How to get a tax-free bike through the UCL Cyclescheme.
The scheme is administered through a salary sacrifice / hire agreement and will be run in accordance with the Government’s Green Travel Plan. This scheme offers an attractive employee benefit by encouraging staff to maintain a healthy and active lifestyle whilst making substantial savings on the cost of a bike and safety equipment. You can select any make/model bike up to a value of £5000 through independent bike shops taking part in this scheme thereby providing business to local communities.
Cyclescheme Ltd is an independent company created to use their industry experience and trade contacts to get more people riding to work on bikes of their choice from their local bike shops. Cyclescheme Ltd has been set up to facilitate companies taking part in the government’s green travel plan, through assisting with the administration of tax and NI efficient ways to cycle to work.
Cyclescheme customers are not limited to any particular bike or accessory brand and therefore they can choose from a wide range of quality products and achieve value-for-money. This results in the package of bike, accessories and safety equipment that best fits their need.
How Cyclescheme works
The scheme is a voucher scheme and you will need to apply for a certificate to redeem against your goods when you collect them from the bike shop. Find partner stores online.
How do I go about getting a tax-free bike through Cyclescheme?
To obtain your voucher you need to:
- Visit your local participating bicycle shop to choose your equipment and obtain a written quote
- Go to the Cyclescheme website and complete the online application form
- Sign the online Hire-Agreement (by signing the Hire Agreement you are accepting the Terms & Conditions of the scheme)
- Contact Cyclescheme on 0844 879 5101 if you are not a computer user and want your order placed for you. UCL will in turn, approve the request providing you have met UCL’s eligibility criteria.
- UCL pays the invoice for the cost of your bike and any accessories
- A certificate is emailed to you or posted to your home address upon receipt of UCL’s payment
- Redeem your voucher at the bike shop and collect your goods (you must provide your UCL photo ID card to do this).
- Start reductions to gross salary, via salary sacrifice. (This will be effective from the next available pay date).
Salary sacrifice happens when an employee gives up his or her right to receive part of their pay in return for the employer’s agreement to provide some form of non-cash benefit, in this case the loan of a bicycle and related equipment for a 12 month hire period. The employee then pays back the loan on the goods from gross, rather than net, pay for the hire period - hence allowing the employee to benefit from income tax and NI relief.
The Scheme is open to all full and part-time staff whose term of employment is more than the period of the loan (12 months). To take advantage of the tax breaks that result from salary sacrifice please also note:
- You need to be a UK taxpayer
- You need to be over 18 years of age to comply with Consumer Credit Act legislation
- You need to be earning more than the National Minimum Wage after your salary has been reduced.
Tax and National Insurance savings are typically between 31% and 41% of the original cost of the bike, depending on your personal taxation and NI status. Should you be offered and decide to purchase the bike, the fair market value according to HMRC’s guidance will be charged to you plus VAT. See the savings calculator for further information.
The bike and goods are technically the property of UCL but the employee is totally responsible for the bike during the hire period. At the end of the hire period you may be given the opportunity to buy the bike and any safety equipment/accessories for a fair market value (plus VAT).
The employee is responsible for insuring the bicycle and UCL will bear no liability in the event of loss/theft. It is therefore very important to insure the bike, and any goods fitted to the bike, to safeguard against the losses following theft. Household insurance policies are usually much cheaper than specialist bike insurance policies but you must ensure that your insurer covers the bike when in storage away from your home and any other eventuality that may occur. You also need to check that the upper limit on a claim is appropriate in light of the cost of the bike.
Warranty / Maintenance
The employee is responsible for maintaining the bike during its use and s/he agrees to this when signing the hire agreement. All Cyclescheme bikes come with a warranty for the duration of the 12 month hire period. Your local shop will be able to advise you about necessary servicing, depending on how you use your bike. They are also likely to give your bike a first free service once you have bedded it in.
UCL has limited spaces for parking bicycles and prior to signing the Hire Agreement the employee should give some thought to where they will secure the bicycle. Bicycles must not be tied to railings or taken inside buildings (unless it is a foldable bicycle and if approved by your line manager). If a bicycle is left in a place where it causes a hazard, it may be removed/impounded and UCL accepts no liability for the cost of any associated damage to the bicycle and/or locks.
