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Cycle to work is changing – what does this mean for you?

Cycle to work is changing – what does this mean for you

The Department for Transport (DfT) has updated its guidance on cycle to work schemes – this is what you need to know.

Caroline Laffey

Partner, Tax and People Services

KPMG in the UK


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Cycle to work schemes are a popular part of many companies’ total reward packages. Provided certain conditions are met, the provision of bikes and safety equipment will be income tax free and, if offered through salary sacrifice, generate national insurance savings for the employee and employer.

What has changed?

Salary sacrifice cycle to work schemes often involve the employer entering into a consumer hire agreement with the employee for the loan of cycling equipment.

In principle, the employer must be authorised by the Financial Conduct Authority (‘FCA’) to offer consumer hire agreements. However, there is an exemption for qualifying cycle to work schemes where the value of the cycling equipment provided to each employee does not exceed £1,000.

Most employers limit the value of cycling equipment to £1,000 to benefit from this exemption.

However, many employers want to offer higher value cycling equipment, and the DfT has revised its cycle to work scheme guidance to allow this to happen.

The updated guidance now allows FCA authorised third party providers to enter into agreements with employees and run cycle to work schemes on behalf of the employer.

What do employers need to think about?

The updated DfT guidance is welcome, and many employers will be looking to amend their cycle to work arrangements to increase the value of equipment provided to employees.

The scheme provider will need to be an FCA authorised third party, but the employer may still be required to:

  • Seek ‘limited permission’ FCA authorisation to act as a credit broker; or
  • Act as an ‘appointed representative’ of the scheme provider (which would involve the scheme provider supervising the employer’s activities as its representative).

Deciding whether to increase the value of equipment provided will require employers to carefully consider their scheme rules, particularly in relation to National Minimum Wage (NMW) compliance and for leavers.

How can KPMG help?

KPMG’s tax and legal services team can assist employers with all aspects of compliance including the tax, NMW, consumer credit and FCA authorised activities aspects of cycle to work schemes.

If you would like to talk through how the revised DfT guidance might affect your cycle to work scheme, please get in touch with your normal contact or e-mail or

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KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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