With a report by The Bicycle Association revealing that the pandemic saw £1 billion added to sales of cycles and accessories, while predicting sales of e-bikes could triple by 2023, cycling is becoming big business. Earlier this year, Lovewell Blake provided corporate finance and tax advice as part of the management buyout of Pedal Revolution, one of East Anglia's most prominent independent bicycle retailers. Last year, as headline sponsors of the Lowestoft & Waveney Business Awards, we named Lowestoft-based CycleRecycleUK as the runner-up in the Business of the Year category.
Under the Government's Cycle to Work Initiative, businesses are able to offer employees the opportunity to purchase a bicycle to be used mainly for business commuting.
This is done by the company purchasing the bike on their employee’s behalf, and the employee then sacrificing part of their salary to cover a monthly hire payment for the bike. By sacrificing salary, the employee saves tax and national insurance, as well as the business saving employer’s national insurance. At the end of the scheme, which runs for 12 or 18 months, the employee has the option to extend the scheme further, as well as making a final settlement payment to take ownership of the bike.
Cycle to work scheme vat
As it will be the business making the purchase of the bike and equipment, VAT can be reclaimed, and the net cost set off against taxable profits utilising the annual investment allowance. New bikes will also qualify for the super-deduction, meaning tax relief of £1.30 can be claimed for every £1.00 spent up to 31 March 2023 by limited companies.
If you’re an employer who is interested in utilising the scheme for your employees
Guidance
from HM Revenue & Customs can be found here.