Cycle to work scheme

bikes and flowers What is the scheme?

*The University's cycle to work scheme has been updated and improved (April 2021)*

The University are partnered with the Green Commute Initiative to provide a Cycle to Work Scheme which allows eligible employees the tax-free hire of bicycles and related safety and security equipment. The scheme operates through a Government initiative aimed at getting more people to cycle to work.

The scheme allows staff to hire a bicycle (and safety and security equipment) from the University up to the value of £1,000 (incl. VAT) for standard (pedal power) bikes and up to a value of £2,500 (inc. VAT) for electric bikes, over an 18-month period. 

The scheme requires eligible staff to enter into a salary sacrifice agreement during the hire period which allows Income Tax and National Insurance contributions savings to be realised. The scheme will be open all year round.

Key considerations

Qualifyng Journeys (commuting to work)

Bicycles and/or safety equipment hired through the scheme should primarily (more than 50% of the time) be used for ‘qualifying’ journeys but can also be used for non-work journeys. 'qualifying journeys' means a journey or part of journey:

  • Between your home and work place;
  • Between one workplace and another;
  • To and from the train station to get to work.

If you don't intend to use the bike for 'qualifying journeys' you will not be able to join the scheme.

If you were to join the scheme and the bike wasn't used for 'qualifying journeys' you would become liable to an income tax Benefit in Kind charge.

Certain eligibility requirements must be met to qualify for participation in the scheme.

The salary sacrifice agreement will be effective for the duration of the hire period. After a 14 day “cooling-off period after signing the hire-contract, the contract is irrevocable.

If an employee leaves the University before the end of the salary sacrifice period the outstanding balance will be deducted from the employee’s final salary. 

It will be the employee’s responsibility to maintain and insure the bicycle. If a bicycle is stolen during the hire period the employee will still be required to make the remaining payments.

To be eligible you must:

  • be an employee of the University (with a contract in place for at least the duration of the salary sacrifice period but this scheme is not open to employees on probation),
  • earn more than the National Minimum Wage after salary sacrifice,
  • be aged 18 or over (Under 18s can join the scheme if their guardian signs a guarantor agreement),
  • intend to use the bike primarily for commuting to work (at least 50% of journeys should be for commuting to work).

There is no credit check for employees wishing to participate in the scheme.

Salary sacrifice occurs when an employee agrees to give up part of their salary for an agreed period (in the case of the Keele University Cycle to Work scheme this is 18 months) in exchange for a non-cash benefit, such as the loan of a bicycle and safety equipment.

As salary sacrifice is taken from the gross salary (before tax) rather than net salary it means the employee pays less income tax and National Insurance.

Example

Here’s an example of how the savings work during the hire period, assuming the following:

  • Employee is paid monthly,
  • Employee is a standard rate tax payer hiring a bike and safety equipment to the value of £500 (incl. VAT),
  • The hire period is 18 months,
  • The employee’s monthly gross salary is £1,200.00 (£14,400 per annum).

Before Scheme Participation 

 

Monthly Gross Salary (before tax and NI deductions)

£1,200.00

Monthly National Insurance contribution (12%)

£144.00

Monthly income tax contribution (20%)

£240.00

Monthly Net Salary (after tax and NI deductions)

£816.00

During Scheme Participation

 

Bike value including VAT

£500.00 

Monthly Gross Salary Sacrifice

£500 / 18 months = £27.77

Monthly Gross Salary after salary sacrifice (before tax and NI deductions)

£1,200.00 minus £27.77 = £1,172.23

Monthly National Insurance contribution (12%)

£140.66

Monthly income tax contribution (20%)

£234.44

Monthly Net Salary (after tax and NI deductions)

£797.13 

MONTHLY NET SALARY REDUCTION

(i.e. difference between net salary before scheme participation and net salary during scheme participation)

£816.00 minus £797.13= £18.87

MONTHLY SAVING

In this example, the employee makes a contribution of £27.77 to the employer, but it only costs them £18.87, resulting in a saving of £8.90 per month.

