Introduction · Web viewAs mentioned above if using Cyclescheme, Schools will be invoiced for the...

Cycle to Work Scheme

A model for Schools and Academies

ContentsIntroduction

1) Key Issues for Schools

2) Who is eligible for the scheme?

3) Operation of the Scheme

4) Group Consumer Credit Licence

5) Financing the Scheme

6) Insurance

7) Who owns the cycle and accessories?

8) What accessories can be purchased?

9) What does an employee have to do to join the scheme?

10) What is a hire agreement?

11) What is the Contract?

12) How long will it take for the employee to get their cycle once they have applied for a Cyclescheme Certificate?

13) What is a salary sacrifice agreement?

14) What happens at the end of the hire term process?

15) What is a fair market value?

16) What happens if an employee leaves?

17) Can an employee still claim cycle mileage when they use their cycle obtained through this scheme for business travel?

Enabling teachers to teach

t. 0345 200 8600 e. [email protected] w. junipereducation.org

© 2019 Juniper Education. All rights reserved. This publication is the intellectual property of Juniper Education and no part of it may be reproduced, stored or transmitted by any means without prior permission of Juniper Education. Any unauthorised use for commercial gain will constitute an infringement of copyright.

https://www.junipereducation.org/

mailto:[email protected]

Introduction

The cycle to work schemes are run in strict accordance with the legislation and reflects the current tax position and Department of Transport Guidance.

Currently Essex County Council operates a Cycle to Work Scheme using a scheme provider namely Cyclescheme. This guidance is based around using the same scheme provider. It is important to note however, that there are many other scheme providers approved by HMRC offering a similar scheme if schools wish to use someone other than Cyclescheme.

The schemes are generally quite simple to set up and manage. The scheme such as www.cyclescheme.co.uk can be accessed via a secure and fully automated website. They also provide marketing support to help schools promote the scheme to staff.

This scheme is implemented via a salary sacrifice arrangement and employees agree to a monthly salary sacrifice from their gross salary in order to cover the cost of the benefit.

Participation in the scheme is voluntary for employers and employees and the tax break for the cycle and accessories will only apply where the employee’s primary use of the cycle is mainly for commuting to and from work.

Employees may obtain a cycle and safety accessories up to a maximum value of £1,000 tax-free.

1) Key Issues for Schools

i) Once a decision has been made to implement a Cycle to Work scheme, schools will need to know how this is being financed.

ii) Cyclescheme invoice the school for the full amount of the cycle and accessories at the beginning of the contract, and the school pay for the equipment outright.

iii) This scheme operates as a loan, i.e. the school is technically loaning the cycles and accessories to the employee for a fixed period of time.

iv) A Hire Agreement reflects the conditions of hire between Cyclescheme and the employee and sets out the employee’s payment responsibilities. Because salary sacrifice alters the employee’s contract, schools will need to amend their Pay Policy to indicate their participation in the Scheme.

v) The contract between the scheme provider and the school extends credit to employees up to a value of £1,000 including VAT without needing special permission. If the amount they wish to lend exceeds £1000 they will have to apply for a group consumer credit licence or the employee could put their own money towards the cost of the bike if the amount exceeds £1,000.




vi) On the 28 July 2011 HMRC announced changes to the Cycle to Work Scheme in that the employer has to pay VAT in the normal way on the bike and any accessories (excluding helmets). Therefore, schools must now account for VAT on the supply of bikes to employees made through the scheme. Participants signing up to the scheme after the 28th July 2011 will have these VAT changes built into their salary sacrifice payments by their provider. If you need advice on the rules governing VAT please contact. [email protected]

vii) When the final payment is made at the end of the hire agreement period then the contract comes to an end between the school and the scheme provider and ownership of the bike is handed back to Cylescheme, this is made clear in the Contract and the Hire Agreement.

2) Who is eligible for the scheme?

The scheme is available to all employees, as long as the salary sacrifice does not put the employee’s earnings below the national minimum wage (NMW). If employees are close to the NMW, the school can run a separate scheme for these employees where it can limit the value of the cycle and accessories that can be purchased to ensure the reduction in their salary does not take them below the NMW.

Any employee who is still in their probation period, or has a contract that is less than 12 months will not be eligible to participate in the scheme.

Nb. salary sacrifice may have implications for payments such as working tax credit, child care tax credit, statutory maternity/paternity leave etc.

3) Operation of the Scheme

Employees who wish to participate in the scheme must use their cycle to get to and from work or for work-related purposes. This can include incorporating cycling with getting a train, bus or sharing a car journey and may include cycling with children to school first.

Under the scheme the school has to register with Cyclescheme. The employee then has to obtain a quote for a new cycle and safety accessories and completes the online form at Cyclescheme, The employee has the choice over 1,000 participating bike shops to select the bike and equipment they want.

The employee uses the Cyclescheme’s online tool to apply for their chosen package by entering the details online and requesting a Cyclescheme Certificate, up to the value of £1,000 including VAT. When the quote is received the quote is sent to the employer for approval and when approved Cyclescheme will invoice the employer for the bike and package. A Hire Agreement is then sent to the employee to sign. A contract is then set up between Cyclescheme and the Employer and a Hire Agreement is set up between Cyclescheme and the Employee.

