The exemption removes the tax charge that would otherwise apply to cycles and cyclists’ safety equipment loaned to employees provided the following conditions are met:
- Ownership of the equipment is not transferred to the employee during the loan period;
- Employees use the equipment mainly for qualifying journeys; i.e. for journeys made between the employee’s home and workplace, or part of those journeys (for example, to the station), or for journeys between one workplace and another
- The offer of the use of a loaned or provided cycle (i.e. one for which ownership is not transferred to the employee) is available across the whole workforce, with no groups of employees being excluded. This does not necessarily have to be through a Cycle to Work salary sacrifice arrangement.
The tax exemption only applies when an employee
mainly uses the cycle and cyclists’ safety equipment for qualifying journeys. A qualifying journey for an employee means a journey, or part of a journey,
- between his or her home and workplace, or
- between one workplace and another,
in connection with the performance of their duties of employment. So, for example, cycling to and from the station to get to work would qualify. In this case, ‘mainly’ means that more than 50% of use of the cycle and safety equipment must involve a qualifying journey.
Employees are not expected to keep mileage logs but employers should make clear to them that if they do not use the cycle mainly for qualifying journeys, they may lose the benefit of the tax exemption. In that event the employer would have to report the benefit in kind on form P11D, and account for Class 1A NICs, in the normal way. The employee would be liable for the tax due on the benefit in kind.