Flexible Benefits Cycle to Work

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1 Flexible Benefits Cycle to Work How does it work? Within the Government s Green Transport Plan, there s a tax exemption which allows employers to provide cycles and safety equipment to employees as a tax-free benefit. It is the intention that the scheme is used to provide cycles that are primarily used for commuting to an employee s place of work although they can clearly also be used for other purposes. The Inland Revenue guidance is that the cycle should be used a minimum of 50% of the time for commuting to work (note that this does not mean that you have to commute by bike for 50% of the year). They can also be used for only part of a journey, such as cycling to and from a railway station or between work locations. The employer buys the bikes and safety accessories at full retail price, including VAT which is reclaimed in the normal way, if applicable. The balance is recovered from a reduction in the employee s gross wages (salary sacrifice). The employer technically hires the cycle and accessories back to the employee, initially for a 12 month period with equal payments being deducted from salary on either a monthly or weekly basis. Under the Inland Revenue scheme rules it is not possible for the Company to agree in advance to give the employee an option to purchase the cycle outright at the end of the agreement. However the Company s chosen scheme provider, Halfords, will contact any participating employees after 10 months to explain the options available at that stage. These may include an option to extend the hire period at a nominal cost. What is a salary sacrifice? A salary sacrifice means giving up part of your salary in exchange for a non cash benefit; in this case, the bike and safety accessories is the maximum you can spend! You can spend anything from 100 up to a maximum of 1,000 on a bike and accessories. This can work out to as little as 5 per month

2 Example savings Employee Savings without VAT* Retail Price Basic Rate Taxpayer 20% Tax, 11% NI Income Tax and NI Saved Net Monthly Payments Total Cost of Bike Package % Savings over 12 months 31% 31% 31% Higher Rate Taxpayer 40% Tax, 1% NI Income Tax and NI Saved Net Monthly Payments Total Cost of Bike Package % Savings over 12 months 41% 41% 41% Example How do I apply? Complete the Flexible Benefits Enrolment Form for , indicating your wish to participate in the Cycle to Work Scheme. You will need to provide a contact address so Halfords can get in touch with you. You also need to confirm the amount you wish to spend on the cycle and accessories. See the frequently asked questions below for further information on what Letter of Collection value to select. You can read further details of the scheme and start reviewing cycles and accessories at What happens next? We will approve your application and send your details to Halfords shortly after the end of the flexible benefits enrolment window. Halfords they will then your hire agreement to you. On receipt of this, you will have up to 20 March 2015 to sign your hire agreement and print off your Letter of Collection. You then need to take the Letter of Collection and a form of personal identification to the Halfords store where you plan to purchase the cycle and any equipment up to the value of the total spend. Other arrangements can be made by ordering on-line or from other independent shops via Halfords see the website for details. You can then start using the cycle and accessories. The Company will pay Halfords directly and arrange to make the salary deductions. In around 10 months time you will be contacted by Halfords and you will be advised of the options for the end of the 12 month hire period

3 Frequently asked questions See also Can I add my own money to the value of a Letter of Collection in order to get a more expensive bike? No. To be eligible for the tax break, the bike must remain the sole property of the employer for the duration of the hire period. For that reason the selected Letter of Collection must cover the full cost of your selection (bike and accessories) and you cannot add to that. What happens at the end of the loan period? There is no automatic entitlement for you to take ownership of the cycles and safety accessories at the end of the loan period. However, we may choose to give you the option to purchase the equipment. For further details of the options that may be possible, see the Halfords end of hire solutions document on the Volt. What bikes are available through the Halfords cycle2work scheme? Halfords have a wide range of brands in-store, online and via the UK Partner Independent Bike Shop Network. See the "Our Brands" section of the website. Who owns the equipment? The legislation that governs a cycle to work scheme states that the employer must own the equipment. There can be no automatic right for the employee to own the equipment at the end of the Agreement. If they do, they cannot claim the tax exemption. Therefore a cycle to work scheme operates as a loan: the employer is technically loaning the equipment to the employee for a fixed-period of time. Although employees do not actually own the equipment, they remain custodian of the equipment and are free to use it as they wish, providing it is mainly for cycling to work. Who is responsible if the cycle is stolen, damaged and for ongoing maintenance? The employee. Monthly salary deductions will continue irrespective of any loss or damage to the cycle. Check your home insurance details and notify your insurance company as appropriate. Can a Letter of Collection be used to get a bike for a family member, partner or friend? No. The cycle must be used by you, mainly for commuting to work. For example: journeys made between the home and workplace, or part journeys (e.g. to the station), or for journeys between one workplace and another. What happens if I do not use the bike for commuting after I have joined the scheme? You will no longer qualify for the tax relief afforded to this benefit. In such circumstances your payroll department will arrange for the remaining salary reductions to be taken from your net pay i.e. after tax and National Insurance have been deducted. You cannot return the cycle and have your salary readjusted

