Alpine Bikes - Cycle to Work

Frequently asked questions

• Employees who have contracts of employment that outlast the duration of the salary sacrifice period.
• According to Scottish law, employees need to be 16 years of age or older.
• Employees must pay tax via the PAYE system.
• Employees must not drop below the minimum wage once the loan repayment has been deducted from their gross salary.

A salary sacrifice occurs when an employee agrees to a reduction in pay in return for the employer providing a non cash benefit. The reduction comes out of the employee's gross, rather than net pay. This causes a reduction in income tax and National Insurance payments, which is where the savings are made.

Yes. The primary use for the bike should be for work related journeys travelling to and from work or between work sites. The bicycle can be used for recreational purposes the rest of the time.

No, by ensuring that the Hire Agreement, terms & conditions, FAQ's and any other supporting marketing material clearly state that the primary use for the bike must be used for work related journeys, the employer is doing all that is required to ensure compliancy. Alpine Bikes staff are trained and aware that the bicycle must be suitable for travelling to and from work.

The bicycle must be suitable for travelling to and from work. For this reason children's bicycles are not available to hire under the scheme.

The normal length of the repayment period is 12 months. Ultimately this decision is made by the employer, though Alpine Bikes would not recommend a repayment period of more than 18 months. An employee would have the right to cancel the lease agreement after 18 months, unless an exemption from the Office of Fair Trading is received to stop employees from doing this. Employers are able to choose a repayment period of less than 12 months if required.

As the bicycle equipment will belong to the employer, the employee must:

• Make sure that the bicycle and equipment is insured. The easiest way to do this is to get it added to household contents insurance, if it is not already covered. Replacement equipment is not available under the scheme. If the bicycle equipment goes missing or is damaged, the employee will still have to pay the monthly amount for the remainder of the repayment period.
• Keep the bicycle equipment clean and in good order.
• The following rules apply so that the employee does not pay tax on this benefit:
• The bicycle equipment is used primarily to commute to work;
• The bicycle equipment remains the property of the employer for the length of the repayment period.

No, at the end of the repayment period the employee won't own the bike and equipment. To be able to save on the tax and National Insurance contributions, the agreement must be a Hire Agreement not a Purchase Agreement. At the end of the scheme it is common for the employer to offer to sell the bicycle and equipment to the employee for a fair market value (Alpine Bikes will be able to advise of the fair market value of a bicycle and safety equipment at the end of the scheme), although employees must be made aware that there is no guarantee of this taking place. Alternatively the employer may allow the employee to continue to use the bicycle without ownership of the bicycle being transferred to the employee.

Up to £1,000 on the total package (bike and accessories). If an organisation wishes to offer bicycles and equipment to the value of more than £1,000, the employer must have a Consumer Credit Licence. For a limited company, a Consumer Credit Licence costs £970 and is an indefinite licence that does not expire. The application to receive one normally takes 6 to 10 weeks. For more information on the Consumer Credit licence please click here.

If the employee leaves the employer before they have repaid the full amount then:

• The employee will have to repay the outstanding amount that is left to pay from their final payslip. However, this amount will not be tax-free as it will be taken from their net salary.
• So for example, if they leave a year into the hire agreement for a £300 bicycle, and they have paid £200 so far, they will have to pay the remaining £100 outstanding on the bicycle. The employee will not be entitled to receive the Tax and National Insurance savings on this outstanding £100. However, they will still have benefited from saving the Tax and National Insurance contributions on the first £200.
• If the employee's final salary does not cover the outstanding amount, they will be sent an invoice for the remainder of the balance.

When each employee chooses a bicycle and equipment, Alpine Bikes will advise them of the warranty period, as they vary with each bicycle‚ some bicycle frames feature a 5 year, 10 year or even lifetime warranty. If the employee experiences problems within the duration of the warranty period, Alpine Bikes will liaise with the supplier on the employee's behalf. The employer, despite owning the equipment, will not need to be involved in the warranty process at all.

Alpine Bikes will not charge your organisation for implementing the scheme.

The cost of implementing a Cycle to Work Scheme can be negligible. Some administration duties are detailed below but there are also significant opportunities for the employer to save while using the scheme. For example, for every £500 an employee hires on the scheme, the employer saves £64 NI contributions. Private companies can also claim capital allowances on the cost of the bike and safety equipment while they are owned by the employer.

These savings can help offset any set up costs and if additional revenue is created from implementing a scheme. This revenue is normally used to improve cycling facilities within the organisation. We would recommend that you have secure bicycle storage facilities at work to prevent theft. For more information and advice on this please contact cycle2work@alpinebikes.co.uk.

The level of administration to set up the scheme can be outlined as follows:

• Making the legal documentation as supplied by Alpine Bikes available to all staff
• Assist in marketing the scheme using the tools provided by Alpine Bikes
• Checking the eligibility of employees and issuing authorisation letters
• Implementing the salary sacrifice process
• Paying invoices from Alpine Bikes within agreed terms
• Managing leavers from the scheme
• Dealing with the fair market value payment if required.

