The HMRC cycle to work scheme is a scheme which offers a great way for small traders to purchase a bicycle while claiming capital allowances on it.
In its simplest form, which is the form most likely to be used by a small company, the business can make a purchase of bicycles and cycling equipment which are then loaned to employees by the business. The bicycles must be used primarily for the purpose of journeys between the workplace and the employee’s home, but personal use is permitted.
If bicycles are purchased in this manner by the business, they become eligible for the Annual Investment Allowance, meaning they are a 100% allowable expenditure. In simple terms, every £1 you spend on the bikes will save you 20p in corporation tax at year end. There are a small number of criteria that the business has to meet, but most of these are do not represent an issue for small traders:
- The bikes take the status of a Benefit in Kind (BIK), this means they have to be reported on a p11D form at the payroll year end, however it is not a taxable BIK and so does not lead to increased tax.
- The bikes must remain the legal property of the business for at least 12 months in order to qualify for the allowance.
- The scheme must be open to all employees of the business.
While relatively simple, we would recommend that any clients thinking of taking up cycling to work take advantage of this scheme as it is extremely tax efficient.
Full details can be found here: https://www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance