HMRC internal manual

Employment Income Manual

EIM21667 - Particular benefits: bicycles: transfer of bicycle to employee

As explained at EIM21664, employers commonly offer loans of cycles to employees under salary sacrifice arrangements. It’s not unusual for a cycle to be sold to an employee after the end of the loan period.

If ownership of the cycle is transferred to an employee after a period of use as a benefit during which the exemption described in EIM21664 applied, this may fall within the meaning of ‘earnings’ in section 62 ITEPA 2003. To the extent that section 62 does not apply, the transfer will be a benefit and the cost of that benefit is the market value at the date of transfer. This is different from the ‘special rule’ for working out the taxable amount under the benefits code when assets are transferred after a period of use as a benefit.

Even when the tax charge arises under section 62 the liability is returned on form P11D because the charge arises on a non-monetary asset, rather than being collected through PAYE. Only Class 1A NICs will be due.

If a cycle is transferred to an employee at a nominal value (say 5% to 10% of the original retail price), then if the market value is higher, the employee will be taxable on the difference. See EIM21667a for details of an optional simplified approach to valuing cycles sold after the end of a loan/salary sacrifice period.

The exemption from tax and NICs for loaned or hired cycles only applies where there is no transfer of the property in the cycle or equipment in question. This means that the exemption will cease to apply if ownership is transferred to an employee. Similarly, the exemption will not apply if any agreement builds in from the outset an automatic transfer of ownership to the employee at the end of the hire period.