PAYROLL INSIGHT
On your bike
Diana Bruce, MCIPPDip, CIPP technical material author, races through on e-bikes
I n our somewhat austere political society, we tend to know when the government is steering us, both as employers and employees, in a certain direction by the income tax and National Insurance contributions (NICs) breaks we are provided with. Initiatives from government drive forward change, a prime example being cycle-to-work schemes; and recently refreshed guidance has seen a push to encourage the use of e-bikes. Finance Act 1999 introduced an annual tax exemption which allows employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit. Primarily this has been accessed through salary sacrifice but loan and pooled cycle schemes are also used. Since introduction of the tax exemption employers have been encouraged to get their workforces cycling. More than 40,000 employers across the country are involved, and more than 1.6 million commuters encouraged to cycle to work. The government want to make sure that cycle-to-work schemes continue to attract new cyclists and are as inclusive as possible so that all people travelling to work have the opportunity to realise the benefits that cycling affords. More recently this has resulted in a greater use of e-bikes, or electrically assisted pedal cycles (http://bit.ly/2KRR2Cx) to give them their formal name. E-bikes have an integrated motor that helps the cyclist pedal, allowing them to reach speeds of up to 15.5 mph. They are seen as a game changer for their potential to make it easier for older, less able or less fit people to make cycling a part of their commute. Worth noting is that there are different rules in Northern Ireland for e-bikes (http:// bit.ly/2KPufHq).
Greener commutes In June this year during Bike Week, ‘refreshed’ guidance (http://bit.ly/2NgPB3s) was published by the Department for Transport (the first update since 2011), hailing a “new era of green commutes”, making it easier for employers to provide cycles and equipment, including e-bikes, worth over £1,000. The guidance primarily concerns schemes using the salary sacrifice process and it sets out how such schemes typically operate, and what is needed to ensure that the tax and NICs benefits can apply. It also sets out whether the associated hire agreement may be regulated by the Financial Conduct Authority (FCA) or exempt. ...salary sacrifice but loan and pooled cycle schemes are also used Previously, many employers that have been the owners of bikes provided under cycle-to-work schemes, may have limited the total value to £1,000 per employee to avoid the red tape requirement of compliance with the FCA for any agreement above this cost. As e-bikes are generally more expensive they may not always have been considered. The refreshed guidance makes it clear that where the employer uses a FCA- authorised third-party provider, then the limit does not apply – thereby increasing the options for providing employees with a higher cost bike. Increasing the use of e-bikes is predicted
to help tackle congestion, speed up commutes, make journeys greener and cut travel costs. A survey of 2,000 commuters (commissioned by Evans Cycles) estimated that by switching from car, bus, tube or train to e-bikes, commuters could save an average of £7,791 over five years. Salary sacrifice Employers can set up and run their own salary sacrifice scheme, or there are cycle- to-work scheme providers who can run the schemes on behalf of employers. Where a cycle and/or safety equipment is made available to an employee under a salary sacrifice arrangement there will be a consumer hire agreement in place which will typically be between the employee and the employer, or it could be with a third party. If the scheme meets the relevant criteria it can benefit from the tax exemption in the Income Tax (Earnings and Pensions) Act 2003. Since a portion of the salary is foregone, the employee pays less tax and NICs, and the employer is able to save on employer NICs at 13.8% and apprenticeship levy at 0.5% (where applicable) on the amount sacrificed. There are also other ways in which the employer can encourage cycling to work: ● Loan schemes – One alternative option is to provide a loan to an employee to purchase a cycle, similar to schemes offered to employees for purchasing rail season tickets. Loan schemes, including on an interest-free basis, may be subject to regulation by the FCA. ● Pooled schemes – Another option is the workplace pool cycle model, a tried and tested way for supporting staff in their commuting and for inter-site and business
| Professional in Payroll, Pensions and Reward | October 2019 | Issue 54 26
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