CYCLE TO WORK SCHEME – KEELE UNIVERSITY
What is the scheme?
The Cycle to Work Scheme allows eligible employees the tax-free hire of bicycles and related safety and security equipment. The scheme operates through a Government initiative aimed at getting more people to cycle to work.
The scheme allows staff to hire a bicycle (and safety and security equipment) from the University up to the value of £1,000 (incl. VAT) over a 12 month period.
The scheme requires eligible staff to enter into a salary sacrifice agreement during the hire period which allows Income Tax and National Insurance contributions savings to be realised.
The University is also offering a separate scheme for employees who earn close to the National Minimum Wage (see below) who cannot participate in a salary sacrifice scheme. The principles and considerations set out below will apply to both schemes.
The schemes will be open for applications between 1st March 2012 and 31st May 2012. The University intends to run the scheme on an annual basis and will therefore have a window for applications each year, the dates of which will be advertised.
Key considerations
Bicycles and/or safety equipment hired through the scheme should primarily (more than 50% of the time) be used for ‘qualifying’ journeys. This means a journey or part of journey:
· Between your home and work place;
· Between one workplace and another;
· To and from the train station to get to work.
However the bike can also be used for non-work journeys.
Certain eligibility requirements must be met to qualify for participation in the scheme.
The salary sacrifice agreement will be effective for the duration of the hire period. After a 7 day “cooling-off period after signing the hire-contract, the contract is irrevocable.
If an employee leaves the University before the end of the hire period the outstanding balance will be deducted from the employee’s final salary. This will be a deduction from net salary (i.e. without any tax relief).
It will be the employee’s responsibility to maintain and insure the bicycle. If a bicycle is stolen during the hire period the employee will still be required to make the remaining payments.
FREQUENTLY ASKED QUESTIONS
Q1. Am I eligible to hire a tax-free bike for work?
To be eligible you must –
· be an employee of the University (with a contract in place for at least the duration of the hire period),
· earn more than the National Minimum Wage after salary sacrifice,
· be aged 18 or over (Under 18s can join the scheme if their guardian signs a guarantor agreement),
· intend to use the bike mainly for commuting to work.
Staff who would earn less than the National Minimum Wage after salary sacrifice will have the opportunity to participate in a separate scheme (see Question 4 below). The eligibility requirements are as above but with the exception of the earnings requirement.
There is no credit check for employees wishing to participate in the scheme.
Q2. What is salary sacrifice and how do participants save?
Salary sacrifice occurs when an employee agrees to give up part of their salary for an agreed period (in the case of the Cycle to Work scheme this is 12 months) in exchange for a non-cash benefit, such as the loan of a bicycle and safety equipment.
As salary sacrifice is taken from the gross salary (before tax) rather than net salary it means the employee pays less income tax and National Insurance.
EXAMPLE
Here’s an example of how the savings work during the hire period, assuming the following:
· Employee is paid monthly,
· Employee is a standard rate tax payer hiring a bike and safety equipment to the value of £500 (incl. VAT),
· The hire period is 12 months,
· The employee’s monthly gross salary is £1,200.00 (£14,400 per annum).
Before Scheme ParticipationMonthly Gross Salary (before tax and NI deductions) / £1,200.00
Monthly National Insurance contribution (12%) / £144.00
Monthly income tax contribution (20%) / £240.00
Monthly Net Salary (after tax and NI deductions) / £816.00
During Scheme Participation
Bike value including VAT / £500.00
Monthly Gross Salary Sacrifice / £500 / 12 months = £41.66
Monthly Gross Salary after salary sacrifice (before tax and NI deductions) / £1,200.00 minus £41.66 = £1,158.34
Monthly National Insurance contribution (12%) / £139.00
Monthly income tax contribution (20%) / £231.67
Monthly Net Salary (after tax and NI deductions) / £787.67
MONTHLY NET SALARY REDUCTION
(i.e. difference between net salary before scheme participation and net salary during scheme participation) / £816.00 minus £787.67= £28.33
MONTHLY SAVING
In this example, the employee makes a contribution of £41.66 to the employer, but it only costs them £28.33, resulting in a saving of £13.33 per month. / £41.66 minus £28.33 = £13.33
Q3. How do I get a tax-free bike for work?
Step 1. Employees considering participating in the scheme should contact the Cycle Scheme Administrator at Keele (ext. 33549 or ) to check they meet eligibility requirements.
Step 2. The University is partnered with Cyclescheme. Employees wishing to participate in the scheme will need to visit a local Cyclescheme Partner Store (for store locator go to www.cyclescheme.co.uk) to choose a bike and, if required, safety equipment to a maximum of £1,000 including VAT.
Step 3. Employees then apply for a Cyclescheme Certificate via www.cyclescheme.co.uk/d46907. The employee will usually sign an online Hire Agreement at this time. The hire agreement does not become effective until it has been countersigned by the University.