 

£27.77 minus £18.87 = £8.90

*The University's cycle to work scheme is currently under review so that improvements can be made to the scheme. Details of the new scheme will be available shortly and the new scheme will be launched in April 2021*

Step 1. Employees considering participating in the scheme should contact Karen Beeston, HR Advisor, (k.l.beeston@keele.ac.uk or ext 33404) to check they meet eligibility requirements. If you are currently working from home due to Covid-19 restrictions and not commuting to work It's advised that you delay joining the scheme until you resume commuting to work so that you can meet the 'qualifying journeys' requirement of the scheme.

Step 2. The University is partnered with Green Commute Initiative. Employees wishing to participate in the scheme should visit a bicycle store registered with the Green Commute Initiative (for store locator go to https://www.greencommuteinitiative.uk/gci-registered-bike-shops/ ) to choose a bike and, if required, safety equipment to a maximum of £1,000 including VAT for standard (pedal power) bikes and up to a maximum of £2,500 for electric bikes. Please note that safety equipment includes items such as lights, reflective strips, reflective clothing, and helmets, but not cycle computers, turbo trainers or waterproof clothing (unless reflective).

Step 3. Employees then apply via https://www.greencommuteinitiative.uk/quote/ using the unique Keele reference KEELEP for standard (pedal power) bikes and reference KEELE for electric bikes. 

Step 4. The University will check the application to ensure the employee meets the eligibility requirements (see Question 1 above). 

Step 5. Green Commute Initiative will then send to the employee two electronic agreements to sign, one being the hire agreement and the other the salary sacrifice agreement. The University will be notified and the salary sacrifice scheme will commence from the next available Payroll processing schedule/run after the notification is received. This will apply even if the employee has not yet redeemed the certificate.

Step 6. Green Commute Initiative will send the employee a voucher to redeem at the bike shop and notify the bike shop that the request has been notified. 

Step 7. The employee can then contact or visit the bike retailer to exchange the voucher for the bike package.

Step 8. At the end of the initial 90 day hire period Green Commute Initiative will contact the employee to discuss options concerning ongoing use of the bike. One of which is to extend the hire free of charge to continue to benefit from the use of the bike.

 

The scheme allows for bikes and equipment up to £1,000 inc.VAT. for standard (pedal power) bikes and up to £2,500 for electric bikes. The difference in value is due to electric bikes being much more expensive than standard (pedal powered) bikes. 

The bike and equipment remain the property of Green Commute Initiative throughout the hire period. Employees will have the option to take full ownership of the bike at the end of the 'loan' term or during the hire/loan agreement. We would reccomend you contact Green Commute Initiative to understand these options and any financial impact these may have.

It is the employee’s responsibility to maintain and insure the bike. If the bike is stolen you should inform Green Commute Initiative so that this can be administered and we can terminate your hire/loan agreement. You will be required to pay Keele University any outstanding monies owed under your salary sacrifice agreement. 

The University provide free monthly dr bike maintenance checks on campus. You can find further information on the bicycle users group webpages.

The cycling charity 'Sustrans' offer good advice on bike security here

Our cycle to work scheme provider Green Commute Initiative recommend bike insurance through a partner. Further details can be found here 

Employees should use the bike primarily for commuting to and, if relevant, between workplaces (at least 50% of the bike’s use should be for work purposes). However, the bike can also be used for non-work purposes. If you don't intend to use the bike for 'qualifying journeys' you will not be able to join the scheme. If you were to join the scheme and the bike wasn't used for 'qualifying joureys' you would become liable to an income tax Benefit in Kind charge.

Please note that employees cannot claim business mileage allowance with a bike that is being hired to them by their employer.

At the end of the initial 90 Day hire period the employee will be contacted by Green Commute Initiative and presented with their options. These include the option to purchase the bike at HMRC’s Fair Market Value, or select an extended free of charge loan. At the end of the extended loan period, the employee has the option to buy the bike for £1.

Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 14 working days following collection of the goods. This means that if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay (i.e. without any tax relief).

If applicable, the employee may then be offered ownership of the equipment in the normal way (please see Question 8 above).