AN OVERVIEW
The employer buys the bike and accessories, up to a maximum £1,150.00 inc VAT, and loans it to the employee. The employee repays the employer the total sum less VAT over 12 months, or 18 months, without that amount being subject to National Insurance or Income Tax. After 18 months the employee gets to buy the bike from the employer for £50, or 5% of the purchase price.
THE EMPLOYER
You or your employee select a bike and accessory kit which you then buy and claim back the VAT. You then agree to let your employee repay you the cost, without the VAT, over an agreed period (usually 12 months but can be 18 months) which you deduct before tax and NIC. You can also claim up to 25% in the first year on capital allowance. After 12 (or 18) months you can sell or give the bike to your employee.
THE EMPLOYEE
You agree to repay your employer the cost of the bike and accessories, less VAT, over an typical 12 month period. In return the deductions will be taken off your salary BEFORE income tax and National Insurance and thus you will be able to buy the bike for almost 50% of what it would have cost you normally.
