An Introduction to the Tax Free

Bicycle Scheme
Contents
Overview of the Tax Free Bicycle Scheme Page 2
Benefits of a the Scheme Page 2
How the Scheme Works Page 3
Risks associated with running a Scheme Page 4
The Service Page 4
Project Stages Page 5
Commitment Agreement Page 6
Fact Find Page 7
Next Steps Checklist Page 8

Any Questions?
Call: 0870 6091114

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 1 Doc Ref: InformPack Version 1.1 – 12th April 2006
 An Introduction to the Tax Free Bicycle Scheme

Overview
Tax Free Bicycle Schemes (Bike schemes) enable organisations to loan bicycles to their employees free of
income tax and National Insurance.

The 1999 Finance Act introduced an annual tax exemption, which allows employers to loan bicycles to
employees as a tax-free benefit. The exemption was one of a series of measures introduced under the
governments Green Transport Plan.

Employers can loan bicycles to their staff as a tax-free benefit on the condition that the bicycles are mainly used
to get to and from work or for work-related purposes. The employee ‘buys’ the bike at the end of the loan
period for a nominal sum. With a budget of, say, £400, the employee can now afford a bike, plus accessories,
worth £800. Implementing the benefit as a reduction in salary (through Salary Exchange) enables savings to be
made by both the employee and employer.

In June 2005, the Department for Transport re-launched the cycling tax incentive as ‘Cycle to Work’ with a
maximum of £1000 of Tax Free benefit available.

Bike Schemes have already proved extremely successful with over 300 organisations taking advantage of this
unbeatable offer.

We have developed a cost free, simple method of implementing a Bike Scheme for any size of organisation.

Benefits of the Scheme

Scheme
Bike schemes allow employees to enjoy the use of a top of the range bicycle at a saving of up to 50% of the
typical retail price. Tax and NI savings alone generate approximately 33%- 41% cost savings for the employee,
depending on their rate of taxation. Your company also save 12.8% on their Employers NI contributions
making it attractive for you too.

The government have also made the scheme VAT free, so staff save even more if you are VAT registered.

Organisation Benefits Employee Benefits

A saving on income tax of 22% or 40%
A saving on National Insurance Contributions of 12.8%
(depending on Tax bracket)
A saving on National Insurance Contributions of 11% or 1%
Increased loyalty – attractive benefit package
(depending on Tax bracket)

Part of Green travel and environmentally friendly Huge savings on bicycles when compared to the High Street

No cost involved to set up the scheme Easy terms through Payroll

No credit checking and no deposit

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 2 Doc Ref: InformPack Version 1.1 – 12th April 2006
 An Introduction to the Tax Free Bicycle Scheme

How the Scheme works

You loan a bicycle to your staff and in return the employee agrees to a monthly reduction in their gross salary
(a salary exchange) for the use of the bicycle during the loan period. An employee agrees to accept a lower
amount of salary in return for a benefit, in this case, a bicycle.

We run the scheme for 12 months where the employee can take advantage of up to £1000 of benefit. At the end
of the term, the employee is offered the option of either buying or returning the bicycle for a nominal payment.
Schemes work this way to take advantage of the specific tax legislation within the 1999 Finance Act.

There are two main legislative requirements for you to adhere to when running a Scheme:

1. Implementing an effective Salary Exchange through your Payroll (Governed by Revenue and Customs)
2. Using compliant documentation to the Consumer Credit Act – (Monitored by Trading Standards)

We offer full guidance for you to implement the scheme and provide a suite of compliant documentation.

We work with Giant and Marin, two of the leading bicycle brands in the UK. There will be a range of bicycles
on offer including Gents and Ladies models, mountain bikes, lifestyle bikes and racing bikes.

We regularly change the specifications of the bicycles in the scheme and you choose when you want your
employees to be offered the scheme. You can elect to take part in a scheme in any calendar month and we will
send you the relevant brochure to distribute to your staff during this period. Full details of how the scheme
works and the effect of the Salary Exchange arrangements are included in the brochure so that your staff are
made aware of any implications.

During the ordering window, you are responsible for collecting orders from your staff and entering them onto
our secure online orders system. The order system is your permanent record of your staff taking up the scheme
and the products ordered. There is a suite of reports available within the system so you can manage the scheme
proactively.

The organisation can either purchase the bicycles outright and own them for the duration of the scheme, or fund
the scheme through a lease that we will set up for you. With the lease option, the leasing company owns the
bicycle for the duration of the scheme. In all cases, ownership transfers to the employee at the end of the
scheme after the final nominal payment has been made.

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 3 Doc Ref: InformPack Version 1.1 – 12th April 2006
 An Introduction to the Tax Free Bicycle Scheme

Risks associated with running a Scheme

To take part in the scheme, your employee will sign a Hire Agreement with you covering the period of the loan.
The Hire Agreement acts as an amendment to their terms and conditions of employment so they accept a salary
exchange in return for the bicycle. This also states that they will pay any outstanding amount owed to the
organisation in the event that they leave your employment.

The organisation recovers the cost of providing the scheme to the employees over 1, 3, 6 or 12 months. There is
very little financial risk associated with our 12 month scheme because the maximum bicycle cost is £1000 and
the entire cost of providing the scheme is recovered by the organisation from the employee in a short
timeframe. It is unlikely that staff will leave the organisation during the payment period so the risk of not being
paid for the bicycle is small.

