Cycle to work for a single-director limited company
Yes. The company is the employer and the director is the employee, so both sides of the arrangement exist. What surprises most directors is that the tax exemption does not need salary sacrifice at all.
No minimum headcount
There is no minimum headcount in the rules, only in the sales models of the providers. The exemption applies where cycles are available generally to all employees, and in a company with one employee the offer is made to all of them. HMRC's guidance does not address one-person companies specifically, so that is a plain reading of the condition rather than a statement from HMRC.
The exemption does not need salary sacrifice
The exemption covers cycles provided to employees for mainly qualifying journeys, whether or not there is a salary sacrifice. HMRC's guidance on it, EIM21664, is written that way. The DfT guidance says the same from the other direction: where a sacrifice would take pay below the minimum wage, an employer can "hire a cycle to the employee without a salary sacrifice arrangement".
So a one-person company can buy a bike and lend it to its director, and the exemption still applies, provided the conditions below are met.
The two conditions
- Available generally to all employees. Every employee has to be able to take it up, even if not all of them do.
- Used mainly for qualifying journeys, which broadly means commuting and business travel. HMRC does not ask for detailed records. The test is treated as met unless there is clear evidence that less than half the use is for qualifying journeys.
Two ways to do it
| What differs | Company buys and lends it | Salary sacrifice through a scheme |
|---|---|---|
| Who owns the bike | The company | The company, or a scheme provider |
| Paid for from | Company money | The director's gross salary, through payroll |
| Needs a scheme provider | No | Yes |
| Capital allowances | Available to the company, which owns it | Only where the company owns it |
Which suits you depends on how you pay yourself, and that is a question for your accountant rather than for us. Nothing on this page is tax advice.
Capital allowances
The DfT guidance: "If you purchase cycles outright and cyclist's safety equipment to hire out to your employees, this will be capital expenditure and you can claim capital allowances in the normal manner." It adds that for many businesses the expenditure "will qualify for the Annual Investment Allowance", and that the company can keep claiming for as long as it owns the bike.
In other words, the guidance treats a bike the company buys outright to provide to an employee as capital expenditure, including for the Annual Investment Allowance.
At the end of the loan
If the director later buys the bike from the company, the same HMRC values apply as for any scheme. What happens at the end of the hire sets them out, including when a nominal price is genuinely tax-free.
Sources
Checked .
- DfT, Cycle to Work Scheme Guidance for Employers, June 2019: paragraphs B.3, B.8, B.16, B.17 and B.21.
- HMRC Employment Income Manual, EIM21664.
- Income Tax (Earnings and Pensions) Act 2003, section 244.