cycle to work Alliance) There will also be a separate hire agreement, which may or may not be regulated by the FCA. This will typically be between the employee and the employer, who has either purchased the equipment or leased it from a third party (such as a retailer or a specialist leasing firm).

10 The employee pays for the hire via the salary sacrifice arrangement with the employer. In some cases, the hire agreement may be between the employee and a third party, such as a Scheme provider, who hires the goods to the employee and is remunerated by the employer from the salary sacrifice proceeds. 8 4. The salary sacrifice Scheme Overview A Cycle to work Scheme can benefit both the employer and the employee. If the Scheme meets the relevant criteria it can benefit from a tax exemption introduced under Section 244 of the Income Tax (Earnings and Pensions) Act 2003. Since a portion of the salary is foregone, the employee pays less tax and National Insurance Contributions (NICs), and the employer is able to save on employer NICs at and Apprenticeship Levy at (where applicable) on the amount sacrificed.