Easement for employer provided cycles exemption
Published 3 March 2021
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This publication is available at https://www.gov.uk/government/publications/easement-for-employer-provided-cycles-exemption/easement-for-employer-provided-cycles-exemption
Who is likely to be affected
Users of the employer provided cycles exemption, which includes employers who offer a Cycle to Work scheme, and employees who are users of the scheme and are working from home due to the coronavirus outbreak.
General description of the measure
This measure will introduce a time limited easement to disapply the condition which states that cycles and cyclist’s safety equipment, where obtained through a Cycle to Work scheme, must be used mainly for qualifying journeys.
The easement will apply to existing users and will allow those employees to continue to benefit from the employer provided cycle tax exemption without needing to meet the qualifying journeys condition.
Policy objective
This measure is designed to minimise the financial burdens for employees who joined a Cycle to Work scheme expecting to meet the qualifying criteria for the employer provided cycles exemption, but due to the government’s COVID-19 restrictions, now find themselves unable to do so.
The easement will mean that employees who have received a cycle or cyclist’s safety equipment on or before 20 December 2020, will not have to meet the qualifying journeys condition until after 5 April 2022.
Background to the measure
The tax exemption for the employer provision of cycles and cyclist’s safety equipment was introduced to support employers in promoting healthier journeys to work and to encourage green commuting. Many employers offer this in the form of Cycle to Work schemes.
One of the conditions of the exemption is that the cycling equipment provided should be used mainly for qualifying journeys (to or from work or in the course of work).
However, the government’s COVID-19 restrictions have required employees to work from home where possible. Therefore, many existing users of the scheme are not travelling to work and may be unable to meet the condition for qualifying journeys.
The government is committed to supporting employers and employees through the COVID-19 outbreak. This easement will ensure that those who entered into an agreement with the expectation of meeting the qualifying journeys criteria but are unable to do so due to the COVID-19 restrictions, continue to benefit from the tax exemption.
No consultation has been held as this is a minor and temporary change which provides an easement.
Detailed proposal
Operative date
This measure will have effect on and after the date of Royal Assent to Finance Bill 2021 and will apply retrospectively.
Employees who have joined a Cycle to Work scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020, will be permitted to an easement, and will not have to meet the qualifying journeys condition until after 5 April 2022.
HMRC will exercise its collection and management powers and will not collect Income Tax and National Insurance contributions (NICs) liabilities prior to the date of Royal Assent.
Employees who join a scheme from 21 December 2020 will need to meet all the normal conditions of the exemption.
Current law
Cycle to Work, covered by a tax exemption set out at section 244 Income Tax (Earnings and Pensions) Act 2003 (ITEPA) was introduced to help employees with the cost of getting a cycle and/or cycling equipment.
The receipt of a cycle and/or cyclist’s safety equipment for the employee’s use would normally be treated as a Benefit in Kind (BIK), however this BIK is not taxable by virtue of s244 providing that conditions A to C are met.
Condition A is that there is no transfer of the property in the cycle or equipment in question.
Condition B is that the employee uses the cycle or equipment in question mainly for qualifying journeys.
Condition C is that cycles or cyclist’s safety equipment are available generally to employees of the employer concerned.
Proposed revisions
Due to the government’s COVID-19 restrictions, many employees who received a cycle and/or cyclist’s safety equipment, and were previously able to comply with all the conditions in s244 are no longer able to meet Condition B as they will not be using the cycle or equipment mainly for qualifying journeys.
S244 will be amended to remove the requirement for employees to meet Condition B, in relation to cases where an employee is provided with a cycle or cyclist safety equipment on or before 20 December 2020.
The easement will apply so that eligible employees do not need to comply with Condition B until after 5 April 2022.
The requirements set out in s244 will remain the same for employees who entered into an arrangement on or after 21 December 2020.
Summary of impacts
Exchequer impact (£m)
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| -5 | Negligible | - | - | - | - |
These figures are set out in Table 2.1 of Budget 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2021.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This proposal is expected to have a positive impact for employees who have been provided with a cycle or cyclist safety equipment on or before 20 December 2020.
This proposal ensures that individuals continue to benefit from the employer provided cycle tax exemption without needing to meet the qualifying journeys condition.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This proposal is expected to have a positive impact on businesses and civil society organisations who offer a Cycle to Work scheme for their employees. There will be a one-off cost in the form of familiarisation with the change.
There are not expected to be any continuing costs. There will be one off saving from not having to report information for those employees who have already joined a scheme but are unable to meet the qualifying journeys condition.
Customer experience is expected to stay broadly the same as there is no significant change to business processes.
Operational impact (£m) (HMRC or other)
There will be no operational impact to HMRC for this change.
Other impacts
This measure is likely to have a positive health impact for employees who joined a Cycle to Work scheme on or before 20 December 2020, as they will temporarily be able to use their cycle without needing to meet the qualifying journeys criteria.
Other impacts have been considered and none has been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact the employment income policy team by email: employmentincome.policy@hmrc.gov.uk.