You will need to incorporate a check during your leavers process to see if there is a balance due on the loan of
the bicycle and recover it through a lump sum deduction.

We also recommend a contingency fund is created from the National Insurance savings you are making to
offset any liability should you not recover lump sums due for any reason.

The Service

We will ensure that any scheme is implemented with minimum red tape and disruption to the day-to-day
running of the organisation. Our service is pain free and includes everything you need to implement a Scheme
in a structured and co-ordinated manner. Our service includes:

• Production of a compliant Scheme Brochure and Hire Agreement to use.

• Provision of our electronic order management system to enter and track orders.
• Setting up a lease to fund your scheme if required.
• Supplying electronic advertising material to distribute to staff.
• Supplying all bicycles directly to your staff.
• Providing a National Call Rate helpline for ordering advice and customer support.
• Providing advice and guidance on Salary Exchange and literature to send to Revenue and Customs.

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 4 Doc Ref: InformPack Version 1.1 – 12th April 2006
 Project Stages

Stage 1

You complete and return the following documents to us:

• Commitment Agreement
• Fact Find
• Recent set of Accounts (If you require Lease Finance for the scheme)

Stage 2

• We establish a lease provider for your scheme (Only if Lease Finance is required)
• We add you to the launch schedule for the appropriate month
• We provide you with full details of how to implement Salary Exchange on your
Payroll
• We send you an electronic teaser for you to advertise the scheme to staff

Stage 3

• We send you the information on the lease being established (If required)
• We set you up on the online Order System and provide instructions on how to use it
• We send you posters to advertise the scheme to your staff

Stage 4

• The Scheme is launched and we send you an electronic brochure and order form.
• You distribute the brochure to your staff
• You collect orders from your staff and enter them onto our online order system

Stage 5

• The Scheme closes and we raise the schedule for the orders made
• You sign off the invoice/lease to enable deliveries
• We deliver the bicycles
• You set up the salary exchange payroll deductions for the appropriate staff
• You pay the monthly lease invoice (if leasing selected)
• At the end of the scheme you make a final deduction from net pay from your staff for
them to take ownership

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 5 Doc Ref: InformPack Version 1.1 – 12th April 2006
 Commitment Agreement

Are you happy with your obligations?

Please
Tick We understand that there is no obligation on us if our staff do not make any orders through the scheme.

Please We are happy to implement Salary Exchange through payroll for our staff if any orders are made.
Tick (Full guidance and support are provided – See Page 3)

Please We have read and understand our commitment for handling early leavers and acknowledge our liability
Tick should we not recover outstanding amounts owed by our staff – See Page 4
Please
Tick We are happy to promote the scheme to our staff.

Our commitments

• Produce a compliant Scheme Brochure and Hire Agreement to use

• Provide the use of an electronic order management system
• Establish a lease provider to fund the scheme (Depending on credit worthiness)
• Supply electronic advertising material to distribute to staff
• Supply and deliver all bicycles to employees
• Provide a National Call Rate support line for ordering advice and customer support for the duration of the scheme
• Provide advice and guidance on Salary Exchange and provide literature to send to Revenue and Customs

Your commitments
• Provide the most recent set of Accounts (if lease finance is required)
• Promote the scheme to staff using the materials provided
• Collect orders from staff and enter them onto the electronic order management system
• Sign off the orders schedule to allow delivery of the bicycles to staff
• Make the salary reductions from staff participating in the scheme
• Pay the monthly leasing invoice (if lease finance selected)
• Make final salary deductions should any staff leave the organisation before the end of the scheme
• Make the final payment from staff for them to take ownership and pay the invoice for this

SIGNED by or on behalf of the parties:

For and on behalf of: SME HCI Ltd:

Signature:.……….………………………… Name:……………………………………... Date:……………..

For and on behalf of: ……………………………………………………………………………..… (The Customer)

Signature:.……….………………………… Name:……………………………………... Date:……………..

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 6 Doc Ref: InformPack Version 1.1 – 12th April 2006
 Fact Find

Organisation Name

Address

Are you VAT Registered?

VAT Number

Contact Name

Job Title

Telephone Number

Fax Number

E-mail address

Number of permanent staff on payroll

Do you have an electronic Payroll?

If yes, which system do you use?

What month do you want to run a

scheme?

Do you require Lease Finance for the

scheme?

Referral Code (If applicable)

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 7 Doc Ref: InformPack Version 1.1 – 12th April 2006
 Next Steps Checklist

If you want your organisation to participate in the Bikes Scheme, just follow these simple steps:

Please
Tick

Step 1 - Complete and Sign the Commitment Agreement and send it back to us
(Found on Page 6 of this pack)
This outlines the responsibilities for both parties

Please
Tick

Step 2 - Complete the Fact Find and send it back to us

(Found on Page 7 of this Pack)
This provides us with additional information to run your scheme

Please
Tick

Step 3 - Send us a copy of your most recent set of Accounts

(Only required if you want Lease Finance to fund the Scheme)
This enables us to obtain the necessary finance for you to fund the scheme.

When you have sent these back to us, we will acknowledge receipt and keep you
informed of the progress towards your launch

SME HCI Limited

The Studio, Hunts Hill House, Hunts Hill Road, Guildford, Surrey, GU3 2AH
Tel: 0870 6091114 E-mail: info@smehci.com
Page 8 Doc Ref: InformPack Version 1.1 – 12th April 2006