Cycle to Work Scheme

The cycle to work scheme is not a formal “scheme”.  Instead it is simply an exemption from Income Tax for the loan of a cycle and related safety equipment by an employer to their employees.  To mitigate the cost to the employer it is also possible for the employee to reimburse the cost of the bicycle, typically by way of a formal “salary sacrifice” arrangement.  This has tax benefits for both employer (a NIC saving) and employee (acquiring a cycle out of pre-PAYE earnings).  In due course the ownership of the bicycle can pass to the employee, typically without further payment.

An academy trust may therefore consider offering staff the chance to acquire a bicycle using these favourable terms.

However this arrangement does result in various VAT consequences and complications, which may not be well understood.

VAT Treatment