Tax breaks for cyclists

As a result of the coronavirus pandemic you may be thinking of alternative commuting arrangements other than travelling by public transport. As the government plans to invest in pedestrian friendly city centresthis article covers the tax breaks for cyclists available to you and your staff.   

tax breaks for cyclists

There are several different ways that your company can provide cycles and safety to yourself and your employees:

  • The loan of cycling equipment by your company to yourself and or employees 
  • A loan from your company to purchase cycling equipment
  • Provision of a pool of cycles for general use by employees

The loan of cycling equipment

This is usually implemented using the Cycle to Work scheme. This enables your company to provide cycles and or associated safety equipment to yourself and your employees effectively tax-free.

Equipment must be offered to all employees and ownership must not transfer to you or the employee during the loan period. Additionally the equipment must be used mainly for qualifying journeys. A qualifying journey is considered to be all or part of a journey between your home and workplace or between workplace and workplace.

A salary sacrifice scheme can be operated alongside the cycle to work scheme. This continues to be a tax-free benefit in kind despite the changes several years ago. Once the loan period has ended the cycle can be transferred to you or your employees using HM Revenue's simplified valuation method.

What is classed as equipment?

Essentially a cycle must have at least two wheels and can't be a motor vehicle. However an electrically assisted pedal cycle is allowable. Tax law does not specifically define 'cyclists safety equipment' so takes it's ordinary meaning. The most obvious examples would be cycle helmets, gloves and lights.  

What tax relief is available?

 Your company can reclaim the VAT on any equipment bought for you or your employees and potentially deduct 100% of the cost using the Annual Investment Allowance.

Additionally any ongoing costs of repairs and maintenance of the equipment are tax deductible for corporation tax purposes. 

A loan from your company to purchase cycling equipment

Your company can make a tax-free loan to you or your employees of up to £10,000 per year. Where an interest- free loan is made in excess of the tax-exempt amount a taxable benefit will arise. However let's face it, unless you or your employees have a part time role as a competitive cyclist £10,000 is probably excessive for any bike.

You'll need to consider carefully the tax implications of writing off this loan. Additionally if you are a director of your company you'll need to consider the tax implications for your company. We've discussed this topic in a previous post here.

Although you won't be able to claim for the cost of the cycling equipment if you use your own cycle for work you are entitled to claim 20 pence per mile, tax-free. It should be mentioned that journeys between home and work do not count as business mileage. 

Provision of a pool of cycles for general use by employees

A workplace bike pool provides bikes and safety equipment for employees to use. Pool bikes can be offered to employees for any kind of journey. However they are typically used for work related trips, such as local meetings, travel between sites and visiting clients. Generally pool bikes are kept in a central location and can be booked out by any member of staff.

In order for a bike to qualify as a pooled and avoid a tax charge, the following conditions need to be met.

  • The bike is used for business purposes and any private use is incidental
  • The same bike not used exclusively by one or two employees in a tax year
  • The bike is not usually taken to an employee's home at night

Essentially the same considerations as for pooled cars need to be taken into account to avoid any adverse tax implications. 

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at richard@tfaaccountants.co.uk.

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