FAQ's
- Why do you supply mainly Halfords bikes?
- Can employees obtain non-Halfords bikes?
- How much work is involved for my HR?
- How much can my employees have?
- Can employees add some of their own money to the Letter of Collection to obtain a higher value bike?
- Can someone have more than one bike?
- How long does it take to set up a scheme?
- How long does it take to get a bike?
- Which of my employees are eligible?
- What constitutes having mainly used the equipment for cycling to work?
- How do I reclaim VAT on the scheme?
- Do I need a Consumer Credit Licence to run a scheme?
- Do I need to advise HMRC?
- Can an employee enter into more than one Hire Agreement concurrently?
- Who owns the equipment?
- What happens at the end of the scheme?
- What if an employee leaves early or is made redundant?
- Who is responsible if the equipment is lost or stolen?
- Can you come and visit my company?
- Why should I use Bikescheme – can’t I just go direct to a supplier?
- Will a salary sacrifice scheme affect my benefits?
- What happens if an employee does not use the bike for commuting after they have joined the scheme?
- VAT: Can a VAT exempt organisation simply not claim the VAT on the purchase and not pay over VAT included in the amount of salary sacrificed?
- VAT: My organisation have never reclaimed VAT and passed it on to employees: can we continue with our previous processes?
- VAT: My organisation is not VAT registered: am I affected?
- VAT: What rate of VAT should an employer charge their employees for the hiring of a bicycle and safety equipment?
- VAT: Will employers be required to issue VAT invoices to their employees?
- VAT: Can a VAT partially exempt business reclaim all VAT charged on their bicycle and safety equipment purchase(s)?
- VAT: Can I pass on the “new” VAT charges to my employees?
- VAT: Will these VAT changes be applied retrospectively?
- VAT: How will the VAT changes affect employers’ savings?
- VAT: How will the VAT changes affect employee savings?
- VAT: What do the VAT changes mean for the future of cycle to work?
- VAT: What are the “new” VAT changes and when are they being introduced?
Why do you supply mainly Halfords bikes?
We are proud to work in conjunction with Halfords as we believe that Halfords have the most robust and compliant scheme in the market, coupled with an unbeatable buying power, excellent customer service and warranties. They have over 460 stores nationwide and a unique ability to offer the “UK’s widest bike brand choice. Fulfilments of orders are through letters of collection (LoCs) which are either emailed or posted direct to your employee’s. They simply take this with a valid form of ID to their nearest Halfords store and exchange it for the bike of their choice. By using Halfords, you have the peace of mind that your employees will be getting a bike that is compliant with the rules of the scheme. BikeScheme works closely with the Halfords Cycle2Work scheme and it utilises its documentation, as we know that they are compliant with the legislation and guidance (from HMRC and the Department for Transport) and they ensure the scheme reflects its overall intent and spirit.
All cycles fitted, assembled & safety checked in local store for collection
Can employees obtain non-Halfords bikes?
Yes, through our Special Order option, we endeavour to offer most bikes, subject to availability.
How much work is involved for my HR?
We have developed BikeScheme to make it as simple as possible to run the scheme. A scheme can be set up on the portal within a couple of days. We suggest you appoint one person in your HR responsible for checking the eligibility of employees against the eligibility criteria. (Eligibility criteria are set by the government, but you can also add some rules of your own if you wish). You will have access to your company and employee’s data 24/7, so the minimal administration time can be fitted to suit you. Remember – we can also handle all the Hire Agreements and log them at no extra charge!
How much can my employees have?
The Minimum that an employee can choose is £100. The Office of Fair Trading has issued a Group Consumer Credit Licence allowing any employer to run a Cycle to Work Scheme. The Licence allows you to have equipment up to the value of £1000 inclusive of VAT.
Employers who have or obtain their own Consumer Credit Licence B (consumer hire) can allow employees to request an LoC value of more than £1000.
Can employees add some of their own money to the Letter of Collection to obtain a higher value bike?
No. The Department for Transport have issued guidelines that state that employees cannot do this. We have made the bikes available in £10 increments, so that employees can round up to a value close to the value of the bike and safety accessories.
Can someone have more than one bike?
Yes, provided that both add up to no more than £1000 and that both bikes are used for journeys to or from work. For example, one bike could be from home to the train station and left there, and the second bike could be used for the journey from the destination train station to work and back. Alternatively, an employee may choose to have a summer bike and a winter bike.