Health & Safety
Set out below is information from the Crime Prevention Section of the Camden Borough Police A lot of cycle crime occurs within Camden and especially around Holborn. In order to keep your bicycle secure you should:
1. Buy at least one good quality lock, at least to the "sold secure" silver standard rating, available at most cycle shops. The website soldsecure.com lists attack-tested locks for reference.
2. Use proper cycle stands where available.
3. Make sure both wheels and frame are locked to stands. If you have a quick release front wheel, take it off and lock the wheels and frame together using one lock. If your saddle is quick release, remove it and take it with you.
4. Try and keep locks off the ground and as good a fit as possible to prevent leverage for any potential thief.
5. Security marking aids recovery if your cycle is lost or stolen.
6. Register your cycle (model, make and frame number) on the Immobilise Register
If you haven’t cycled for quite some time or are unfamiliar on how to safely navigate around the busy roads in the area we suggest you register for free cycling training such as that provided by Camden Council.
Considerations/Effects of salary sacrifice on:
The Cycle Scheme may affect your pension but this depends on your particular pension scheme. The USS, SAUL, FPS and RFHPS will accept pension contributions based on ‘notional salary’ i.e. your salary before any sacrifice is made and therefore the benefits of those in these schemes will not be affected. The NHS Pension Scheme, however, will only accept pension contributions based upon the reduced salary. This could affect retirement benefits and AVC contributions for those in this scheme. Any questions regarding how the Cycle Scheme may affect your pension contributions and benefits should be addressed to your Pension Administrator in Payroll and Pension Services.
- Statutory Maternity/Sick Pay
Employees with sufficient service and who meet certain conditions may be entitled to statutory maternity payments during a portion of maternity leave which may be affected by participation in the Cycle Scheme. Statutory Maternity pay is calculated on the salary earned in the two months prior to the 15th week before the baby is due. As the value of the salary sacrifice will not be considered to be part of salary, the result could affect the sum of Maternity pay that you may be eligible for. We would therefore suggest that any employee likely to take maternity leave while participating in the Cycle Scheme should contact Emma Sweeney, Payroll and Pension Services for further information. There may also be implications for Statutory Sick Pay while participating in the Cycle Scheme. This is in connection with earnings falling below £481 per month(tax year 14/15). If an employee earns below this amount after using Cycle Scheme, entitlement to Statutory Sick Pay ceases. Please contact Emma Sweeney, Payroll and Pension Services in the first instance to discuss further.
- Working Tax Credit
Despite the exceptions outlined above, the vast majority of staff will benefit from joining the Cycle Scheme. However your personal circumstances may mean that it is not beneficial. This is most likely to be the case for those on a low income affected by Working Tax Credit, which may cancel out the savings made on Income Tax and National Insurance Contributions. There may be other cases where the benefit of the Cycle Scheme will be outweighed by possible reductions in working tax credits. Please seek advice from HMRC on 0845 300 3900 for your individual circumstances.
- Child Tax Credit There may be implications on Child Tax Credit for employees in a salary sacrifice scheme. For more information on your individual circumstances check with the HM Revenue and Customs advice line on 0845 300 3900
Below is a selection of Frequently Asked Questions relating to Cycle Scheme
Who do I contact with queries?
Emma Sweeney in Payroll and Pension Services on ext 58861 or email email@example.com is the UCL contact for any queries. Alternatively please contact Cyclescheme on 01225 448933 or email firstname.lastname@example.org
Can I use Cyclescheme to get a sale bike?
Yes, but this is subject to the bike shop’s discretion. You must mention Cyclescheme when obtaining a quote for your bike and safety equipment.
Fair market value
What is the fair market value payment?
A fair market value payment is the amount that a willing buyer would pay to a willing seller to purchase certain property at a particular point in time. After a period of 12 months, for a bike with a value of less than £500, this is typically 18% of the original cost of the bicycle and safety equipment plus VAT.
|Age of Cycle||Original price less than £500||Original price more than £500|
When do I pay the fair market value to make the bike mine?
At the end of the 12-month hire period the bike may be bought for a fair market value. This payment is subject to 20% VAT. This is a separate agreement and does not form part of the Hire Agreement. You may also be given the option to extend the hire agreement by 3 years. If the extension is applied a deposit will be taken from your salary equal to the value of your bike after 4 years.
What happens if I leave my job before I’ve finished paying for my bike during the 12 month hire period?
