Features

The cycle to work scheme is a winner

David Woods , 27 Apr 2011

bike

Love him or hate him, the outwardly bumbling, yet surprisingly articulate, mayor of London, Boris Johnson, is doing his bit for the environment: by making cycling sexy.

Famed himself for cycling to and from work, BoJo has worked tirelessly to increase the number of cycling routes in the capital and to introduce a public rental bike scheme (fondly dubbed Boris Bikes).

But while, in an ideal world, every able-bodied employee would be getting fit and healthy and lowering carbon emissions by cycling to work, the reality is different. Crammed tube and rail carriages, soaring fuel and ticket prices, traffic jams, road rage, never-ending 'upgrade work' on transport networks - not to mention congestion charges and the hunt for that all- important parking space - have become as much a signature of the average commuter's morning routine as a paper cup full of overpriced coffee.

But the good news is that cycling is growing in popularity: in 2008, 4.75 billion km was travelled by bike in the UK - up 0.5 billion on the previous year.

And the Government is walking the talk when it comes to sustainable transport. Last year, it released a white paper linking sustainable transport to the goal of stopping climate change and the minister for cycling, Lib Dem MP Norman Baker, commented: "I want to support as many people as possible to take to two wheels.

"The benefits of cycling run much deeper than balance sheets or carbon footprints. It is a crucial life skill as well as offering easy, exhilarating exercise," he added.

The Government's public health white paper, Healthy Lives, Healthy People, published last November, speaks of the Department of Health "working with employers to unleash their potential as champions of public health". In addressing the root causes of ill-health, employers "should look to support the health and wellbeing of their staff", the white paper states.

And another white paper, this time from the Department for Transport, Creating Growth, Cutting Carbon: Making sustainable local transport happen, published in January, seeks to ensure sustainable transport will help create growth in the economy and tackle climate change, by cutting carbon emissions. Local authorities have been tasked with addressing climate change, by delivering cleaner environments, improved safety and increased levels of physical activity.

According to consultancy Westminster Advisers, which is lobbying the Government through cycle providers' body the Cycle to Work Alliance, the cycle-to-work scheme plays a vital role in helping Government not only achieve its transport policies, but also its health and climate changes too.

The initiative is a tax-efficient and salary-sacrificed employee benefit. Employers buy cycling equipment from suppliers and hire it to staff. At the end of the loan period, the employer may choose to give the employee the option to purchase the equipment. The alliance estimates that 260,000 people and 15,000 employers are using the scheme.

Alexandra Arikoglu, senior account executive at Westminster Advisers, explains: "The cycle-to-work scheme enables employers to encourage staff to take part in a healthier commute. The scheme is consistent with the Government's theme of encouraging behavioural change, while the savings offered play a vital role in incentivising individuals to live healthier lives, reduce their carbon emissions and contribute to a more sustainable transport system."

Keith Scott, head of business services at bike manufacturer Halfords, believes the benefits speak for themselves: "The scheme improves health and wellbeing of the workforce, including mental engagement. It supports recruitment and retention, enables employers to make savings on national insurance, reduces on-site car parking pressures and carbon footprint."

A cycle-to-work arrangement is cost-neutral for employers to run because the administrative fees are paid through the national insurance savings from the tax- exempt benefit.

In August, HM Revenue and Customs (HMRC) set out to simplify administration for employers around cycle-to-work schemes - but news headlines claimed the ruling could make it more expensive for employees.

HMRC decided the estimated percentage value of the cycles at the end of a one-year cycle-to-work scheme loan would be increased from 5% to 18% - a significant increase.

It is common for cycles provided under salary- sacrifice arrangements to be sold or transferred to employees after the end of a period of loan.

The HMRC guidelines state if a cycle is transferred to an employee after a period of use as a benefit during which the tax exemption applied, the transfer may be taxable either as earnings or as a benefit. HMRC composed a matrix table for employers to work out the market value for secondhand cycles. This means a bicycle that cost £500 new will be worth 18% of that in a year, going down to 16% after 18 months and 13% after two years. After five years, the price will be negligible.

A £500 bike would cost an employee £41.66 per month from their gross salary. Under the new rules, it seems the 18% would double that to become £90.

But Daniel Gillborn, head of commercial operations at Cyclescheme, explains: "HMRC doesn't want to damage the cycle scheme, just clarify it. The matrix is only concerned with what happens to the bikes when they go from the employer loan into the employee's possession.'

Halfords' Scott adds: 'The clarification resulted in misinformed publicity about how break savings could be eroded. In reality, these arrangements make cycle-to-work an even more attractive benefit, and employers are enthusiastic about them, loving their simplicity, their certainty on the transfer process and the enhanced savings they bring for participants."

