Rules for the operation of the salary sacrifice scheme in conjunction with Cyclescheme for the provision of bicycles and equipment

Who are Cyclescheme?

  • Cyclescheme is an independent company created to help both employers and employees take advantage of the Green Transport Plan Initiative and the associated tax benefits of the scheme.
  • Cyclescheme use their industry experience and trade contacts to get you riding to work on a bike of your choice from your local preferred participating bicycle shop.

Who is entitled to use Cyclescheme?

Under this agreement, salaried employees of the LSE who:

  1. Have a contract of employment that outlasts the duration of the salary sacrifice period of 12 months.
  2. Have a salary which will not be reduced beneath the national minimum wage (as a result of the salary sacrifice).
  3. Have completed a minimum of three month's service.
  4. Are UK taxpayers.
  5. Are over 18 years of age.

Why use Cyclescheme?

Cyclescheme customers are not limited to any particular bike or accessory brands and therefore can choose the best for quality and value-for-money. This results in the optimum package of bike, accessories, and safety equipment.

Cyclescheme work with the LSE, under this arrangement to ensure that hire agreement terms and conditions are written in full compliance with the Office of Fair Trading regulations, HM Revenue and Customs, Trading Standards and the Department for Transport.

Cyclescheme is also fully supported nationwide by 12 representatives who liaise with independent bike dealers providing up-to-date literature and point-of-sale material.

What support will Cyclescheme offer to you when the scheme is running?
Cyclescheme will offer full support for handling your queries, and advice on choice of bike and safety equipment. Cyclescheme partners (the cycle shops in your area who are partnering with the School and Cyclesheme) will be your local port of call for test riding etc. Once the bike package is purchased these local bike shops will also handle servicing and any warranty issues.

Savings and money matters

What is a salary sacrifice arrangement and how do I make my savings?
A salary sacrifice happens when an employee gives up the right to receive part of the pay due to them under their contract of employment in return for the employer's agreement to provide some form of non-cash benefit, in this case the loan of a bicycle and related equipment. You are paying back the loan on your goods from gross - rather than net - salary for the 12 months of the hire period.

The actual amount of discount appears to be a bit vague - precisely how much do I save on my equipment?
Typical savings are 33% but the precise amount depends on your personal tax band.   It can vary from 23% up to 42%.  An individual being taxed at 40% will save a bit more than someone who pays standard rate tax.

Is there any limit on the price of the bike I can obtain?
No, there is no limit on the price of the bike, provided the salary sacrifice does not bring your salary beneath the national minimum wage.


Is the bike mine straight away?
No, the bike and goods remain the property of the School until the hire period finishes. At this point you will be given the opportunity to buy your bike at a fair market value.

At the end of the 12 month loan period you may be given the opportunity to take ownership of the bike, or to sign a hire agreement with Cyclescheme.

If you decide to buy the bike at this point, the fair market value will be between 18% and 25% of the original cost.

However, if you sign an "extended use agreement" with Cyclescheme, you can continue to use the bike for a small refundable deposit (3% or 7%). At the end of the extended hire period of 36 months, you will be become the owner of the bike.

See the Cyclescheme website for details.

What happens if the bike gets stolen before I've paid for it?
It will still be down to you to complete the full payment even if you no longer possess the bike. It is very important to insure the bike, and any goods fitted to the bike, to safeguard against the losses following theft. You can obtain safety equipment from Cyclescheme's partnering shops, where you can ask for Home Office-approved 'Sold Secure' D-locks and cable locks to conform to insurance companies requirements.

What happens if I don't want the bike at the end of the loan period?
If you choose not to buy the bike you will have to return it to Cyclescheme.

How Cyclescheme works

How do I go about getting a tax-free bike through Cyclescheme?
The scheme is a voucher scheme and you will need to apply for a voucher to redeem against your goods when you go to collect them from a local participating bicycle shop. To obtain your voucher you need to:  

  • Visit your local participating bicycle shop to choose your equipment and obtain a written quote.
  • Go to the Cyclescheme website  and request your Cyclescheme Certificate, if you are a computer user or,
  • Contact Dominic Burchnall (7078) if you are not a computer user and want your order placed for you.
  • Complete and sign the Hire Agreement (which is sent to you) and return it to Dominic Burchnall.
  • Collect your secure voucher from Human Resources.
  • Redeem your voucher at the bike shop and collect your goods (you must provide your LSE photo ID card to do this).
  • Start to pay back your loan from gross salary, via salary sacrifice. Your first payment will be deducted from your salary in the month that you receive your voucher.

What is the timeframe involved?
This scheme will run from December 2006 onwards.  Each month there will be a deadline for applications, which will be the payroll deadlines, as per the HR webpages:

Employees should have their vouchers shortly after the application deadline.

Are there any eligibility criteria for employees?
The Scheme is open to all salaried full- and part-time employees of the LSE whose term of employment is longer than the period of the loan (12 months) and who have worked for a minimum of three months.
To take advantage of the tax breaks that result from salary sacrifice please also note:

  • You need to be a UK taxpayer
  • You need to be over 18 years of age to comply with Consumer Credit Act legislation
  • You need to be earning more than the national minimum wage after your loan repayment has been deducted.

What is the payback period?
12 months with a monthly salary sacrifice.

What is the hire period?
12 months from the date of voucher issue?

How many times a week to I have to use the bike for work?
There is no requirement for you to cycle to work for a specified number of days throughout the year and there is no special requirement for you to record your trips. You can also use the bike for leisure at weekends and on holiday, although a bike purchased under Cyclescheme should be used for at least part of 50% of the trips you do to work.

