Cycle to work

Any upper limits for business owner

Didn't find your answer?

I understand a company Director/Shareholder can purchase a bike in his comapny and reclaim CT/VAT with no BIK, but are there any upper limits on the cost, i.e some will buy one for £500 but other keen cyclists may want to spend up to £10k, are there any issues with this? 

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By David Ex
15th Jan 2024 10:27
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By ireallyshouldknowthisbut
15th Jan 2024 10:45

The question is as ever "are they really using this to get to work on, or have a ride out with their mates at the weekend?"

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Replying to ireallyshouldknowthisbut:
RLI
By lionofludesch
15th Jan 2024 16:09

ireallyshouldknowthisbut wrote:

The question is as ever "are they really using this to get to work on, or have a ride out with their mates at the weekend?"

Mmmmm - I wondered that.

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Replying to lionofludesch:
By ireallyshouldknowthisbut
15th Jan 2024 16:31

People who spend silly money on bikes normally have a half a dozen for all different reasons. And the silly money one might just be for racing, or time trials, for hills, or for something else.

Its not likely to be the one they use to dodge potholes and buses when you mostly want some fat tyres, a comfy seat and somewhere to sling the laptop.

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Ivor Windybottom
By Ivor Windybottom
15th Jan 2024 11:13

Such a large cost may trigger issues under the consumer credit rules, requiring the employer to register for a consumer credit licence authorised by FCA. While there has been some guidance/relaxations to allow schemes to offer cycles costing over £1,000 this is definitely something that may impact a much larger value scheme.

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Replying to Ivor Windybottom:
DougScott
By Dougscott
15th Jan 2024 15:47

Ivor Windybottom wrote:

Such a large cost may trigger issues under the consumer credit rules, requiring the employer to register for a consumer credit licence authorised by FCA. While there has been some guidance/relaxations to allow schemes to offer cycles costing over £1,000 this is definitely something that may impact a much larger value scheme.

My interpretation of the rules, when reading them, is that they do not apply to one-off/irregular transactions (which makes sense)

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VAT
By Jason Croke
15th Jan 2024 11:36

No limit but as noted earlier, FCA issues arise. The cycle to work scheme offer a potential solution.

https://www.cyclescheme.co.uk/cycle-to-work-scheme-any-price

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By SA2016
15th Jan 2024 12:44

Thank you all, but if they are buying it outright would the FCA side of things no longer be an issue?

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Replying to SA2016:
Ivor Windybottom
By Ivor Windybottom
15th Jan 2024 14:35

The "scheme" works by providing a cycle on terms that requires the employee to reimburse the cost using repayments via salary sacrifice, so credit is granted to the employee.

Any credit arrangement between the cycle retailer and employer is irrelevant.

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Replying to Ivor Windybottom:
DougScott
By Dougscott
15th Jan 2024 15:46

Ivor Windybottom wrote:

The "scheme" works by providing a cycle on terms that requires the employee to reimburse the cost using repayments via salary sacrifice, so credit is granted to the employee.

Any credit arrangement between the cycle retailer and employer is irrelevant.

Just to be clear the employee is paying to hire the bike not "repay" anything under the salary sacrifice scheme. The employee MAY be given the option to buy the bike at the end of the loan hire period - see HMRC scales setting out value at end of hire period.

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Replying to SA2016:
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By FactChecker
15th Jan 2024 15:47

Take a step or two back to the start of your post ...

1. Your title ("Cycle to work") suggests that you are referring to the Scheme of that name which, as Ivor points out, is (one of the few remaining legally valid) Salary Sacrifice schemes.
The point of the scheme is to enable the Employer to provide an Employee with what would be treated as a BiK if not supplied under the terms of that Scheme.

2. You then go on to say "I understand a company Director/Shareholder can purchase a bike in his company" ... which I'm sorry to say makes no sense.
Who is buying the bike (company or person)? And what does Shareholder have to do with anything?