How long does it take to set up a scheme?
We offer a choice of a self funded scheme or a 3rd Party funded option. Depending on your choice of funding and the outcome of associated company credit checks, you can be setting up a scheme within a couple of days. You will be invited to download and post back to us original signed copies of the supplier agreements. Once these are in place the scheme can launch.
How long does it take to get a bike?
This depends on the choice of bike supplier, and also on the funding route. Halfords process orders on a weekly basis, so if Halfords offer your company 30 day payment terms, then employees can have their bikes within a matter of days. Alternatively, you can pay pro-forma on a weekly, fortnightly or monthly basis to suit. Once payment is cleared your order details are forwarded to Halfords or our Special Order suppliers accordingly. If you have chosen 3rd Party funding, then once the scheme has closed you will be sent lease documents and an invoice for the first month’s payment. Once these signed documents and a cheque have been sent back to us and received, our suppliers are notified, and Halfords LoCs are email out within the following 4 working days.
Which of my employees are eligible?
When running a cycle to work scheme it is important that you do not discriminate on any grounds, and so for example, you cannot offer the scheme to directors only or on favourable terms to them. Employees who are on NMW or under 18 can also benefit from the scheme; they will automatically be advised to contact us directly so that we can talk them through it, as the process is different.
What constitutes having mainly used the equipment for cycling to work?
The equipment should be predominantly used for commuting purposes, which includes journeys made between the employee's home and the workplace, or part journeys (for example, to the station), or for between one workplace and another. Provided the equipment is used predominantly for commuting purposes, then it can also be used during leisure time too. There is no set criteria for the employee to confirm they have satisfied the "mainly for work" requirement, such as frequency of use, miles travelled, or hours spent cycling. Employees are not expected to keep mileage logs but employers should make clear to them that if they do not use the cycle mainly for qualifying journeys, they may lose the benefit of the tax exemption. The Hire Agreement provided for participating staff through this scheme, which is signed by the employee, outlines this requirement, ensuring the employee is aware of their responsibilities
How do I reclaim VAT on the scheme?
ALL employers may reclaim VAT (INPUT tax) incurred on the initial purchase of the bikes and safety equipment.
ALL employers must account for VAT (OUTPUT tax) on bikes and safety equipment made available to their employees via salary sacrifice Cycle to Work arrangements.
Do I need a Consumer Credit Licence to run a scheme?
The Office of Fair Trading (OFT) has issued a group licence which authorises all employers to run cycle to work schemes without each employer applying for an individual licence. You can download a copy of the licence here>> if you wish.
Do I need to advise HMRC?
Yes, you need to write to your local HMRC office and inform them you are running a cycle to work scheme. You need to do this after you have set the scheme up. You do not need to seek their approval prior to setting up a scheme.
Can an employee enter into more than one Hire Agreement concurrently?
An employee can have more than one Hire Agreement for BikeScheme with you at any one time. However you must make sure that any combination of LoC values does not exceed £1000 in total. Our portal automatically checks this for you.
Who owns the equipment?
The employer company/leasing company owns the equipment. The legislation that governs cycle to work schemes quite specifically forbids the employee to own the equipment - and therefore there can be no automatic right for the employee to own the equipment at the end of the Agreement. If they do, they cannot claim the tax exemption
What happens at the end of the scheme?
After the Agreement period is over, the employer may offer to sell the equipment to the employee for its then fair market value. If the equipment is leased the leasing company will appoint the employer as the disposal agent. There can be no automatic right for the employee to own the equipment at the end of the hire term, otherwise the Agreement is deemed to be a Hire Purchase Agreement, which does not attract the same tax exemption. However, clearly it is in the interests of all concerned if the employer does sell the equipment to the employee at the end of the hire period. For End of scheme options, please click on the “End of Scheme” tab.
What if an employee leaves early or is made redundant?
If an employee leaves before the end of the scheme, they must pay their employer any outstanding salary deductions from their final net salary, as compensation for non completion of the salary sacrifice. They may then have continued use of the equipment without further payment until the hire period expires, when they may be invited to purchase the equipment and become the owner. It is important that the employee is not deemed to be given the automatic right to own the equipment otherwise they would not be able to benefit from the tax exemption. Employees must therefore not be offered the equipment to purchase until the culmination of the hire term. In the case of redundancy, the balance of payments due on the equipment can be deducted from the employee's redundancy settlement. The employer may of course choose to waive or reduce this amount.