Do I have to keep a record of my commuting mileage?
HM Revenue and Customs does not expect employees to keep a record of mileage.


Is it my responsibility to insure my bike?
Yes, even though you are still paying for your bike through salary sacrifice.

What's the best way to insure the bike?
Household policies are usually much cheaper than specialist policies but you must ensure that the insurer covers the bike when in storage away from your home. You also need to check that there's no upper limit on a claim (if you have a reasonably expensive bike).

If your bike cannot be covered on your home insurance then specialist insurers are available.

Consumer credit licence

Does the School need a consumer credit licence? 
The School has a licence in place to cover bike packages up to £10,000. When you and the School sign the Hire Agreement, the resulting relationship is defined under the terms and conditions of the Credit Consumer Act. 

Fair market value

What is the fair market value payment?
A fair market value payment is the amount that a willing buyer would pay to a willing seller to purchase certain property at a particular point in time. At present there are no guidelines for judging the fair market value but Cyclescheme have established a fair market value of 5% after 12 months.

At the end of the 12 month loan period you may be given the opportunity to take ownership of the bike immediately (at a cost of 18%-25% of the original cost), or to sign an "extended use agreement" with Cyclescheme. If you sign a hire agreement with Cyclescheme, you can continue to use the bike for a small refundable deposit of between 3% - 7%. This must be paid at the end of the 12 month period. The bike will officially change ownership after an additional 36 months.

See the Cyclescheme website for more detail.

Getting the bike mail order

Can I get a bike from Cyclescheme mail order?
Cyclescheme's partner shops are capable of supplying bike packages mail order from their shops, under the Government's green travel plan. However, there are distinct advantages when buying from your local bike shop that will be the first port of call for advice, servicing, after sales and warranty.


Do I need to maintain the bike myself?
You are responsible for maintaining the bike for your own use. Your local shop will be able to advise you about necessary servicing depending on how you use your bike. They are also likely to give your bike a first free service once you have bedded it in.

Changing jobs

What happens if I leave my job before I've finished paying for my bike?
Under the terms of the hire agreement and the Credit Consumer Act, the agreement to pay your loan is "non-cancellable". This means that you will need to settle all outstanding monies before you leave. The outstanding balances will be deducted from your final net salary payment. Settlement will be from net pay because once you leave the School, you also leave the bike scheme, and are no longer eligible for tax deductions.

Effects of salary sacrifice

How will salary sacrifice affect my pension?
Your pension contributions are payable on your full salary. Consequently, your pension and related benefits are not affected by the sacrifice.

What happens if I go on unpaid leave?
During approved unpaid leave such as maternity leave, the hire agreement period will be extended by the number of months when the salary was not paid and the School was not able to collect payments.

And maternity/paternity/parental/sickness leave?
Your reduced income may also have an effect on the following:

Statutory maternity pay

Employees with sufficient service and who meet certain conditions may be entitled to statutory maternity payments during a portion of maternity leave which will be affected by the participation in the Bikes Scheme. Although statutory maternity pay is a flat rate for part of the qualifying period, the first 6 months are usually paid at a rate of 90% of average weekly earnings. During this period, normal deductions will continue to be made. When you go on maternity leave, payments will be suspended until either of you return or you resign from the post. If you return, payments will be restarted. If you resign, you will need to pay the balance due.

During maternity/paternity/parental/adoption leave: you will continue to have the bike and equipment on loan during your absence with your gross salary still at the reduced level according to the salary sacrifice arrangements. You will continue to have deductions made from any payments you are receiving and/or will accrue a debt that will be recovered as soon as you return to work and receive a payment from the School.

What happens if I am made redundant or my contract is terminated?
Employees with sufficient service and who meet certain other conditions may be entitled to statutory payments on redundancy. It is possible, though unlikely, that such payments could be affected when you join the scheme.

If you leave the School before the final deduction has been made from your salary you will be obliged to pay the remaining amount in full.

Does it affect my student loan payments?
Yes. Your student loan repayment is 9% of your earnings over £17,355. This will alter as the trigger point is based on salary on which you are liable to pay National Insurance contributions (NICS). Under salary sacrifice your total gross salary on which NI is paid will reduce, so your loan repayments will reduce.

Although I will be better off financially, my gross salary will be less. How will this affect my credit status, e.g. when applying for a mortgage?
In replying to credit reference checks we will inform companies of the situation with regard to your total remuneration package. On the grounds that you are actually better off under this scheme, it can be seen that you should not be disadvantaged. However, all lending companies are different and the LSE can make no guarantees.

Do I need to tell HMRC about this benefit?
The bike scheme is a government-sponsored initiative that has been set up so that you do not have to pay tax on items bought under the agreement. There is no need for you to contact HMRC.

Is there a credit check?
There is no credit check.

What happens if I change my mind after joining the scheme?
Under the unique terms of the scheme it is not possible for you to cancel the loan. You are therefore committed to making the salary sacrifice for the duration of the loan period. If your employment is terminated during the loan period you will still be liable to complete payments identified in the loan agreement. This means that you must be sure you are happy entering the scheme and with the selection you have made.

I want to join the scheme – what next?

  • Decide if you are eligible by reading the paragraph on "Are there any eligibility criteria"
  • Visit your local bike retailer and follow the steps set out above to order your voucher

Please see the Cyclescheme website for more details.