Yes. There may be an impact on an employee's entitlement to benefit payments such as Statutory Maternity or Paternity Pay, Statutory Sick Pay and Working Tax Credit, as they will be calculated on the employees reduced pay. There may also be an impact on the employee's state pension.

No. The scheme is set up so that under the current tax rules the employee does not have to pay tax on the benefit and therefore the employee does not have to notify HMRC.

The employer does not need to inform HMRC prior to the start of the scheme. However, it is advised that the employer submits an example of an employee's payslip prior to the scheme starting and an example of an employee's payslip once the salary sacrifice has been started to ensure the reductions have been implemented correctly.

You can find out more about Cycle to Work by downloading the Department for Transport's Information Booklet about the scheme. To download this booklet follow this link.

• Employer's Cash Flow: Running a scheme where your organisation pays for the bicycles upfront, then gets the money back via employee salary sacrifices, may have cash flow implications for your organisation. Alpine Bikes also offers payment terms for companies looking to have 12 or more employees on their Cycle to Work scheme. For more information or advice on this please contact cycle2work@alpinebikes.co.uk.
• Repayment Period: This is usually 12 months, however the employer can set a shorter repayment period.
• Consumer Credit Licence: As a rule, employees can choose bicycles and safety equipment up to a maximum value of £1,000 under the Cycle to Work Scheme. However, if your organisation has a Consumer Credit Licence, there is no limit to the value of the bicycles and equipment your staff can choose. If you apply for a Consumer Credit Licence the application process normally take between 6 and 10 weeks and the licence costs a one-off payment of £970. For more advice please contact Alpine Bikes by emailing cycle2work@alpinebikes.co.uk.
• Shared Ownership: The employee cannot share ownership of the bicycle with the employer over the hire period. This means that when a limit is set (say, at £1,000) the employee cannot opt for a more expensive bike by paying the difference to Alpine Bikes.
• Transfer of Ownership: At the end of the scheme, employees will not own the bicycle or safety equipment, the employer will. This is because salary sacrifice is a hire agreement, not a purchase agreement. Transfer of ownership can take place with a one-off Fair Market Value payment (plus VAT) if so wished. If your organisation does transfer ownership of the bicycle to the employee with a one-off Fair Market Value Payment, it must be a separate agreement after the hire period is complete. You can also choose to allow the employee to continue using the bicycle after the hire period is complete without transferring ownership. The bicycle then remains the property of the employer and, as such, can be declared as an asset in your company accounts.

This is the formal agreement between the employer and the employee and contains the salary sacrifice details and terms and conditions. Alpine Bikes will provide this document as part of our Cycle to Work service. We recommend that you complete two copies; one for the employee’s records and one for the company.

1. The employee selects a bicycle and safety equipment at their local branch of Alpine Bikes. With the help of our friendly staff they will fill in their Customer Order Details Form with details of their chosen Cycle to Work bike and accessories and the total cost. The Customer Order Details form will double up as a Pro Forma invoice however, if you would like a separate Pro Forma invoice please let us know.
2. The employee then takes their form Customer Order Details form to your HR / finance / personnel department who approves the purchase.
3. Your company arranges for the payment to be processed directly to Alpine Bikes:
   Alpine Bikes Ltd
   A/c: 00395768
   Sort: 80-06-60
   VAT reg: 6638 36212
4. Together with your employee sign the Hire Agreement form.
5. Once the payment has been cleared by Alpine Bikes, your employee will receive confirmation that their Cycle to Work bike and accessories are ready for collection.
6. In order to collect their Cycle to Work bike and accessories, your employee should visit their Alpine Bikes shop ensuring that they bring photo ID.

If you are looking to have more than 12 employees who are going to join the Cycle to Work scheme, Alpine Bikes will be happy to set up an account for you to simplify the process. Please contact accounts@alpinebikes.co.uk for more information.

You can even take advantage of the Cycle to Work Scheme if you are a sole trader. If you use the PAYE scheme, you can buy the bike as an employer and lease it back to yourself as an employee, thus saving yourself between 30% and 50% off the bike's retail price.

If, like many sole traders, you pay yourself an occasional lump sum rather than a regular salary, you will not be able to commit to a monthly salary sacrifice, so you won't be eligible to join the scheme.

You can still make savings however, if you intend to use a bicycle for work-related journeys. You would purchase the bike from Alpine Bikes in the normal way then claim back capital allowances and write the purchase off against tax. To do this you will require an invoice from Alpine Bikes addressed to your company and we can supply this to you on request.

This facility is explained in the Department for Transport Cycle to Work Scheme booklet. Alpine Bikes recommends that you discuss this option with your accountant before purchasing the bike.