A company may lend or hire a bicycle and cycling safety equipment to an employee. There are no reporting, tax or NIC requirements if the following conditions are met:
• The bicycles or equipment are available to all your employees
• The bicycles or equipment are used mainly for 'qualifying journeys'
A journey only counts as a qualifying journey in two situations:
• All or part of the journey is between home and the workplace
• All or part of the journey is between workplaces
In practice, HMRC would find this "mainly for qualifying journeys" difficult to prove if they investigated. However, if all your clients are, say, abroad or very far away, then they would have an easy benefit in kind argument against the company.
Tax savings
A Company bicycle will attract corporation tax relief as a capital asset of the company. You can reclaim the VAT on the purchase if you are VAT registered and on the Standard VAT scheme. If you are on the Flat rate scheme, the bicycle must be at least £2,000 to reclaim any VAT. The company can also provide safety equipment, such as helmets, high-visibility jackets, etc which are allowable expenses and eligible for Corporation Tax relief. Helemt cameras, such as GoPros are not included in this list.
If you proceed to buy the bicycle and expenses, please remember to get the invoice in the company name, or it will be deemed a personal cost by HMRC and unavailable for any tax relief.
Pool bicycles
A bicycle will only qualify as a pool bike if available to all company employees. If there are many employees and it is only available to the director, for example, then the annual value of the bicycle could be taxed. Class 1A NIC, payable by your company, would be charged at 13.8%. The annual value of the bicycle is calculated as 20% of the purchase price (including VAT). This will be reported on a P11d and taxed via your self-assessment at your highest tax rate.
If the bike does not qualify as a pool bike, you may be better off paying for the bike personally and claiming 20p for each business mile you travel.
Cycle to Work Scheme
This allows employees to buy a bicycle via salary sacrifice and have the cost deducted from their monthly salary gross saving tax and NIC, which particularly benefits employees on the payroll who pay tax and NIC at the higher rate.
This scheme is normally offered by larger companies who wish to help their employees subsidise the cost of buying a bicycle, since they would otherwise buy a bicycle out of after tax and NIC has been deducted. The employer would also usually save on employers NIC at 13.8%, which makes it attractable for them to engage with the scheme. Higher rate employees could save up to 42% in tax and NIC through using the scheme. There are various conditions to be met to qualify. Employers should
register for the scheme. However, please contact your accountant before doing this to make sure it is suitable for you.
Please note that where a salary sacrifice scheme is used the company must still comply with national minimum wage rules and cannot sacrifice salary that would cause an employer to be in breach of the minimum wage regulations. The national minimum wage rules do not apply to directors. Since the employee is paying for the bicycle there is no ultimate VAT or corporation tax saving as the tax saving would be countered by the refund via the salary sacrifice.
Electric bicycles
E-bikes are also permitted, if you prefer an easier ride!
For most small businesses simply buying the bicycle through the company, making sure the company name is on the invoice is the most tax efficient way of making use of this.