Employers have the option to extend the hire period from one year to up to five years, with a notional or even nil transfer value at the end of the period or make a P11D declaration of the end of hire term value (based on the HMRC matrix) as a benefit in kind, which is then taxed at the scheme participant's marginal tax rate to reduce the transfer-of-ownership payment.

Cyclescheme allows employers to give the bikes to it after one year, meaning employees can buy the bike at between 3% and 5% of its original value - which, according to the matrix, would be what it is worth in four years. The staff member can re-join the cycle-to-work scheme and have another bicycle, enjoying the tax perks again, should they wish to do so.

Linda Henry, group personnel manager at Associated British Ports, believes the provider should be able to clarify the position to employers. She said: "Our provider Halfords' cycle-to-work end-of-hire-term processes bring clarity on transfer value. It has designed solutions that mean we can offer a significant employee benefit through a hassle-free process."

Gillborn explains: "There is no evidence HMRC will remove [any] tax benefits. It has tinkered with the scheme, clarified its position and now it will leave it alone."

One of Boris Johnson's biggest headaches is public transport. Transport for London (TfL)'s main role is to implement his transport strategy. But for the mayor to encourage Londoners to get on their bikes, TfL should be following suit. And it is.

Take-up of TfL's own internal cycle scheme, started in 2006, has increased each year. Over 2100, the scheme has enrolled 529 staff, with the figure for 2011 set to be even bigger. The scheme is run through benefit provider Asperity, with Halfords supplying the cycles.

Patricia Roach, TfL's reward delivery manager, explains: "There is always a lot of interest from staff wanting to know when the next enrolment is and how much they can spend and save by joining it."

Positive news then, that with continuing pre-Olympic 'improvement work' across the transport network, one method of getting to work is thriving. Thanks, BoJo.

Figure it out

Research released in February from the Cycle to Work Alliance has discovered that 89% of employers believe the scheme is an important means of improving employee engagement and 98% of employees said they would encourage other colleagues to take part in the cycle-to-work scheme.

The Cycle to Work Alliance's Behavioural Impact Analysis, published in February, which surveyed over 44,500 employees, examined the benefits of the cycle-to-work scheme and the motivations that drive demand both from the users of the scheme and the employers who offer it.

The research discovered that the cycle-to-work scheme is recognised as an important way to reduce carbon emissions. Users of the scheme in the UK save 133,442 tonnes of carbon dioxide (CO2) every year.

This works out as the equivalent of the total annual CO2 emissions of 24,000 homes or a city larger than Hereford or 76 full Boeing 747s flying around the world - more indeed than the combined fleet of British Airways and Virgin Atlantic's Boeing 747s.

There is a direct health benefit from cycling to work, with 87% of participants noticing their health improving and 84% of users rating the scheme as an important and easy way for them to keep fit.

The scheme plays an important role in helping new cyclists get started. The research found that 61% of people did not cycle to work before they signed up to the scheme and 70% classed themselves as either novice or occasional cyclists.

The scheme drives trade to the cycling industry, with 76% of participants stating they would not have bought their bicycle if they had not been offered one through the cycle-to-work scheme.

The financial benefits provided by the scheme are central to its success in delivering behavioural change, with 73% of respondents declaring that the savings they were offered through the scheme were the most important factor in their decision to take part.

Case study - Bristol City Council

In 2008, Liverpool had the honour of being named European City of Culture. Not so many people know that in June of the same year Bristol was named the UK's first Cycling City.

Bristol City Council launched a project showing its commitment to promoting and encouraging cycling through better infrastructure, training and promotion, in a bid to introduce a healthier way of living for residents, as well as better air quality, less traffic congestion and safer roads. As part of the commitment, the council took steps to promote cycling within its own employee base.

Gary Bevan, cycle-to-work scheme administrator for Bristol City Council, explains: "In keeping with the Cycling City accolade, the council has made great efforts to promote green, healthy and sustainable travel modes to its staff. In respect of cycling to work and encouraging the use of bicycles for relevant council business, our cycle-to-work scheme was introduced.

"This is a 'salary sacrifice' scheme through which our employees can get a new bike for commuting to work, taking advantage of tax and national insurance savings allowed for under the scheme. Savings of up to 40% can be achieved for staff participating in this scheme."

Since the Bristol initiative started in June 2008, it has attracted nearly 800 participants.

Bevan adds: "It remains a very popular benefit with staff and even during the past three months of this very severe winter we are still experiencing healthy uptake from employees new to the scheme.

"The scheme has also been of considerable financial benefit to the council in the form of reduced employer's national insurance contributions. This is a particularly important benefit as it helps to illustrate the tangible value of scheme participation for employers, in addition to the host of benefits for our employees who choose to participate and ride to work on a regular basis."

 

 

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