Cycle to work scheme for single director businesses

The Cycle to Work scheme is a government initiative that helps people across the UK save money on a bike or bike accessories if they intend to cycle to work. The ‘cycle-to-work tax breaks apply equally to directors of one-person limited companies as they do to regular employees of large businesses. In that case, a company (employer) can buy a bike and bike accessories and loan it to the director (the employee) for qualifying business journeys.  

How can a limited company director join the scheme? 

There is no need for prior approval from HMRC (HM Revenue and Customs) or an agreement to be drafted when single director businesses join the scheme. Fundamentally, there is no “scheme” to join intrinsically, but the company can utilise the beneficial tax legislation relating to the use of bicycles and bike safety equipment – by buying a bike or bike safety equipment and loaning it to you for qualifying journeys to work.  

After directly purchasing the bike, the company can reclaim VAT, where relevant, on the purchase price. For corporation tax purposes, a deduction may be claimed on the cost of the bike using the capital allowances annual investment allowance (AIA). 

Conditions to be met for the purchase to qualify for The Cycle to Work scheme 

To be eligible for The Cycle to Work scheme, you must meet these conditions: 

• The bike remains owned by the company during the loan period. 
• Use the equipment for qualifying journeys, for at least 50% business use. Qualifying journeys are those made between the employee’s home and workplace, travel to clients, journeys between one workplace and another or part of those journeys (for example, to the station). 

What can I get through the scheme? 

You can only redeem adult bikes and cycling accessories that you will be using yourself.  

Accessories you can get, include: 

• Safety accessories like helmets, bike lights, reflectors, mirrors, bells, and locks. 
• Essential accessories necessary to cycle like clothing and shoes, mudguards, panniers, and backpacks. 
• Components and parts that keep your bike in great shape like pumps, puncture repair kits, cycle tool kits, tyre sealant, groupsets, wheels, cranksets, and cassettes. 

Accessories are treated as revenue expenditure, eligible for corporation tax relief. 

However, you cannot get: 

• Scooters & electric scooters 
• Action cameras 
• GPS computer 
• Kids/Junior bikes 
• Cycling technology 
• Cycle Carriers 
• Bike building costs 
• Delivery costs 
• Bike repairs and maintenance 

I already have a bike; can I still take part? 

Kind of! You can still take part in the scheme by getting a second bicycle, or use the scheme for eligible accessories only to your existing bike. 

Taxable benefits 

There will be no taxable benefit-in-kind for the director arising from the use of the bike. Hence, there will be no need for a tax reduction in salary to offset the cost of the bike, and your wages summary will remain unaffected. 

Later ownership by the director 

When the bike ownership is transferred from the company to the director the taxable benefit will only be charged on the value of the bike at the date of transfer. If the market value is difficult to obtain, the following table details HMRC accepted percentages that can be used against the original purchase price of the bike, when determining these transfer values: 

The company may pay corporation tax on the market price in the accounting period the transfer of ownership took place. 

Claiming mileage for using my bike 

You can claim mileage for bikes you own personally and use it for journeys to and from your temporary workplace. HMRC lets you claim 20p per mile for business journeys, but it is important to be careful during the period the company owns the bike. 

Can I extend the scheme to other employees? 

Yes, as long the recipient receives a salary through the Pay-As-You-Earn (PAYE) system. The Cycle to work scheme will be automatically covered- by your group consumer credit license if the cost of the bike and equipment is less than £1,000. However, if the cost exceeds £1,000, you must set up a separate Consumer Credit License for your company. 

Help with Cycle to Work Scheme as a limited company director 

Please visit the government’s website to learn more about setting up a cycle to work scheme. You can also reach out to us for help in answering Cycle to Work scheme Frequently Asked Questions and general guidance.