14 March 2006
Accountants at our Manchester office are donning cycle helmets and bicycle clips to highlight an underused tax break.
The Cycle2work scheme allows employers to loan cycles and cyclists’ safety equipment to employees as a tax free benefit and offer staff cut-price bikes.
In the past employers have been put off the scheme because of the administration involved but this month a simpler version of the scheme has been launched.
Clive Gawthorpe, tax partner at our Manchester office, explains:
“The scheme allows basic-rate tax payers to get 40% off the cost of a bike and higher rate taxpayers 50% off when the bike is used mainly for travel to and from work.
“Until recently, companies who wanted to offer the scheme had to apply for a consumer credit license but it’s now become much more straightforward. It’s a great way to encourage environmentally friendly travel to work and it’s open to businesses of all sizes.”
The employee chooses a bike; the employer then buys it and leases it to the employee over a set period. A monthly payment is taken from the employees’ salary. After this, the member of staff can buy the bike to keep themselves for the market value at the time of the purchase which will be at a significant discount from the original cost.
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