Who is responsible if the equipment is lost or stolen?
All equipment obtained through the BikeScheme is the employee's responsibility and it is recommended that they take out adequate insurance to cover damage or theft, informing the insurance provider that the owner (either the leasing company or the employer) has an interest in the equipment for the duration of the hire term. (This may be covered under an employee's home contents insurance policy.)
For a great deal on Cycle Assist cover please click here>>
Can you come and visit my company?
In order for us to be able to provide BikeScheme to you free of charge, we do not make company visits. This is a green initiative and making journeys for face to face meetings are not necessary. We hope you are not offended by our policy please remember that you can contact us on 0333 200 5931 (charged at local rate) if you have any queries not answered within this website.
Why should I use Bikescheme – can’t I just go direct to a supplier?
Many cycle to work providers are not interested in companies with less than several hundred employees. Salary Exchange have used their expertise in administering Cycle2Work schemes on behalf of Halfords, and harnessed with their experience of running a range of employee benefit initiatives, they have created the bikescheme portals - sophisticated yet simple to use portals that take care of all of the hard work. Salary Exchange will hand hold you throughout the process and provide you with two dedicated helplines for you and your employees. Our proven formula will ensure that when you run a cycle to work scheme, it will have a successful outcome for all concerned, and will be fully compliant with OFT and HMRC regulations. Plus our services are free of charge.
Will a salary sacrifice scheme affect my benefits?
Possibly, although in most cases the effect is likely to be small. However, you need to be aware of the implications of paying less tax and NI contributions and accepting a reduced salary. It is recommended that you seek professional advice if you have any concerns or need more information.
What happens if an employee does not use the bike for commuting after they have joined the scheme?
They will no longer qualify for the tax relief afforded to this benefit. In such circumstances your payroll department will arrange for the remaining salary reductions to be taken from the employee’s net pay i.e. after tax and National Insurance have been deducted. They cannot return the cycle and have their salary re-adjusted.
For further details on running a BikeScheme, please view the Department of Transport Website http://www.dft.gov.uk/pgr/sustainable/cycling/cycletoworkguidance/
VAT: Can a VAT exempt organisation simply not claim the VAT on the purchase and not pay over VAT included in the amount of salary sacrificed?
Because the employer is making a supply of the bicycle, which is a supply for VAT purposes HMRC cannot set aside the normal VAT treatment that must be applied. A basic tenet of the VAT system is that VAT rests with the final consumer, in this case the employee.
Therefore, employers are expected to claim from HMRC the VAT incurred on purchasing the bicycle and pay over to HMRC VAT included in the payments received (the salary sacrifice).
VAT: My organisation have never reclaimed VAT and passed it on to employees: can we continue with our previous processes?
No, whilst employee’s savings will remain the same, you need to adjust your internal processes.
From 1st January 2012 you are now required to account for output tax on the salary sacrifice amount.
It may now be possible to reclaim the VAT (input tax) incurred on the initial purchase of the bikes and safety equipment (even if you didn’t previously do so). We continue to seek clarification from HMRC on accessing unclaimed input tax on previous schemes.
VAT: My organisation is not VAT registered: am I affected?
You will not be required to account for VAT on salary sacrifice payments nor will you be able to recover VAT on your original purchase of the bikes and safety equipment. The amount of salary sacrificed by your employees will be considered when determining whether or not you have exceeded the VAT registration threshold (currently £73,000).
Your employees can continue to benefit from tax and NIC savings through salary sacrifice and you will also benefit from NIC savings.
Should your business become VAT registered, you will need to account for VAT (from 1 January 2012) and may be able to recover input tax – subject to the usual VAT recovery rules.
VAT: What rate of VAT should an employer charge their employees for the hiring of a bicycle and safety equipment?
The hiring of a bicycle is chargeable to the standard rate of VAT (currently 20%). HMRC have confirmed that where safety equipment is provided with a bicycle to an employee then the safety equipment is incidental to the main supply of the bicycle and therefore the entire supply is considered to be chargeable to the standard rate of VAT.
VAT: Will employers be required to issue VAT invoices to their employees?
No, employers will not be required to issue VAT invoices to their employees.
VAT: Can a VAT partially exempt business reclaim all VAT charged on their bicycle and safety equipment purchase(s)?