3. So, before even considering your core question (about any cap on cost of bike), you'd need to satisfy yourself that the specifics proposed would meet the eligibility criteria - including:
• An employee must not, at any point during the hire period, own the cycle;
• At least 50% of the cycle’s use must be for ‘qualifying journeys’, i.e. commuting to work purposes;
• The offer of the use of hired cycles must be made available across the whole
workforce, with no groups of employees being excluded.
[There are other criteria such as the machine needing to be a "cycle for active travel", which I think means no specialist off-roaders for instance.]

4. And then you move on to where the fun starts ... the need for a consumer hire agreement and the likely involvement of the Consumer Credit Act 1974 (as others have hinted at above).

The short answer to your main question is "For tax and National Insurance purposes there is no limit on the value of the cycle and safety equipment you can provide to an employee" ... but I hope the above (by no means exhaustive) points may lead you to study what is involved and whether it will be appropriate to you.

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Replying to FactChecker:
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By Wanderer
16th Jan 2024 00:10

FactChecker wrote:

1. Your title ("Cycle to work") suggests that you are referring to the Scheme of that name which, as Ivor points out, is (one of the few remaining legally valid) Salary Sacrifice schemes.

You are making the classic mistake of confusing Cycle to Work with Cyclescheme. Think vacuum cleaner & Hoover.
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Replying to Wanderer:
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By FactChecker
16th Jan 2024 00:33

???

"Cycle to work" is a *type* of valid Salary Sacrifice scheme (just like "Employer pension contributions" is another); whereas "Cyclescheme" is AFAIK a brand name.

So I wasn't confused ... although I now am (as to what point you're making here)?

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DougScott
By Dougscott
15th Jan 2024 15:55

To add to FactCheckers comments and having been involved in setting up a CTW scheme at my former employers. The rules for the CTW scheme are as stated and there is no limit on value and if a bike can be used for commuting then all is good. Ideally the director should use it over 50% of the time to commute from home to place of work but I can't say I've seen many HMRC inspectors out checking up on peoples use of their CTW bikes.....

However are we really talking about operating a CTW scheme here or are we really just talking about a "Company Bike". The company buys the bike and the director just uses it to cycle about on for no consideration? Is that exempt from BIK?

1

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Replying to Dougscott:
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By FactChecker
15th Jan 2024 16:42

Per your last paragraph ... I wondered the same (hence my hints).

And, as I'm sure you know, the answers to your final two questions are - if 'yes' to the first one, then 'no' to the final one.

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By SA2016
15th Jan 2024 21:08

Thank you all and apologies for the poorly written questions.

Essentially yes you can ignore the cycle to work parts! Can a director buy himself a bike through his company and as long he uses it for some business use there are no BIK issues and he can spend as much as he likes in theory?

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Replying to SA2016:
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By FactChecker
15th Jan 2024 22:07

"Can a director buy himself a bike through his company?"
No - not as stated in that phrase; director can buy bike himself (nothing to do with company) OR company can buy bike ... he and company are not the same entity.
[If company buys it, there may be other issues outside of the questions you're asking if it's not really for business purposes.]

"as long he uses it for some business use there are no BIK issues?"
No - why do you expect that outcome?
Company owned bicycle provided to employee is an excellent example of a BiK (which is why some employers support the SalSac scheme to get round it).
[If you want to try 'interpreting' the rules differently, then at least start at https://www.gov.uk/expenses-and-benefits-bikes-for-employees ].

Given those answers, I guess you can work out the impact of "spend as much as (the company) likes".

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Replying to FactChecker:
DougScott
By Dougscott
15th Jan 2024 23:00

FactChecker wrote:

"Can a director buy himself a bike through his company?"
No - not as stated in that phrase; director can buy bike himself (nothing to do with company) OR company can buy bike ... he and company are not the same entity.
[If company buys it, there may be other issues outside of the questions you're asking if it's not really for business purposes.]

"as long he uses it for some business use there are no BIK issues?"
No - why do you expect that outcome?
Company owned bicycle provided to employee is an excellent example of a BiK (which is why some employers support the SalSac scheme to get round it).
[If you want to try 'interpreting' the rules differently, then at least start at https://www.gov.uk/expenses-and-benefits-bikes-for-employees ].

Given those answers, I guess you can work out the impact of "spend as much as (the company) likes".

