It allows employers to loan cycles and cyclists' safety equipment to employees as a tax-free benefit.
On 6 August 2010 HMRC issued a statement to clarify the fair market value, which should be charged if the employees want to take ownership of the bike at the end of the repayment.
[1] Some of the providers have always recommended continued use at no further charge as the best option to avoid any additional cost and remain within the scheme guidelines.
On 28 July 2011, HMRC published guidance stating that VAT needs to be accounted for on Salary Sacrifice payments for Cycle to Work from 1 January 2012.
Employers of all sizes across the public, private and voluntary sectors can implement a tax exempt loan scheme for their employees.
FCA regulation is only required where employers are operating a scheme 'by way of business', a term which relies on various tests outlined in the perimeter guidance.
The inclusion of such a statement may expose employers to consumer protection claims as the document may be considered to be misleading.
The exemption removes the tax charge that would otherwise apply to cycles and cyclists' safety equipment loaned to employees provided the following conditions are met: To take advantage of the tax and Class 1A NICs exemption, an employer can simply buy a cycle and cyclists' safety equipment, reclaim the VAT (if applicable), make use of the capital allowances and loan it to an employee for qualifying journeys to work.