Salary sacrifice arrangements – cyclists
HMRC have updated their guidance for employers that provide salary sacrifice arrangements involving bicycles, usually referred to as ‘Cycle to Work’ arrangements.
The arrangements allow employers to loan bicycles and cyclists’ safety equipment to employees as a tax-free benefit. Where certain conditions are satisfied there is no employer liability to National Insurance Contributions (NICs) in respect of the benefit.
The updated guidance includes details of how to establish the market value of a bicycle sold to an employee at the end of the loan period.
HMRC have also updated their employment income manual to include a simplified approach to valuing bicycles sold at the end of the loan period.
The cycle to work benefits only relate to the loan period, however it is quite commonplace for an employer or a third party bicycle provider to offer the employee the bicycle they have been using for sale after the loan period has ended.