TR0028

Written evidence submitted by the Cycle to Work Alliance

 

Introduction

 

Does the current suite of tax reliefs represent good value for money?

 

The Cycle to Work scheme is a hugely popular and highly effective initiative that has already benefitted around 2 million people, setting it apart as one of the most effective tax reliefs that employees can access.

 

The economic benefits associated with the Cycle to Work scheme are:

 

 

The role of the scheme in promoting behaviour change:

         Supporting the UK workforce: The scheme supports increased rates of cycling activity among employees, helping to reduce the number of journeys taken by car and reducing carbon emissions. Evidence published by TfL shows that cycling also contributes £5.4bn to the UK economy through increased retail spending, reduced road maintenance, reduced healthcare costs and a range of other factors.  

         Supporting employers: Cycle to Work Alliance data shows that almost 90% of employers believe the Cycle to Work scheme helps improve employee wellbeing. Meanwhile, almost half of employers said the scheme is an integral benefit in their workplace.   

 

Do cliff edges in the structure of tax reliefs lead to problems for taxpayers, businesses or for the wider economy?  

 

Please outline potential reforms to the system of tax reliefs

 

Low Earners

         Government should introduce a specific exemption for the Cycle to Work scheme, allowing employers to enter staff into a salary sacrifice arrangement for the specific purpose of obtaining a bike and safety accessories through the scheme, even if it brings their take-home pay below National Minimum Wage.

         The Cycle to Work Alliance has developed a comprehensive set of safeguards to protect scheme users earning at or near the NMW, including integration of cost-calculators as part of the process for joining the scheme to help lower earners understand the required payments, as well as a mechanism that can identify whether an employee’s income is likely to be taken below NMW.  

         Where an employee’s wage would be taken below NMW, we have also proposed integrating a warning system to clearly indicate that this would be the case, and a verification process that would require the employee to confirm they understand the risk that salary sacrifice payments could bring them below the NMW threshold. This will likely be in the form of a checkbox and we will link to our FAQ page to clarify any further queries.   

 

Self-employed

         HMRC currently publish a list of allowable expenses for self-employed workers. These include office, travel, and uniform costs, for example.

         To enable self-employed sole traders to benefit from the scheme, this guidance should be updated to include the Cycle to Work scheme as a permissible expense under travel costs.

         The Department for Transport should also remove the current statement which explicitly states that self-employed people cannot participate.

         Self-employed workers would then include the purchase of a bike under their allowable expenses, just as train tickets and fuel are currently.

         Scheme providers could work with the self-employed to process the administration behind the salary sacrifice benefit, and as with all employers, get to work in engaging and activating cycling to work in their mindset.

 

October 2022