Are contractors eligible for the cycle to work scheme?

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If you’re a keen cycler or looking to reduce your carbon footprint, it’s likely you would want to take advantage of the Cycle to Work Scheme.

Luckily, the Cycle to Work Scheme is not just for permanent workers. Read on to discover how, as a contractor or limited company director, you can still make use of the scheme.

Can I join the Cycle to Work scheme as a limited company director?

If you are the only person employed by your company then it is very easy to set up a Cycle to Work scheme. In this context there is no “scheme” as such but you are simply making use of the favourable tax legislation relating to the use of bicycles and bike safety equipment.

This enables your company, the employer, to buy a bike and bike safety equipment and loan it to you, the employee, for qualifying journeys to work. There is no agreement to be drawn up and no need for prior approval by HM Revenue & Customs.

How do I join the scheme?

To join the scheme, you as the employer simply buy the bike. You can then reclaim the VAT on the purchase and claim a Corporation Tax deduction for capital allowances on the full cost.

The company can also provide any safety equipment for the cyclist i.e. helmets, high visibility jackets, cycle clips etc. and these will be treated as revenue expenditure, eligible for Corporation Tax relief.

There are a couple of conditions to be met in order to qualify for The Cycle to Work scheme:

  • Ownership of the bike is not transferred to the employee during the loan period – so the bike remains owned by the company.
  • Employees use the equipment mainly for qualifying journeys, at least 50% business use; i.e. for journeys made between the employee’s home and workplace, or part of those journeys (for example, to the station), travel to clients or for journeys between one workplace and another.

Is there a taxable benefit?

There is no taxable benefit in kind arising from the use of the bike and there doesn’t need to be a reduction in salary to offset the cost of the bike. Therefore your wages summary will remain unaffected. If the bike is transferred into your personal ownership at a future date then you are only taxable on the market value of the bike at that date (the normal rule is that you would be taxable on the value of the bike at the time it was first provided to you).

Can I offer the scheme to other employees?

If you should want to extend the scheme to other employees and to make a charge for loan of the bike, then provided the cost of the bike and equipment is less than £1,000, the scheme will automatically be covered by a group consumer credit license. However, if the cost goes above £1,000 it would be necessary to set up a separate Consumer Credit License for your company.

Can I claim mileage for using my bike?

It is also possible to claim mileage for bikes you own personally and use for journeys to and from your temporary workplace, just like you would for using your own private motor vehicle. You can enter the journey on our online accounting portal under the mileage tab and select bicycle as the vehicle type. This will then calculate the mileage that you are able to reimburse back to yourself. Mileage for bicycles is 20p per mile.

Need more help?

If you would like any further information or have any queries regarding the Cycle to Work Scheme as a limited company director, please do not hesitate to contact your Personal Accountant.

At ClearSky Contractor Accounting we're with you all the way. Whether you're setting up your limited company or planning on starting a cycle to work scheme, our team is on hand to answer any questions you may have.

For more information, you can speak to our team on 0800 032 5326 or email enquiry@clearskyaccounting.co.uk.

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