When the employee receives the Cyclescheme Certificate, the employee contacts their chosen bike shop to arrange collection.




The Hire Agreement is usually for a fixed hire term, the minimum period you can join the scheme for is 12 or 18 months (hire period) via their monthly salary through a salary sacrifice agreement. This means the employee accepts a lower salary for the agreed period and subsequent savings are made through the tax and NI savings on their lower salary.

The overall cost of the bike is then deducted from the employee’s salary by equal instalments over a period of time e.g. 12 or 18 months but as the employee does not pay tax or NI on this amount this will be a saving for the employee.

At the end of the hire agreement period, the contract between the Employer and Cyclescheme comes to an end and the “End of Hire Agreement” is instigated, which states that ownership of the cycle and accessories transfers to Cyclescheme. When ownership of the cycle and accessories are transferred to Cyclescheme they are then able to offer three options to the employee:

1) Cyclescheme advise on the cost at a “fair market value” price and the employee pays this amount, the cycle is then transferred over to employee;

2) The employee returns the bike to Cyclescheme at their own cost;

3) Cyclescheme extend the Hire agreement by 36 months, the employee has to pay a one off deposit and this payment has to be made at the beginning of the 36 months, with nothing to pay after this time. At the end of the 36 months the cycle and accessories transfer to the employee, the deposit payment is worked out using the “fair market value”. This option works out cheaper than option 1 as the agreement has been extended, which in turn has increased the amount of time the employee has the cycle and accessories, reducing the “fair market value” price.

4) Group Consumer Credit Licence

Consumer Credit Licences ceased to exist with the closure of the Office of Fair Trading (OFT) on 31 March 2014. The Financial Conduct Authority (FCA) now regulates the consumer credit market, by granting authorisation to firms for consumer credit activities, in line with its regulatory regime. Under this licence, employers can extend credit to employees up to a value of £1,000 including VAT without needing special permission. If the employer wishes to exceed the £1,000 set down by the OFT the employer must apply separately for a Credit Licence or, the employee can agree to pay the additional money towards the bike, if the latter, the employer would not have to apply for a Credit Licence. Further information can be obtained from the Financial Conduct Authority website: www.the-fca.org.uk

5) Financing the Scheme

As mentioned above if using Cyclescheme, Schools will be invoiced for the full amount of the cycle and accessories at the beginning of the contract. For further information about the contract between the Employer and Cyclescheme please contact: Cyclescheme tel: 0344 879 5101 or www.cyclescheme.co.uk




If the employer does not want to pay upfront for the cycle and accessories they can seek assistance by selecting a third party finance company, however the salary sacrifice savings would not go back to the employer but direct to the finance company. There would also be implications on who owns the bike as in this case it could be the finance provider. As this guidance is around the use of a scheme provider and the school paying outright for the equipment please contact Unilink Finance or Cyclescheme for further information on using a third party finance provider. www.unilinkfinance.co.uk or www.cyclescheme.co.uk

The Government’s Cyclescheme is the largest administrator for the Government's Green Transport Plan Initiative. Cyclescheme is partnered with around 1500 independent bike shops throughout the UK.

6) Insurance

The employee must insure the cycle and accessories and will have to make any claim on their own insurance as the hire agreement between the employee and Cyclescheme states the bike is the responsibility of the employee.

7) Who owns the cycle and accessories?

The legislation that governs the scheme forbids the employee to own the cycle and accessories during the salary sacrifice period. If they do own it before the period of salary sacrifice comes to an end, they cannot claim tax exemption.

The scheme operates as a hire agreement between the employee and Cyclescheme however there is a contract between the school and Cyclescheme which determines that the school owns the cycle and accessories for the duration of the hire agreement, ie the school is technically loaning the cycle and accessories to the employee for a fixed period of time. He/she is free to use it as they wish, providing it is mainly used for cycling to and from work.

8) What accessories can be purchased?

Eligible accessories include cycling safety accessories. The tax exemption rules define a ‘cycle’ as a bicycle or tricycle. Electric cycles are also included. Cycling safety accessories includes:Helmets (conforming to European standard EN 1078)Bells and bulb hornsLights, including dynamo packsMirrors, mudguards Cycle clips and dress guardsPanniers, carriers to carry luggage or children safely and cycle bags Locks and chainsPumps, cycle repair kits and tool kitsReflective and waterproof cycle clothing




An employee must purchase a cycle in order to access the safety accessories. When they have decided what they want to obtain, they can then request a Cyclescheme Certificate which when received must be provided to the cycle provider. 9) What does an employee have to do to join the scheme?

If an employee wants to join the scheme, they need to obtain a quote for the cycle and accessories they want from one of the many retailers nationwide that have signed up to the scheme.

