The Government’s Cycle to Work Scheme allows employers to hire bicycles and safety equipment to employees, with the employees being able to save up to 50% off the cost as a tax benefit. However, there are a number of legal and practical issues that arise when implementing it, which are not immediately obvious.
Most people do not realise that the agreement with the employee must be a hire agreement to qualify for the tax benefit. This means the employee cannot own the bicycle or equipment during the hire period or have an automatic right to own them at the end. Any sale at the end of the hire period must be under a separate agreement and for market value.
The scheme also falls under the Consumer Credit Act 1974 (‘Act’) which means that various requirements of the Act must be complied with, for example, in relation to the form of the hire agreement. Although, a separate consumer credit licence is not needed to operate the Government scheme up to the value of £1,000 per employee, a licence is needed if packages are outside of the scheme or above £1,000 are offered.