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news
London cyclists at Hyde Park Corner (copyright Britishcycling.org_.uk).jpgCycle to Work scheme bikes (temporarily) don't have to be used for commuting
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.
> How to save money on a bike with the Cycle to Work scheme
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.
> Cycle to Work scheme bike purchases more than doubled in June
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.
> Cycling dos and don'ts in a time of pandemic – how to be a responsible cyclist
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 joined road.cc as news editor in 2009 and is now the site’s community editor, acting as a link between the team producing the content and our readers. A law and languages graduate, published translator and former retail analyst, he has reported on issues as diverse as cycling-related court cases, anti-doping investigations, the latest developments in the bike industry and the sport’s biggest races. Now back in London full-time after 15 years living in Oxford and Cambridge, he loves cycling along the Thames but misses having his former riding buddy, Elodie the miniature schnauzer, in the basket in front of him.
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I've posted before about being 69, lifelong cyclist as my main transport, much of it in, through, under, over London and how it's bicycles that...
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I hope you're all checking your insurance policies, helmets, test certificates and road tax, it's the 2024 round-up...
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200 people out of a close by population of how many? Just build it and stop being a wuss
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To paraphrase Field of Dreams, "Build it right and they will come: and use it!"
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Thanks for using my picture of chocolate in your opening picture. The original can be found here, chocolate! | LongitudeLatitude | Flickr.
- lesterama 18 hours 13 min ago
Fair comments. I'll put my hands up and say I got the wrong end of the stick with this one. ¡Feliz navidad! Here's a pic for the season of goodwill.
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25 comments
I once used our CTW scheme to buy a Tarmac SL4 frameset which, some years later, has yet to enter office premises & i now use the scheme to upgrade parts - a set of Bontrager wheels for my gravel bike was this year's indulgence.
Never, ever have I been asked what I'm buying or for what purpose or whether it's ever been used to get into the office. I don't think employers really care!
In other words, a good old rort.
I used the C2W 3 times, a road bike, CX bike and entry level TT bike. The CX is also my winter bike and has been used for a few comuttes but the other 2 only ever saw the office from the back of my van
I've looked at the scheme a few times and i've never once seen that requirement for bikes to be used exclusively to and from work. That would be a dealbreaker for me.
no one has used the term exclusively, and it is not in the guidance.
But many people are not following the mainly for commuting definition and some go as far as never used for commuting.
It doesn't have to be used exclusively for work, only the "majority" of trips are required to be "qualifying journeys" (to/from work, or other business use).
The schemes I've looked at do all mention it somewhere, although it's certainly not prominent.
As the other replies to this story, and various other stories about the C2W schemes have made very clear, it is an open secret that this requirement is routinely ignored. There is no requirement to log or record usage, so no mechanism to enforce the rules. And none of the main parties have an incentive to enforce the rules - employees get cheaper bikes, employers reduce their NI contributions, bike shops get more business, and the scheme providers take a fat cut for doing very little. HMRC seem happy to look the other way too for one reason or another.
Despite mainly commuting to work by bike, I never once made use of the scheme as I thought I'd probably move on to another company soon and didn't want the faff. Stayed there nearly 20 years, doh!
This announcement from HMRC is not really news - it's just "avoidance of doubt" stuff. To be clear, the rules of the scheme say this:
- a cycle obtained under the cycle to work scheme should mostly (ie more than 50%) be used for travel to, from or for work;
- there is no requirement for an employee to record mileage;
- there is no requriement on the employer to monitor mileage.
The whole requirement is set out with the biggest nod-and-a-wink from the tax inspector you'll ever see.
The ideal thing would be to do away with the requirement through a specific exemption for cycles as a benefit in kind. The 2nd best thing would be not to rock the boat that nobody is currently trying to capsize.
One issue with removing the requirement entirely would be that it would open it up to people buying as many bikes as they liked to sell on, hire, etc.. At least the requirement that it be used for commuting provides a mechanism, however imperfect, to come down on anyone who tries to blatantly abuse the intent of the scheme.
I do wonder whether, if they could look at the whole picture, the effect on government expenditure might be revenue poistive if they reduced (or eliminated) VAT on pedal cycles (including but not limited to e-bikes).
The positives are legion. The cycle industry would grow yielding more business taxes, employment etc. It would contribute towards CO2 reduction targets (which also cost money). And crucially (which differentiates it from "so why not just get rid of VAT on everything?") it reduces costs in the NHS.
Massive tax subsidies are thrown at motorised "emission free" vehicles on the grounds of CO2 reduction alone. Pedal cycles should be eligible as such in any case, with benefits to the NHS putting their case well in front of electric cars.
I think the many faults of the CTW schemes were discussed here very thoroughly the last time they hit the news, but the 'official' stipulation that the purchased bikes (and/or equipment) must be used for work purposes really needs to go permanently.
Cycling is a net good for the economy, supporting manufacturers, shops large and small, independent mechanics, tourism, and reducing NHS healthcare spend. Proved, many times over.
The benefits should not be limited to people who work in a traditional employer/employee relationship, or even those who are in work at all; and it should certainly not be a greater benefit to those who pay higher rate tax. The government has a simple tool available to achieve this - zero-rate or at least 5%-rate all bikes and bike equipment for VAT.
You have hit the nail on the head with your last paragraph. CTW only works under HMRC rules if the item being purchased is to be used for predominantly work purposes, otherwise it would come under the Benefits in Kind rules and actually be taxed, rather than tax-relieved. If the stipulation were just removed, that would make it unworkable as you would be asking HMRC to sanction employers purchasing personal items for staff and saving the tax on those items. They are not going to do that.