For local cycle retailers, visit the Cyclescheme website at www.cyclescheme.co.uk for retailers that can be used. Once an employee’s request is approved and the school has paid for the equipment, Cyclescheme will send a contract to the school and a Hire Agreement to the employee for signature. Upon receipt of the signed Hire Agreement, the employee will be sent a Cyclescheme Certificate to exchange in the cycle shop, (on production of photographic ID) for the cycle and accessories. The school will need to instruct their Payroll Dept to set up the salary sacrifice. The employee will continue to receive a lower salary for 12 or 18 months.

10) What is a hire agreement?

A hire agreement is automatically populated by Cyclescheme with the employee’s details from the secure website when they sign up for the scheme. It is then printed, signed and sent to the employee to sign. This document reflects the conditions of hire between Cyclescheme and the employee and also sets out the employee’s payment responsibilities.

11) What is the Contract?

This is a contract between the cycle scheme provider and the employer, defining the terms of the cycle to work provision and the conditions of the hirer.

12) How long will it take for the employee to get their cycle once they have applied for a Cyclescheme Certificate?

The school must pay for the cycle before the employee can receive the Certificate from Cyclescheme, which will then be passed on to them providing they have signed and returned the hire agreement. It is anticipated that from the point that the employee logs a request for a Certificate on line, it will take around 4 weeks to process that request.

13) What is a salary sacrifice agreement?

A salary sacrifice agreement is where an employee agrees to sacrifice a portion of their salary in return for a non-cash benefit. Salary sacrifice reductions are made from an employee’s gross salary (prior to tax and NI contributions) which means the employee is effectively putting this amount towards the cost of the cycle instead. It is also beneficial to the school because they save on NI contributions. Once the salary sacrifice agreement is signed, it cannot be cancelled until the end of the hire period.




Individual providers have worked with employers to ensure that the scheme continues to provide a viable and cost-effective way of increasing access to affordable bicycles for their employees. As a result, employees participating in the scheme remain able to make savings between 32% and 42% on the cost of the bicycle, depending on their personal tax circumstances. The amount you save depends on how much tax and national insurance you pay, Cyclescheme has provided a calculator to show you how much you can save.

Examples Basic rate tax payer Higher rate tax payer

Retail Price £600 £600

Your Pay £408 £348

Savings £192 £252

14) What happens at the end of the hire term process?

At the end of the hire period, the contract between Cyclescheme and the employer ceases to exist. The cycle and accessories changes ownership from the employer to Cyclescheme, this is outlined in the Hire Agreement under ”End of Hire Agreement”, Cyclescheme are then able to offer the cycle and the accessories for sale at a ‘fair market value’. At the end of 12 or 18 months, the employee’s salary will return to its normal level.

15) What is a fair market value?

Fair market value is a price that a willing buyer and seller agree on. It is important that this sum actually exchanges between the scheme provider and the employee and this is something named as the “end of hire agreement” this is an important of the process to ensure that the tax benefits are not lost.

The Table below provides a breakdown of how the cost of the cycle is calculated at the correct value at the time of ownership if the bicycle is offered to be transferred to the Employee.

Fair Market Value matrix Age of cycle

Acceptable disposal value as a percentage of original price (including VAT)Original price of the cycle less than £500

Original price £500+

1 year 18% 25%18 months 16% 21%2 years 13% 17%3 years 8% 12%4 years 3% 7%5 years Negligible 2%6 years & over Negligible Negligible




16) What happens if an employee leaves?

Should an employee leave the school before the end of the hire period, the employee will be liable to pay the school any outstanding costs that have not been offset by the hire payments made, the school must arrange with their payroll provider that any remaining outstanding payments must come out of the final payslip as a lump sum NET payment. The school must then notify the scheme provider when the final payment has been made so they can end the contract with the school, the same process is then followed i.e. the employee is given three options as outlined in section 3.

17) Can an employee still claim cycle mileage when they use their cycle obtained through this scheme for business travel?

Because in effect the employee has loaned the cycle from the school, they are not allowed to claim the current cycle mileage if they use the cycle obtained through this scheme for business travel. However, if the employee buys the cycle at the end of the 12 or 18 month period, they can then start claiming business mileage if they use it for business trips.

Contacts:

Cyclescheme – telephone no: 0344 879 5101 or www.cyclescheme.co.uk

Department for Transport – telephone no: 0300 330 3000 or www.dft.gov.uk

Essex County Council – (VAT enquiries): [email protected]

Unilink Finance Limited (Lease Solutions) – telephone no: 0844 887 5544 or www.unilinkfinance.co.uk

Financial Conduct Authority (Credit Licence) – telephone no: 0800 111 6768 or www.the-fca.org.uk






This document is issued by Juniper Education

We provide a range of world-class school support services in the following areas:

China Educational LinksEducation AdvisersEducation Finance SupportEducation HREducational VisitsGovernance and ClerkingSchool Effectiveness+Education Resources ServiceTarget TrackerTraining and Development

Juniper Education Boundary House, 4 County Place, Chelmsford, CM2 0RE


This issue: Sept 2016






Introduction · Web viewAs mentioned above if using Cyclescheme, Schools will be invoiced for the...

Documents

Transcript of Introduction · Web viewAs mentioned above if using Cyclescheme, Schools will be invoiced for the...