An independent body set up by the UK's coalition government last summer to simplify the tax system has advised against scrapping the Cycle to Work scheme.
The initiative – where workers can get up to 40 percent off the price of a new bike by 'hiring' it from their employer and then buying it for a nominal fee, thus avoiding VAT on the purchase and paying less income tax and national insurance on their earnings – was among a number of incentives highlighted for review by the Office of Tax Simplification.
The Office has this week recommended that the scheme be retained, saying that it plays an important role in getting people onto bikes and encouraging them to live healthier lives. It has presented its findings to the Chancellor of the Exchequer, George Osborne, and a formal response is expected as part of the Budget on 23 March.
Cycle to Work has been a huge success since it was introduced in the Finance Act of 1999, with over 400,000 people signing up. The Cycle to Work Alliance's recent Behavioural Impact Analysis found that 76 percent of scheme users wouldn't otherwise have bought a bike, while 87 percent have noticed health improvements.
Keith Scott, a representative of the Alliance – which is made up of four providers of the scheme (Cyclescheme, Cycle Solutions, Evans and Halfords) – said: “We're delighted the Office of Tax Simplification has recognised the important work the Cycle to Work scheme plays in supporting the Government’s health, environment and sustainable transport policy.”
There was speculation last year that new guidance from HM Revenue & Customs regarding the 'final market value' of bikes bought via the scheme – ie. the amount an employee has to pay their employer at the end of the 'hire' period – would lead to a terminal decline. However, a report published by the Alliance last month remained hugely positive about its impact.