There is no need to have a salary sacrifice sheme and provided the employee uses the bike over 50% of the time for commuting or work then there is no BIK, but as I said earlier HMRC Inspectors aren't out spying on people and the wording of the guidance makes it clear that HMRC aren't very interested unless it is obvious that the employee is not using it mainly for work - and obvious probably means stating that they don't!

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Replying to Dougscott:
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By FactChecker
15th Jan 2024 23:17

I didn't actually say that OP "needed to have a salary sacrifice scheme" ... just that, by default, such provision is a BiK (which for many is why they choose the Scheme as one way around that).

I also provided a link to HMRC's simplified guidance - in which OP will find:
"As an employer, lending or hiring bikes to employees doesn’t count as an expense or benefit - *as long as* they’re available to all employees and mainly used for getting to work." In other words a conditional exception is available.

OP's actual question referred to "as long he uses it for some business use", which doesn't sound to me like it meets that condition - but that's up to him.

So we're saying the same thing - but you have chosen to emphasise that the requirement is rarely policed, whilst I prefer to just point out the rules.
OP can start at https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21664 if further investigation is of interest.

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Replying to FactChecker:
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By Wanderer
15th Jan 2024 23:58

FactChecker wrote:

I didn't actually say that OP "needed to have a salary sacrifice scheme" ... just that, by default, such provision is a BiK (which for many is why they choose the Scheme as one way around that).

Not sure I can agree with your 'by default' point.
As long as S244 ITEPA is complied with then, by law (default), the provision of the bike doesn't result in a BIK.
People over-complicate the issue with C2W schemes / salary sacrifice. All these do is make the employer finance the bike & the employee pay for it & get it basically as tax / NI deductible.
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Replying to Wanderer:
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By FactChecker
16th Jan 2024 00:17

I wholeheartedly agree with you about people over-complicating things with the use of C2W - it should have got swept away when the other SalSac options were removed, but it was deemed a political sacred cow.

But although we can play with words (without fundamentally disagreeing with each other), I described the provision of a bike as a BiK by default - and went on to explain that "a conditional exception is available".

And that's exactly what ITEPA s244 sets out ... the required conditions to be met IF that section can be applied - under the chapter headed "Chapter 3 Exemptions: other transport, travel and subsistence".
So if conditions A to C in s244 are NOT met, then that Exemption fails and we are back to what I think of as the 'default'?

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Replying to FactChecker:
DougScott
By Dougscott
16th Jan 2024 11:43

Come-on this is getting pedantic and long-winded - we all agree, in plain English, that the company can buy a bike, claim 100% AIA, lend it to their staff and there is no BIK provided the staff use it mainly to get to work or for business activities, and the C2W scheme is a Red Herring in this particular case.

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RLI
By lionofludesch
15th Jan 2024 22:39

I thought the Cycle to Work Scheme was about cycling to work, not a weekend outdoor activity.

I hope this fella doesn't have a parking place provided by his employer.

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Replying to lionofludesch:
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By FactChecker
15th Jan 2024 23:01

Keep up in the back row there ... OP has decided to reject previous 12 responses and now asks us to "ignore the cycle to work parts"!
Anyway, stop putting ideas in his head (parking racks and someone to clean the bike for him will be next). :=)

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Replying to FactChecker:
RLI
By lionofludesch
15th Jan 2024 23:49

[chuckle]

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By Wanderer
16th Jan 2024 00:03

Sa2016
To answer your OP, (without swerving off into C2W schemes and Consumer Credit Act issues all of which are irrelevant to your question) , there are no problems as long as S244 ITEPA is complied with:-
https://www.legislation.gov.uk/ukpga/2003/1/section/244

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Replying to Wanderer:
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By SA2016
16th Jan 2024 08:02

Thank you Wanderer, I appreciate my question wasn't written perfectly but you have been most helpful with your guidance.

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Replying to SA2016:
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By FactChecker
09th Feb 2024 19:04

For a fuller answer to your original question, see the 2nd case tackled in this month's Any Answers Answered ... https://www.accountingweb.co.uk/tax/personal-tax/any-answers-answered-ca...

You'll recognise the question - even if you don't necessarily like the answer.

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