Cycle scheme puts brakes on tax

Employers may claim incentives on staff bike purchases

A little-known tax clause allows firms to shift gears into greener business practices and bring incentives to their bottom – and waist – line, tax experts advise.

Under the government’s Green Transport Plan, businesses can receive significant tax breaks by purchasing bicycles for their employees.

Employees may buy bikes from their employer with no tax added if they pay full market value for the bicycle. For the employer, the purchase price of the bike and all necessary equipment, such as a safety helmet, lights and a lock, are tax-deductible expenditures.

Employers may also claim tax breaks for any mileage rate they pay to staff. Up to 20p per mile can be paid to employees who cycle for a work-related purpose free of tax or National Insurance contributions.

The plan also abolishes tax on the cost of providing parking spaces for bicycles.

“This scheme is an attractive proposal for small businesses keen to be at the forefront of new initiatives for their staff and to implement greener business practices,” said Karl Sandall, chief executive of tax specialists TaxAssist Direct and business advisor to the Bank of England’s Monetary Policy Committee (MPC).

“Company car regulations currently discriminate against those who drive cars with large engines that have high CO2 emissions, so this scheme offers businesses a way to balance up their travel costs and have a clear conscience.”

Sandall said that the scheme provides added benefits in having a healthier staff, taking less time off work for illness, and boosted morale.

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