Velocommute

The UK Government has established a programme that offers tax savings to anyone who purchases a bike for commuting to work.

The details of the programme can be found here.

Essentially the scheme works like this:

1. The employee finds a bike from Velorution (or any other shop) that they would like to use to cycle to work.

2. The employer purchases the bike, as well as any accessories the employee needs to ensure a safe ride.

4. The employer offsets the VAT paid on the bike against general VAT received from sales.

3. The employer loans the bike to the employee for a fixed period of time. The cost of the loan is set equivalent to the price of the bike, ex-VAT (maximum allowed without a Credit Licence: £851). The employee pays the loan in instalments through a reduction in the gross monthly salary, called a ’salary sacrifice’.

4. The salary sacrifice yields lower PAYE and NI contributions to both employee and employer (NI only for the latter).

5. At the end of the loan period, the employer may make the equipment available for purchase to the employee for a fair market price.

There are a number of so-called “facilitators” who are selling the idea that the programme is difficult to implement. These companies actually increase the paper work required and try to limit the choice of bikes available to employees.

Velorution has developed Velocommute, an Open Source Implementation Pack and a Sample Hire Agreement, that any employer can use, without limiting the choice of bikes for the employees.

For more information, please contact Andrea at 020 7637 4004

UPDATE SEPTEMBER 2010 – The HMRC has issued a statement, clarifying the grey area of the resale value of the bicycle at the end of the scheme. Read here our interpretation.