The fairer way of encouraging bike usage would be to remove or reduce VAT which benefits everyone equally. However, how many car journeys are undertaken by people simply driving to and from work every day, I am not totally opposed to a scheme that encourages people to do that by bike instead.
The self employed can also claim tax relief for transport costs related to carrying out their business, which would include purchasing and servicing a bicycle.
I've just had to go into the office. a 20 mile round trip that I would usually do by public transport (2 buses, a train and a half hour walk - not something I'm comfortable with at the moment). Had to use my good summer bike in foul weather for that as I had no other option. If I get a bike through C2W it will be used every week/month whatever for trips to the office but at the moment that will not be a majority of use so would not be eligible.
Maybe just get a car?
Presumably you're using the summer bike for non-commute trips at the moment anyway, so couldn't you just carry on doing that and reserve the new one for commutes? Or at least say that's what you're doing...?
One of the issues I have with the current CTW scheme is that if you got a bike and used it once a month to cycle to the office and never used it for anything else, that would be within the scheme rules.
On the other hand, you could cycle to the office once a week, but if you also use it to pop to the shops a couple of times and take it out for a bit of fresh air at the weekend, that would be against the rules.
Is that true though?
To be fair I've never, ever heard of them checking up on anyone ever regarding this. It would cost way too much for zero benefit. At the end of the day people riding bikes are getting exercise which helps the nhs and so on in the long run. And tax rebates/avoidance in the rest of the economy is in the 100's of billions per year anyway. Start there if you wanna claw money back
certainly that is the implication of the text, the bike must be used mainly for commuting.
Personally I always intepreted that as most trips, not most miles. So If I cycle commuted 4 days, that would be 8 trips, and I wouldn't think twice about using it at the weekend. But If I were only cycle commuting 1 day a week, then multiple trips at the weekend would be strictly against the rules of the scheme. Of course no one is checking.
I always (when I used to go to an office) idly wondered whether my ~25 mile loops on the way home from work could be counted as commuting. Or could I only count the 6-7 miles that I would have done if I'd gone direct, and the rest would count in the 'other use' column?
As far as I can tell, yes. I'm not a tax lawyer or anything, but the official guidance (here) states that "At least 50% of the cycle’s use must be for ‘qualifying journeys.’" There's nothing else in there to suggest anything different or to put numbers on a minimum number of qualifying journeys.
To be clear, I'm not saying we need a crack down on people flouting the rules; I'm saying that the rules as they currently stand are stupid.
In fact, I would go one further and say the whole scheme is fundamentally flawed by being linked to employment. The government is quite happy to throw £3,000 at people to buy an electric car with no strings attached, so I see no reason why they couldn't do something similar for bikes.
Well ask any of the shops trying to claim their money back via the voucher scheme to repair bikes how organised some branches of the government are with these things.
Its linked with employment because it's dead simple to setup a scheme via paye tax systems. Remember the scheme gives you tax savings but actually operates as an interest free loan for 12 months,which helps lower wage earners afford a bike they may not otherwise have been able to,or afford credit for, and using payroll guarantees that money is then repaid.
That's why just cutting VAT wouldnt achieve the same aims, plus it's designed to shift people towards cycling to work which helps lower congestion,demands on offices for spaces to park etc. Just giving people vouchers to buy bikes theyd not consider riding to work on at all, at least there is some nudge towards that with this as its setup,even if people chose to not follow the commuting rules, though remember in the T&Cs you sign up to,you agree to that rule, and theres nothing stopping HMRC choosing to investigate it.
Plus you dont then have to have the debate about why cant runners be given vouchers for trainers, body builders vouchers for gym membership, swimmers vouchers for well you get the idea.
There are lots of activities that benefit health,mental well being and save the NHS money, but as GMBasix said the best thing is not to rock the boat that nobody has been trying to capsize for more than 20 years now.
Cycling to work is a good thing... but so is cycling to school, cycling to the shops, cycling to the cinema etc. It looks like only ~15% of all journeys are commutes, plus another 3% which are for business use and therefore would count as qualifying trips (https://www.gov.uk/government/statistical-data-sets/nts04-purpose-of-trips).
I can appreciate that the 0% loan aspect is valuable to some people, but I still think there are other options that could be just as useful. The government also directly hands out 0% loans on things like home energy efficiency improvement, so that I'm sure something could be arranged if there was a will.
I would broadly be supportive of a VAT cut on all sporting goods. That said, I think there's a clear argument that no-one ever bench-pressed themselves to the shops!
It's not so much that it's inherently easier, cheaper, or more efficient than if government administered it directly. It's more that recent governments have looked for every opportunity to shift cost and effort onto other people's shoulders so that they can cut them out of the civil service and make themselves look more 'efficient'. cf. the push to get to everyone on to self-assessment for Income Tax, the shifting of responsibilities onto local councils, the new arrangements for registering for and declaring VAT on overseas sales, etc., etc.
In Australia, not only is government refusing to give any subsidy to EV purchases, they are looking how to tax people that buy EV's, as the government is missing out on fuel tax revenue.
I stupid (for the reasons you give) and completely unenforcable - so what exactly is the point.
Also technically, if you are working from home, does that mean that every journey that starts from and/or ends at home is a journey to and/or from work?
Only if they occur before work or after work on a week day