Employees using cycle to work schemes which were signed on or before July 27th 2011 will not have to pay VAT on the remainder of their salary sacrifice payments following a new announcement.
HM Revenue and Customs (HMRC) confirmed it will be issuing a new brief shortly to make these new transitional arrangements for VAT rules clear.
The Cycle to Work Alliance said it had worked closely with HMRC on the move. HMRC will shortly issue further clarification on the judgement of the European Court of Justice’s ruling on applying VAT to salary sacrifice payments, including C2W.
Cycle to work scheme agreements which had been signed on or before the July 27th 2011 cut off – and which extend beyond 31st December 2011 – will not be affected by the new VAT changes. Participants signing up to the scheme after July 28th 2011 will have the VAT changes built into their salary sacrifice payments by their provider. The Alliance said it called for this amendment to reduce the administrative changes for existing schemes.
Chair of the Cycle to Work Alliance and director of Cycle Solutions Steve Edgell explained: “The Cycle to Work Alliance is delighted to have worked with HMRC to achieve this new Brief. It is a victory for common sense and ensures that employers who followed the previous guidance will not be affected by the changes.
“The cycle to work scheme is recognised by Government as an important means to encourage more active and environmentally friendly commuting.”
Cyclescheme, a member of the Cycle to Work Alliance, said it had played an instrumental role in securing the compromise. Daniel Gillborn, head of Commercial Operations at Cyclescheme, added: "This goes to show that working with the No.1 Cycle to Work provider, clients can be assured that they are getting the best advice and unrivalled expertise.
Coupled with our recent news that Evans Cycles is joining our Partner Store network we are confident that Cyclescheme continues to represent the best proposition for all stakeholders i.e. Participants, Employers and especially the Independent Bicycle Dealer network (IBD), where we have consistently grown their share of this market.”
The Alliance added that Ministers are in agreement that the cycle to work scheme forms a key plank in the Government’s strategy to tackle objectives for sustainable transport, carbon reduction and promoting improved public health.