How to supply staff with bikes
AT writes: An employee is struggling financially and has asked us to help. He needs a new bicycle for running errands and getting to and from work. Should we buy it for him?
It may be easier to help him by giving him a loan, writes Jon Sutcliffe, partner at Kingston Smith LLP. Any employee can be lent up to £5,000 interest free, with a taxable benefit arising only if the loan is written off. Also, HM Revenue & Customs rules allow you to pay employees 20p a mile for business mileage they do on their own bicycles. This is unlikely to add up to any great sum, but may appear a significant extra to low-paid workers.
You should also consider HMRC’s Cycle to Work Scheme, which allows cycles to be lent to employees. This offer must be made to all staff, however. They must use the cycle mainly for work or for travelling to work. The employer is able to reclaim the Vat when buying the cycle and claim capital allowances.
However, where an employee has a bike under the Cycle to Work Scheme, the 20p a mile cannot be paid. You should therefore look at whether a loan and 20p a mile will benefit the employee more than the Cycle to Work Scheme and whether the cost of implementing it and offering it to all employees is attractive to the company.
A taxable benefit equal to 20% of market value arises at the date the cycle is first lent (per annum), less the amount the employee pays for use. The Cycle to Work Scheme is therefore often used alongside a salary sacrifice, but you may choose not to impose this in this case.