London Cycling Campaign

LCC has expressed concern that new tax rules affecting the Cycle 2 Work scheme could reduce the number of new cyclists.

The Cycle 2 Work tax incentive scheme has allowed tens of thousands of people to buy a new bicycle at a reduced rate via their employer.

A recent 'clarification' of the tax rules could mean:

1. Fewer employers are willing to adopt the scheme
2. The financial savings are no longer a sufficient incentive to employees to participate
3. Existing participants in the scheme may pay more than they were told
4. Bike purchases might have to take place over 2 or 3 years, not 12 months as previously

When first introduced  the scheme encouraged employees to buy a bicycle - primarily for commuting - in instalments, with payments made from their salaries.

Under the scheme the  bike was in fact bought by the employer and then sold to the employee after a year or 18 months.

Exemption from tax on the payments meant that savings of up to 40% on a bike were typical.

However, new rules mean that employees will have to pay a much greater sum than previously if they buy the bike back after just one  year: 18% of the original value is the guidance from the Inland Revenue (for bikes under £500).

This falls to 13% after 2 years, 5% after 3, and 3% after 4 years Buying back a bike after one year will mean a significant reduction in the potential 40% saving.  

The IR says this is to reflect 'a fair price for the bike', but accepts that if a bike's condition has deteriorated its 'market value' could be lower.

It also says that accessories (shoes, locks, panniers), which can be included in the scheme,  only incur a nominal buy-back price.

LCC's Mike Cavenett said, "The Cycle2Work scheme is a proven scheme that has encouraged thousands of new cyclists.

"Making the scheme less attractive  undermines government ambitions to boost cycling just as it is gaining in popularlity in many regions."