Step 4. The University will check the application to ensure the employee meets the eligibility requirements (see Question 1 above) and if approved will countersign the Hire Agreement and pay Cyclescheme for the full retail price of the bike and equipment.
Step 5. Cyclescheme will then post out a paper Certificate, usually to the employee’s home address. This can take up to 4 weeks. The University will be notified when a certificate is posted out to an individual and the salary sacrifice scheme will commence from the next available Payroll processing schedule/run after the notification is received. This will apply even if the employee has not yet redeemed the certificate.
Step 6. The employee redeems the Certificate in the bike shop and exchanges it for the bike package.
Step 7. At the end of the initial 12 month hire period Cyclescheme will contact the employee to discuss options concerning ongoing use of the bike.
Q4. What is the scheme for lower-paid employees?
Where salary sacrifice would take an employee’s earnings below the National Minimum Wage (£6.08/hr from 1st Oct 2011) the University cannot, for such employees, operate a salary sacrifice scheme. Therefore the University will offer an alternative scheme which allows this group of staff to purchase a bike with a 25% discount. The hire period will be 52 weeks.
Depending on the overall earning level of an employee in this group of staff, there may be a liability to income tax on the discount as it could be deemed a benefit-in-kind. All employees in this staff group should contact the Keele Scheme Administrator (ext. 33549 or ) for advice before proceeding.
EXAMPLE
The example below is based on the following assumptions:
· Employee is paid weekly,
· Value of the bike is £500,
· The hire period is 52 weeks.
During Scheme ParticipationBike value including VAT / £500.00
Total to be re-paid including 25% discount / £375.00
Weekly payment (deduction from net salary) / £375.00 / 52 weeks = £7.21
How do I get a bike through the discount scheme?
Step 1. Employees considering participating in the scheme should contact the Cycle Scheme Administrator at Keele (ext. 33549 or ) to check they meet eligibility requirements.
Step 2. The University is partnered with Cyclescheme. Employees wishing to participate in the scheme will need to visit a local Cyclescheme Partner Store (for store locator go to www.cyclescheme.co.uk) to choose a bike and, if required, safety equipment up to a maximum of £1,000 including VAT.
Step 3. Employees who wish to apply for a Cyclescheme Certificate must advise the Cycle Scheme Administrator who will contact Cyclescheme. The employee will then be required to apply for a Cyclescheme Certificate online. The employee will usually sign an online Hire Agreement at this time. The hire agreement does not become effective until it has been countersigned by the University.
Step 4. The University will check the application to ensure the employee meets the eligibility requirements (see Question 1 above) and if approved will countersign the Hire Agreement and pay Cyclescheme for the full retail price of the bike and equipment.
Step 5. Cyclescheme will then post out a paper Certificate, usually to the employee’s home address. This can take up to 4 weeks. The University will be notified when a certificate is posted out to an individual and the deductions from net salary will commence from the next available Payroll processing schedule/run after the notification is received. This will apply even if the employee has not yet redeemed the certificate.
Step 6. The employee then redeems the Certificate in the bike shop and exchanges it for the bike package.
Step 7. At the end of the hire period (assuming that the discounted cost has been fully paid) ownership of the bicycle and safety equipment, if applicable, will transfer to the employee, as no salary sacrifice scheme is involved in this case, and net deductions from wages will end.
Q5. What is the maximum value bicycle and safety equipment package employees can select through the schemes?
£1,000 inc.VAT.
Q6. Who actually owns the bike?
The bike and equipment remain the property of the University throughout the hire period.
Q7. Who is responsible for maintaining and insuring the bike?
It is the employee’s responsibility to maintain and insure the bike.
Cyclescheme Partner Shops will be able to advise about maintenance and servicing depending on how the bike is used and stores offer a free first service. Cyclescheme participants can obtain a 10% discount on Insurance and Roadside Recovery provided via Cycleguard (see www.cycleguard.co.uk).
Q8. Does the bike have to be used for commuting?
Employees should use the bike mainly for commuting to and, if relevant, between workplaces (at least 50% of the bike’s use should be for work purposes). However, the bike can also be used for non-work purposes. Please note that employees cannot claim business mileage allowance with a bike that is being hired to them by their employer.
Q9. What happens at the end of the hire period?
At the end of the initial 12 month hire period Cyclescheme will contact employees under the salary sacrifice scheme to discuss options concerning ongoing use of the bike.
Q10. What happens if an employee leaves their job or is made redundant?
Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 7 working days following collection of the goods. This means that if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay (i.e. without any tax relief).
If applicable, the employee may then be offered ownership of the equipment in the normal way (please see Question 9 above).
FURTHER INFORMATION CAN BE FOUND AT -
http://www.cyclescheme.co.uk/employers/employer-faqs
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