The Cycle to Work Alliance has welcomed the new rulings from HMRC, calling them a ‘helpful clarification’ on the tax implications of the scheme for the companies taking part in it.
The ruling now allow participating companies to plan with certainty on how to apply the benefits of the C2W scheme for employees, it said.
The Alliance comprises significant providers of the cycle to work scheme – Cyclescheme, Cycle Solutions, Evans Cycles and Halfords.
The Alliance said: “The new ruling on VAT does not mean a blanket reduction in benefit of 20 per cent. Some scheme participants such as financial service companies, and partially exempt organisations, will now get additional benefits as they will be able to recover the VAT in full and this enhances the attractiveness of the scheme for such providers.
“For those already fully VAT registered the impact on savings will not apply at 20 per cent of the purchase value of the bike as this will be offset by an increase in Income Tax and National Insurance Contributions’ savings, which will continue to apply.”
The Alliance also said it welcomed the fact the change will take place from January next year, giving the bike industry five months to manage the change.
It added that the scheme savings typically amount to up to 43 per cent, even after the new ruling has been put in place.