Cycle 2 Work Scheme must be protected to help boost cycling
- By London Cycling Campaign on at 3:08pm 2 September 2010
- Posted in: News and blogs
- Tagged with: cycle to work, tax
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:
- Fewer employers are willing to adopt the scheme
- The financial savings are no longer a sufficient incentive to employees to participate
- Existing participants in the scheme may pay more than they were told
- 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."