Cycle-to-Work Schemes – Issues raised by HMRC Benefits and Expenses Sub GroupMonday, June 9th, 2008
The value of the benefit-in-kind for used cycles: HMRC only provides guidelines on the reasonable steps an employer should take to establish the second hand value of a cycle. HMRC has never indicated that it would accept 40% of the value when new as reasonable, or any other fixed percentage or figure. HMRC simply expects employers to take reasonable steps to establish the value by consulting, for example, the small ads in the local papers or enquiring at a local cycle shop.
Salary sacrifice and the potential benefit-in-kind: The tax and NICs exemption applies where the cycles are available generally to all employees on similar terms and where the ownership of the asset does not pass on to the employee and the cycle is mainly used for commuting journeys. The guidance is clear on this and each arrangement would be looked at on its own merits to see if the exemption applies. If the scheme arrangements were such that 16 and 17 year olds were precluded from participation because the scheme requires completion of a hire agreement (a requirement of the Consumer Credit Act) then the tax and NICs exemption would not apply for anyone as the scheme would not meet the “available generally to all employees” criteria. The issue is not one that HMRC can resolve but an approach to OFT might help to clarify the circumstances under which a hire agreement is required under the Consumer Credit Act.
The minutes also show that this second point raises a general issue about salary sacrifice schemes that place restrictions of any kind on who may participate. For example, employees with low hourly rates of pay may be precluded from making a salary sacrifice if, by so doing, their rate of pay falls below the National Minimum Wage. However, HMRC does not strictly apply the “generally available” rule to the provision of childcare voucher schemes. HMRC undertook to investigate this matter and report back at the next Sub Group meeting on 17 July.
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