Frequently Asked Questions

If your query is not here, or you would like more detail about any aspect of Cycle2Work, please get in touch.

Which of my employees are eligible?
That's up to you - you may want to restrict eligibility based on length of service, or you may want to open the scheme out to all. However, under the terms of Cycle2Work, you cannot offer the scheme to directors only or on favourable terms to them. Employees on or near the minimum wage may not participate in the scheme because the salary sacrifice would take their salary below the legal minimum wage. You could give these employees a small salary increase though, so that they can take part.

Isn't Cycle2Work too good to be true?
Don't be put off from implementing an Cycle2Work scheme because up to 50% off a bicycle and cycling safety equipment sounds too good to be true. Cycle2Work really is as positive as it sounds. To appreciate this, it helps to understand the government's motives for offering such a generous tax break. Offering hundreds of pounds off bicycles and cycling safety equipment isn't an act of generosity or a tax loophole - it makes sound economic sense.

The Government have an ongoing commitment to reduce our greenhouse gases caused by carbon emissions and to encourage more sustainable modes of transport. The UK is also nearing gridlock and this scheme encourages people to use a more sustainable mode of transport during peak commuting hours.

What constitutes having mainly used the equipment for cycling to work?
The equipment should be predominanlty used for commuting purposes, which includes journeys made between the employee's home and the workplace, or part journeys (for example, to the station), or for between one workplace and another.

Provided the equipment is used predominantly for commuting purposes, then it can also be used during leisure time too. There is no set criteria, which can be used by the employee to confirm they have satisfied the "mainly for work" requirement, such as frequency of use, miles travelled, or hours spent cycling. Employees are not expected to keep mileage logs but employers should make clear to them that if they do not use the cycle mainly for qualifying journeys, they may lose the benefit of the tax exemption. The Hire Agreement provided for participating staff through this scheme, which is signed by the employee, outlines this requirement, ensuring the employee is aware of their responsibilities.

Is there a maximum value to the amount of equipment employees can obtain through Cycle2Work?
There is no maximum annual tax allowance for the Cycle2Work scheme, however the Group Cycle2Work Consumer Credit License made available by the OFT for particpating organisations, permits a maximum of £1000 inclusive of VAT per employee. The employee is unable to top up on the £1000 limit to obtain a more expensive bike, but you can of course apply to the OFT for a license to offer in excess of £1000 per participant, or you may have an appropriate license already in place due to the nature of your business

What are the costs to my business?
All business activity has cost implications, and implementing an Cycle2Work scheme is no exception. The costs fall in to two areas:

Promotion costs
Making your workforce aware of the scheme and encouraging take-up. However the specially designed online process used by Halfords scheme minimises these costs. You can even run paper-based schemes using this process

Administrative costs
Signing up to the scheme, making changes to your payroll to reflect the salary adjustments, and keeping records of employee take-up and related salary sacrifices. The Halfords Cycle2Work Portal minimises these costs by automating much of the process.

The really good news is that, in any case, these minimal costs are recovered by savings such as the reduction in NIC contributions, and the equally important but less tangible benefits such as increased staff loyalty and a fitter workforce.

How do I reclaim VAT on the scheme?
Bicycle and Cycling Saftey Equipment obtained under Cycle2Work schemes are to be mainly used for cycling to work by employees. As the equipment is for use in a Cycle2Work scheme for employees, HMRC accept that the VAT incurred is for the purpose of the employer's business and is therefore subject to the usual rules on VAT recovery. The benefits to a business are seen as attracting, retaining and motivating employees and promoting a healthier workforce.

Some businesses are partially exempt from input tax and so their ability to reclaim VAT may be restricted. If in doubt, contact your local VAT office.

How long should my scheme be open to my employees?
The delivery of the Letter of Collection to your employees will not begin until the live scheme and documentation phases have closed, so it makes sense to restrict the length of time the scheme is live. Our recommendation is 4 - 6 weeks.

How soon can I run a second scheme?
You can run a scheme a month or so after the Letters of Collection have been delivered for the preceding scheme. You must be sure though that you will be able to place an order for at least £3,000 worth of equipment

Can an employee enter into more than one Hire Agreement concurrently?
An employee can have more than one Hire Agreement for Cycle2Work with you at a time. However you must make sure that any combination of Hire Agreements does not take the employee below the National Minimum Wage.

Do I have to be a director to run the scheme?
No. Anyone in an organisation can promote and manage the process. An authorised representative must sign Halfords' Supplier Agreement, and sign the leasing document should there be one in place.

During the scheme, an authorised representative must sign the employee Hire Agreement so that it can be executed.

Can the directors have better or more equipment?
No. Under the Cycle2Work rules directors cannot be offered Cycle2Work on preferential terms.

What equipment is available?
Bicycles and cycling safety equipment suitable for commuting on. Halfords has the largest range of bicycles and cycling safety equipment in the UK and can order in most other bicycles available in the UK.

Who owns the equipment?
The employer owns the equipment. The legislation that governs Cycle2Work schemes quite specifically forbids the employee to own the equipment - and therefore there can be no automatic right for the employee to own the equipment at the end of the Agreement. If they do, they cannot claim the tax exemption. Therefore Cycle2Work schemes operate as loans: the employer is technically loaning the equipment to the employee for a fixed-period of time. Although employees do not actually own the equipment, they remain custodian of the equipment and are free to use it as they wish, providing it is mainly for cycling to work.

What happens at the end of the scheme?
After the Agreement period is over, the employer may offer to sell the equipment to the employee for its then fair market value.

If the equipment is leased the leasing company will appoint the employer as the disposal agent. Either way, under Cycle2Work there can be no automatic right for the employee to own the equipment at the end of the hire term, otherwise the Agreement is deemed to be a Hire Purchase Agreement, which does not attract the same tax exemption. However, clearly it is in the interests of all concerned if the employer does sell the equipment to the employee at the end of the hire period.

What if an employee leaves early or is made redundant?
If an employee leaves before the end of the scheme, they must pay their employer any outstanding salary deductions from their final net salary, as compensation for non completion of the salary sacrifice. They may then have continued use of the equipment without further payment until the hire period expires, when they may be invited to purchase the equipment and become the owner. It is important that the employee is not deemed to be given the automatic right to own the equipment otherwise they would not be able to benefit from the tax exemption. Employees must therefore not be offered the equipment to purchase until the culmination of the hire term.

In the case of redundancy, the balance of payments due on the equipment can be deducted from the employee's redundancy settlement. The employer may of course choose to waive or reduce this amount.

Who is responsible if the equipment is lost or stolen?
All equipment obtained through the Cycle2Work scheme is the employee's responsibility and it is a contractual term that they take out adequate insurance to cover damage or theft, informing the insurance provider that the owner (usually the employer) has an interest in the equipment for the duration of the hire term. (This would normally be covered under an employee's home contents insurance policy.)