Changes in working patterns resulting from the coronavirus crisis have led Her Majesty’s Customs & Excise (HMRC) to temporarily relax one of the key rules of the scheme, which allows employees to effectively buy a bike ‘tax-free’ through salary sacrifice.
Under the terms of the scheme, a bike and accessories supplied to an employee whose workplace is signed up to Cycle to Work must be used mainly for what are termed “qualifying journeys” – that is, commuting, or using the bike for work-related purposes, for example site or client visits.
With official advice since last March being for people to work from home wherever possible, many people who have benefited from the scheme and have not yet come to the end of the salary-sacrifice term will unwittingly be breaching that condition.
As a result, Financial Secretary to the Treasury, Jesse Norman MP – a former Cycling Minister at the Department for Transport – announced shortly before Christmas that a temporary easement was being introduced that removed the qualifying journey requirement, but only for people who had obtained bikes through the scheme up to and including 20 December last year.
The temporary easement means that people benefiting from the scheme, which saw a big jump in uptake last year, will not be at a disadvantage, financially, due to changes in working practices that in most cases will be out of their control.
In a statement to the House of Commons on 17 December, Mr Norman said:
The tax exemption for the employer provision of cycles and cyclist’s safety equipment was introduced to support employers in promoting healthier journeys to work and to encourage green commuting. Many employers offer this in the form of Cycle to Work schemes.
One of the conditions of the exemption is that the cycling equipment provided should be used mainly for qualifying journeys (to or from work or in the course of work).
The Government’s COVID-19 restrictions have required many employees to work from home where possible. Therefore, many existing users of the scheme are not travelling to work and may be unable to meet the condition for qualifying journeys. Under the current application of the rules, these individuals would become liable to an income tax Benefit in Kind charge.
However, the Government will introduce a time limited easement to disapply the condition which states that cycles must be used mainly for qualifying journeys. The easement will apply to existing users and will allow those individuals to continue to benefit from the tax exemption without needing to meet the qualifying journeys condition.
The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020. The easement will be in place until 5 April 2022, after which the normal rules of the exemption will apply.
Therefore, employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020, will be permitted to an easement, and will not have to meet the qualifying journeys condition until 5 April 2022. Employees who join a scheme from 21 December 2020 will need to meet all the normal conditions of the exemption.
It's an open secret within the cycle trade, however, that many of the bikes bought through Cycle to Work will never have been ridden to and from work, being kept instead for rides at the weekend or in the evenings.
Planet X, for example, which ceased accepting vouchers under the scheme in 2018, says with an implied nod and a wink on its website that in the two decades since the scheme was introduced in 1999: “We’ve supplied a huge quantity of high quality carbon bikes, time trial bikes, full suspension off-road bikes, track bikes, and other bikes, which we’re sure have given their owners great fun on their daily ride to work.”
Up until now, therefore, it’s probably fair to say that the 'qualifying journey' aspect of Cycle to Work was something that if it was mentioned at all when an employee applied for a bike through the scheme only needed a cursory response, and there would be no follow-up checks that it was indeed being used primarily for those purposes.
The constituent nations of the UK are of course now back under strict lockdown regulations, with many businesses closed and furloughing staff, or allowing employees to work remotely, and it is clear that it will be many months at least until we see a return to anything resembling life as it was before the COVID-19 pandemic struck.
So, could it be that HMRC – which among other things, would be aware of who is applying for tax benefits available to people working from home during the crisis – may start taking a closer look at those obtaining a bike through the Cycle to Work scheme from 21 December, to ensure that they are actually using it primarily for the purposes allowed?
In a statement provided to road.cc Adrian Warren, chair of the Cycle to Work Alliance which represents several major providers of services under the scheme, welcomed HMRC’s decision to provide easement for those receiving bikes through it up to 20 December, and said that the body was seeking clarification on the situation regarding subsequent participants.
“As members of the Cycle to Work Alliance – the coalition of the four leading providers of the Cycle to Work scheme – we are proud to have supported employees to continue commuting to work safely and actively over the course of the pandemic, by providing cycling equipment to a record number of employees in 2020,” he said.
“For many scheme users who followed government advice to work from home where possible, they naturally will have been travelling to the workplace less frequently over the course of the pandemic. The Alliance therefore welcomed the recent decision by HMRC to temporarily suspend the requirement that for equipment obtained through the scheme, at least 50 per cent of its use must be for ‘qualifying journeys’, i.e. commuting to work purposes. This provided important reassurance to employers and employees in relation to those already using the scheme.
“We recognise that in light of the new lockdown restrictions announced on 4th January and the impact this will have on people’s commuting behaviour, there remains questions for how this announcement applies to those joining the scheme after the 20th December (at which point the requirement was reinstated). The Alliance is currently engaging with HMRC and the Department for Transport to explore opportunities to clarify this situation. We recognise that many employees will be wanting to obtain a bike so they can be ready to cycle to work once they start to return to the workplace.
“We look forward to working with government to support many more would-be cyclists to obtain cycling equipment so they can safely return to work as normality resumes. The Cycle to Work scheme remains a core part of the government’s strategy to get more people cycling, and we welcomed endorsements for the scheme from the Prime Minister and Transport Secretary during summer 2020,” Mr Warren added.
Simon has been news editor at road.cc since 2009, reporting on 10 editions and counting of pro cycling’s biggest races such as the Tour de France, stories on issues including infrastructure and campaigning, and interviewing some of the biggest names in cycling. A law and languages graduate, published translator and former retail analyst, his background has proved invaluable in reporting on issues as diverse as cycling-related court cases, anti-doping investigations, and the bike industry. He splits his time between London and Cambridge, and loves taking his miniature schnauzer Elodie on adventures in the basket of her Elephant Bike.