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Update: Cycle to Work Scheme safe from 'salary sacrifice' cuts

The bicycle tax exemption initiative is safe from rumoured cuts to salary sacrifice schemes says Government

Bicycle tax exemption initiative, the Cycle to Work Scheme, is set to be protected from cuts to 'salary sacrifice' perks as the Chancellor of the Exchequer Phillip Hammond prepares to announce a raft of changes in his Autumn Statement.

As part of an August HM Revenue & Customs consultation on salary sacrifice benefits the government confirmed that "the cycle to work scheme will remain unaffected by [cuts to salary sacrifice benefits]."

'Salary sacrifice' perks are options given to employees to forgo a certain amount of their wages for non-monetary benefit. These benefits come in the form of phone contracts, company cars, gym memberships, and health checks, all of which appear to be set to lose their tax-exempt status, and ultimately look set to no longer be offered by employers once Hammond announces his Autumn Statement this week.

While other 'salary sacrifice' perks sit in the firing line, the Cycle to Work Scheme has had a free pass.

A spokesman for the Cycle to Work Alliance said: “The Cycle to Work scheme received an explicit exclusion from HMRC’s recent consultation on salary sacrifice schemes at Budget 2016.

"This welcome announcement recognised the ongoing success of the Cycle to Work scheme, and confirmed the key role that it has to play in promoting employee health and wellbeing. The scheme is a proven mechanism for increasing participation in cycling and achieving behavioural change.”

The cycle to work scheme, which was introduced in the Finance Act in 1999 and has given thousands of tax payers across the country the chance to get cycling at a significantly reduced cost, has been exempted from the action which is looking to reduce the impact of income tax and national insurance losses.

Interestingly, according to a Telegraph report, a number of corporations have written to the government suggesting that the changes, which are set to affect the scope for companies to offer free or reduced-cost gym memberships, would force them to also discontinue the offer of free health checks, thus undermining governmental attempts to keep the country healthy.

>Read more: Cycle to Work Scheme hits new record

The Reward and Employee Benefits Association has also commented on the speculation, suggesting that knock-on effect of these changes such as the cutting of free health checks is counterproductive because "we should be encouraging healthy behaviours."

While encouraging healthy behaviour should be a high priority of the government's, sources in Whitehall say that expensive tax losses is the motivation behind the these speculated changes.

Fears that the growth of these schemes is costing the government too much in losses from national insurance contributions and income taxation has lead to Telegraph sources inside the government suggesting that a refocus on "safeguarding revenue which is vital for funding public services" is most important. 

>Read more: Cycle to Work Scheme to allow accessories-only packages

Should these firms now have to pay tax on these 'perks' the incentive for companies to offer them will likely be significantly reduced.

Hammond says that these changes will look to "proritise support to ordinary working families who are struggling to get by, so that they, too, can join in our vision of Britain's future."

While the debate surrounding the content of the Autumn Statement will no doubt continue to swirl over the coming days, the Treasury has remained quiet and declined to comment on "specualtion."  

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