Under the terms of the Hire Agreement and the Credit Consumer Act, the agreement to pay your employees’ loan is non-cancellable. This means that you would need to settle all outstanding monies should you leave UCL before the end of the Hire Agreement. The outstanding balances will be recovered from your final net salary payment. Settlement will be from net pay because once you leave UCL; you also leave the Cycle Scheme, and are no longer eligible for tax/NI concessions. For those leaving before the end of the Hire Agreement period a termination fee will be charged. The termination fee will not exceed a value equal to the outstanding monthly salary reductions but may also include a sum equating to the fair market value at the time of termination (to transfer ownership of the bike to the employee). The fair market value may be greater than 7% of the cost of the bike depending on the number of months you have been in the scheme. You will be advised at the time of leaving of any purchase / administration sum due.
What happens if I go on unpaid leave?
During approved unpaid leave such as extended maternity leave or career break, the Hire Agreement period may be extended by the number of months in which your salary was not paid and UCL was not able to collect payments During maternity/paternity/parental/adoption leave: you will continue to have the bike and equipment on loan during your absence with your gross salary still at the reduced level according to the salary sacrifice arrangements. You will accrue a debt that will be recovered when you return to work and start receiving a payment from UCL.
Hire Period/Payback Period
What happens if the bike gets lost / stolen before I’ve paid for it?
If the bike is stolen then you will be required to continue to meet your financial responsibilities for the remainder of the hire period. The insurance that you will have purchased for the bike can then be used to provide a replacement. Safety equipment is available from Cyclescheme Ltd’s partnering shops, where you can ask for Home Office-approved ‘Sold Secure’ D-locks and cable locks to conform to insurance companies’ requirements.
What happens if I don’t want the bike at the end of the loan period?
It is UCL's choice whether it opts to sell you the bike at the end of the hire period. If you choose to become the owner of the bike, you may be offered the opportunity to pay the Fair Market Value from your net salary. If you choose not to buy the bike you will be charged the equivalent of the Fair Market Value to dispose of the goods, to a charity.
How many times a week do I have to use the bike for work?
A bike purchased under Cycle Scheme should be used for at least 50% of the total time used, for travelling to work. There is however no requirement for you to cycle to work for a specified number of days throughout the year to be eligible to participate in the scheme and there is no special requirement for you to record your travel. You can also use the bike for leisure at weekends and on holiday.
Can I use the bike for business purposes during the working day?
Yes, you can use your bike for business purposes during the working day, although you may not claim expenses for business trips made on a bike obtained through this scheme until the hire period ends. Employees should ensure they are covered for third party, personal accident and theft during these trips.
Effects of salary sacrifice
I receive out of hours payments on top of my basic salary: will these be affected?
No. In calculating all other payments to you such as out of hours payments, your total unreduced pay will be used.
What happens when there is a pay award?
You will receive any relevant pay awards based on your unreduced salary.
Will the repayments affect student loan payments?
Yes. Your student loan repayment is 9% of your earnings over £16,910(2014/15). This will alter as the trigger point is based on the salary on which you are liable to pay National Insurance Contributions (NICS). Under salary sacrifice your total gross salary on which NI is paid will reduce, so your loan repayments will reduce.
How will this affect my credit status, e.g. when applying for a mortgage?
By entering into the scheme you agree to forfeit part of your salary and this may have an impact when UCL reply to credit reference checks on your behalf. UCL will quote the pre sacrifice amount and will also quote the post sacrifice amount. It is up to providers to determine which salary they will use for their calculations. Please make enquiries with your financial institution regarding what their processes are in these instances.
Does anyone need to tell HMRC about this benefit?
The Cycle Scheme is a government-sponsored initiative that has been set up so that you do not have to pay tax and NI on items bought under the agreement. There is no need for you to contact HMRC about participation in the scheme.
Does UCL have an alternative bicycle loan scheme?
The provision of a standard bicycle loan is different to that of the application for the Cycle Scheme (Salary Sacrifice) and a standard bicycle loan will not provide you with any savings to your tax or national insurance contributions. Therefore please refer to the eligibility rules of this Cycle Scheme before considering a bicycle loan. If you do require information about the bicycle loan scheme please contact Emma Sweeney in Payroll Services on ext 48247 or email email@example.com.
What is the Employer Reference Number?
The Employer Reference Number is f484c