4 If I decide not to participate in the scheme now, can I join later? Depending on the success of this year's scheme, we may choose to repeat it in the future. However, the Company cannot guarantee that there will be another opportunity to participate. What if an employee leaves early or is made redundant? If you leave before the end of the hire period, you must pay the Company the balance of the amount still to pay and this will deducted from your final net pay. You may then have continued use of the equipment without further payment until the hire period expires, when you may be offered the opportunity to purchase the equipment for its then fair market value. However this transfer of ownership is the subject of a separate agreement and is not governed or influenced by the Hire Agreement you sign for this scheme. What equipment is available? Cycles and cyclist's safety equipment are included. The tax exemption defines a "cycle" as "a bicycle, a tricycle or a cycle having four or more wheels, not being in any case a motor vehicle" (192(1) of the Road Traffic Act 1988 (c52.)). An electrically assisted pedal cycle can be included under the scheme. Cyclists' safety equipment is not defined in the legislation and a common sense approach should be taken when selecting it. This could include: 1. cycle helmets which conform to European standard EN 1078, 2. bells, 3. bulb horns, 4. lights including dynamo packs, 5. mirrors and mudguards to ensure the riders visibility is not impaired, 6. cycle clips, 7. dress guards, 8. panniers, 9. luggage carriers and straps to ensure luggage is carried safely, 10. locks and chains to ensure cycle can be safely secured, 11. pumps, 12. puncture repair kits, tool kits and tyre sealant to allow for minor repairs, 13. reflective clothing, 14. white front reflectors, 15. and spoke reflectors. 16. child seats Current guidance from HMRC states that bike Satnavs and cycle computers are not allowed within the Cycle to Work Scheme. When can I collect my bike? If it is in stock at your chosen Halfords store simply surrender your Letter of Collection and present a form of ID. If it is not in stock, you should request that your chosen bike is ordered in to that Halfords store. Your bike will then be built and inspected by a qualified bike mechanic, ready for you to ride away

5 What is a Group Consumer Credit License? The Office of Fair Trading has issued a Group Consumer Credit License allowing any employer to run a cycle2work scheme. The license allows you to hire equipment up to the value of 1,000 inclusive of VAT. How do I know what Letter of Collection value to select? You should select a letter of collection that covers the value of your chosen bike. You can take advantage of any in store promotions or sale prices when selecting a bike from the Halfords store network. If you are selecting a bike outside of the Halfords range which will be sourced via the Independent Bike Dealer network, Halfords will always source the current model of the bike at the RRP. This is to maintain consistency of price and availability across its customer base. I need help with my cycle2work application: who should I contact? Halfords are available to help you with your application - Cycle2Work helpdesk: available at and [email protected], - Halfords store network: the Bikehut team at any of their stores can provide advice on bike type, sizing and maintenance. - Halfords Head Office Bike Technician: if you would like some help matching your specification and requirements to a bike within the Halfords range, please provide full details to the cycle2work helpdesk. They can refer your enquiry to a Bike Technician who can make recommendations, taking in to consideration your requirements and budget