Yes, as of 1 January 2012, VAT partially exempt businesses will be able to recover in full the VAT on their purchases. It is a principle of the VAT system that, broadly speaking, if you make supplies which are subject to VAT then you can reclaim the VAT charged on all purchases forming a direct cost component of the supply.
VAT: Can I pass on the “new” VAT charges to my employees?
Many employers implemented cycle to work schemes that will continue to exist on 1 January 2012 and had not budgeted for these “new” VAT charges when originally setting-up their scheme. These employers had relied upon the VAT guidance in force at the time which specifically stated that VAT was not payable on salary sacrifice payments. The VAT changes will clearly reduce the employer’s projected income from each employee’s salary sacrifice payments as VAT will become payable out of each employee’s salary sacrifice payment from 1 January 2012.
These employers may wish to obtain further payment from their employees to cover the new VAT charges. In the first instance, employers should consult their hire agreements to see whether the terms of the agreement allow them the right to demand further payment. In most cases, we expect the hire agreement to be silent on this matter and therefore any change to the arrangement is likely to require the employee’s consent. Likewise any proposal to bring forward all salary sacrifice payments falling on or after 1 January 2012 is likely to require the employee’s consent.
VAT: Will these VAT changes be applied retrospectively?
No, employers are only required to account for VAT on salary sacrifice payments made after 1 January 2012. HMRC will not look to assess employers for VAT on salary sacrifice payments arising before this date.
The changes will affect all existing C2W schemes in operation at 1 January 2012.
VAT: How will the VAT changes affect employers’ savings?
All employers will continue to benefit from employer NIC savings on the amount of salary sacrificed by an employee.
From the 1st January 2012 standard Employers’ NIC saving will increase with the inclusion of VAT in employees salary sacrifices as NI saving will be based on the gross value of the salary sacrifice inclusive of VAT.
Additionally, all VAT registered businesses are now able to recover (from HMRC) VAT charged on the original purchase invoice issued by Halfords (or the finance provider) - even where they couldn’t previously do so. We anticipate that employers will no longer pass on any recovered VAT to their employees via a reduced salary sacrifice, as employers will be required to account for VAT on the employee’s salary sacrifice payments.
VAT: How will the VAT changes affect employee savings?
From 1 January 2012 employees can expect to make savings between 32% (basic rate taxpayer) or 42% (higher rate taxpayer) on a new bike and safety accessories through income tax and National Insurance Contributions (“NIC”) savings.
Income Tax and NIC savings should remain unaffected for all employees already in cycle to work schemes except where the original terms and conditions are amended.
NB. In schemes where the VAT element has not been passed onto employees savings will remain unaffected.
VAT: What do the VAT changes mean for the future of cycle to work?
The VAT changes have removed the final layer of uncertainty surrounding the operation of the scheme and we are now all able to work from a position of knowledge and confidence - as such Halfords welcomes and supports the clarity the ruling provides.
Employers and employees will continue to benefit from fantastic savings available through Halfords’ cycle to work scheme
We remain at the forefront of scheme compliance and are working with our clients to deliver cost neutral schemes, which reflect the recent VAT changes and deliver fantastic employee savings (which typically cannot be matched by any other provider). We have been greatly encouraged by our clients’ responses to the changes and we believe that employers will continue to benefit from Halfords’ cycle to work scheme for many years to come.
VAT: What are the “new” VAT changes and when are they being introduced?
The change to the treatment of VAT in relation to Cycle to work schemes means that all VAT registered businesses providing cycle to work benefits to their employees through salary sacrifice arrangements will be required to account for VAT on all salary sacrifice payments falling on or after 1 January 2012.
This means that all cycle to work schemes in operation on 1 January 2012 will be impacted by these changes. All schemes concluding before this date will remain unaffected by the VAT changes.
These changes will have a knock-on effect entitling all VAT registered businesses to be able to recover (from HMRC) VAT charged on the original purchase invoice(s) issued by Halfords (or the finance provider) - even where they couldn’t previously do so.
Get Started!
If your company has less than 1000 employees, please click on the “apply now” link to get you started.
You can have a scheme live within a matter of days if you wish, although we suggest you plan a little further ahead to maximise the opportunities to communicate the Salary Exchange message to your staff.
Either way, you are not under any obligation to go ahead with a scheme.
Apply Now