Cycle to Work Alliance given compromise on VAT ruling

Posted - September 29, 2011

Those that joined the cycle to work scheme before 27th July this year will now not have to pay VAT on their remaining payments, thanks to a clarification from HMRC.

HM Revenue and Customs (HMRC) have confirmed it will be issuing a new Brief on the change, in order to make the transitional arrangement clear.

Now, cycle to work scheme agreements that were signed on or before 27th July 2011 with payments that stretch into 2012 will not be subject to the changes announced in regards to VAT. Those that signed after this date will have already had the changes incorporated into their arrangements to ensure full compliancy with the new ruling.

The move comes following pressure from the Cycle to Work Alliance, who represents the country’s top cycle to work providers including Cycle Solutions. They argued that the move had placed extra work on the shoulders of employers who had implemented the cycle to work scheme before the announcement was made.

Cycle Solutions Director, and Chair of the Cycle Alliance Steve Edgell advised; ‘The Cycle to Work Alliance is delighted to have worked with HMRC to achieve this new Brief. It is a victory for common sense and ensures that employers who followed the previous guidance will not be affected by the changes.

‘The cycle to work scheme is recognised by Government as an important means to encourage more active and environmentally friendly commuting.’

On the 28th July 2011 HMRC announced that VAT would need to be covered on salary sacrifice arrangements. The announcement came following a ruling from the European Court of Justice over the case between HMRC and Astra Zeneca and whether companies should recover VAT from employees who obtained vouchers through salary sacrifice. This new ruling affects all salary sacrifice schemes including cycle to work.

If you think this has affected your scheme and have any questions about the information above, please get in touch. You can call us on 0845 279 9970, or email us at info@cyclesolutions.co.uk with any queries you might have.

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