Encouraging Cycling through the Tax System

Yesterday, alongside Chris Boardman and British Cycling, I launched three proposed tax reliefs, drafted at the invitation of the Department for Transport, to increase the numbers of people cycling to work.

You can read the press release here; and the tax reliefs, their design, purpose and illustrative costings here.

Please do pile in; let me know in the comments section below what you think of the proposals – their design, purpose, intention, costings.

14 thoughts on “Encouraging Cycling through the Tax System

  1. OK. I’ll play. But I don’t have time this morning to make this succinct. Just to be clear I’m very happy for the tax system to encourage these behavioural changes. I’m just not sure that the way set out in the note will achieve them.

    If the objective is to encourage regular cycling, why does there need to be a work link to this at all? Why not just give the tax relief where there are rides to any destination?

    I think that the ten month requirement is too long to change behaviours for most. So that means it will be a win for people who already do this, a win for the small number of people who are nearly at the tipping point and then no change for the majority (especially when they work out how expensive it is to stay dry and warm throughout the year).

    There is will be no tax incentive to start tart doing cycling to work in July as they will never be able to get to ten months.

    Ten months is a big cliff-edge. Why not have a smaller amount of relief for (say) three months and more at five months? That way a week where you have the flue and you go on holiday for a couple of weeks (spanning another two months) means you don’t lose as much tax relief – assuming that this is all about nudging people. In the second year of claiming you could take away the shortest period.

    I also think it may make things harder for employers to ask people to move around (but I work at a store two miles away and I will lose £250 if I have to work three months in the new store you are opening ten miles away).

    I have concerns about relying on an app provided by a single third party.

    More specifically, If I’m designing an app, I need to know what “regularly” and “substantial” means (para 3.15). Tax law is generally pretty vague on this type of thing but an app can’t be. But will the app be allowed to take account of illness, public holidays, other holidays, maternity leave, etc in working out what regularly is?

    The app also need to know where ‘home’ is (pretty trivial for most people) but also need to know where ‘work’ is. If someone rides to another office will it know that is still work? If so, what is to stop any ride in the morning counting or being weekly policed.

    I personally feel that 10 months is too much bearing in mind that many people wouldn’t want to cycle when the morning temperatures are three degrees or less (e.g. typically December, January and February).

    My commute is 35k. Sometimes I run in. Why can’t I get a tax break for that? Some summer mornings I ride 90k in. I have no idea if my phones battery would last on a 3.5k ride to work with GPS on. If I run a couple of mile through central London in the rush hour, how will the app know whether I’m running or riding. Why should it matter? Would it spot if I was actually in a taxi?

    Para 3.16 – how would this work for a non-taxpayer? Presumably they would get no relief.

    Para 3.16 – how many of the 489,060 people claiming this will now have to do a tax return to get their £250 credit? Or understand how to claim in on MTD? Is that the opposite of simplifying the administration of the tax system?

    Para 3.22 – I know little about the capital allowances, but the shared areas of buildings are often the responsibility of the landlord rather than the employer. As some landlords are pension schemes a tax relief for them is unlikely to help so the tax relief would need to be available to the employer in these cases.

  2. Sorry about the typos! Flue is probably a different illness to the “flu” I intended (plus there are others)

  3. I am all in favour of more cycling. I am fervently against complicating the tax code with schemes such as cycle to work, particularly where such schemes require special apps to be developed to create special codes to earn a £250 tax credit.

    My proposal would be more expensive in lost revenue terms, but more effective at selling more bikes and encouraging their use, not just for commuting. I expect my proposal would be widely supported by the cycle industry, much more broadly than just by British Cycling.

    As my scheme is simpler to administer, it would be cheaper for HMRC, employers, bike retailers and it would automatically apply to the self employed, the unemployed and everyone else too.

    Apply the 0% rate of VAT to bicycles costing less than £1k and to accessories to the value of £100 bought at the same time as a new bike.

  4. I’m a small employer (38 staff) I haven’t tried to work out the mechanics of how this would work for employers but the deal-breaker for me would be more paperwork and admin. I don’t want to go near P11ds etc. We use a mainstream payroll package, there are 3 or 4 large players, and if there was an input line in the package for bike mileage allowance then I’d be up for it. What I would want to avoid is any more time spent corresponding with HMRC. RTI helps this process.

  5. From my experience, facilities are the key (shower, locker, secure parking), so a tax system helping encourage that is of benefit.

    10 months for the tempted casual cyclist is too long for our winter weather and darkness. More would be encouraged to start (which is the important bit) if this is 6 months.

    The app seems unessessary.

    Overall very welcome proposals.

    Of course, what we really need are better roads, a move away from cycling being viewed as a dangerous and safer car drivers – but little steps in the right direction all help.

    (Boardman’s alleged use of a tax scheme, yet campaigning for the tax system to support cycling, has raised an eyebrow in the past. But we can forgive him – he is a very sensible voice on cycling.)

  6. 1. Facilities and secure parking SO important because bikes easier to steal than cars. No bike parking = no bike commute.

    2. To encourage new cyclists need shorter term than 10 months. Could be incentives at 50, 100, 150 and 200 days of commuting per year. Set total limit at £500 rather than 2 years. People like to chase a target that’s achievable. Many might see 50 days as doable and actually go on to ride 100, but 10 months?? Sounds a lot for even Wiggins.

    3. Main barrier for many is infrastructure, need some way to encourage gov spending (sensible and joined up, not just councils using red paint to hit targets). I know that Chris Boardman is already doing a lot in this area too. Maybe we need the cyclists on the roads first for our gov to see the point in it.

    I’m still hopeful, maybe climate change will ultimately be the only thing to wake up our gov to non polluting travel.

  7. I agree with Mr Powell. The compliance burden of dealing with the practicalities would be immense. When we are free of the incessant burden of EU VAT regulation*, zero rating all bike sales less than £1,000 (so my Brompton would be fine) works well.

    Your proposal (quickly skimmed, so apologies if I have missed it), doesnt deal with self-employed cyclists either!

    You could also increase the allowable rate for business journeys to the same as car rates, so 45p per mile. This would encourage cycling for work purposes, though would probably need to exclude those who cycle for work. Sir Brad might have ended up with a tax loss otherwise.

    * this might just be the one benefit…..

  8. We pursued this exact scheme with a European county 18 months ago. We met in person with the countries Deputy Prime Minister, Minister of the Economy and Minister of Transport and their subordinates spanning a period of over 1 year to both present the scheme in detail, establish a working framework and also to demonstrate the developed Walk-Run-Bike App in order to accurately monitor & control, plus report cyclists activity with exactly this tax incentive reward scheme in mind – finally without success as the government was simply not willing to incentivise targetted soft mobility using a tax incentive. We still are committed to pursuing such a scheme and furthermore continue to invest both time and money into its development. If you would like to discuss in further detail, perhaps to consider a collaborative approach or to simply consider making use of the Walk-Run-Bike platform (user interface being an App) please do not hesitate to contact us. Liz May, LLM, two time Olympian, ex ITU World Cup Triathlete & record 5 times National Sports Woman of the Year.

  9. It seems way too complicated to me, so I’m going to suggest how it might be simplified, taking into account some of the given aims. Obviously the main one is to get people cycling, so targeting the benefit at people getting established as cyclists, rather than actually established cyclists. So how about a life time cycling allowance of say £500 – i.e. the proposed £250 annual allowance for the proposed 2 years.

    To implement it, I like the idea of an app, but it would need to be developed in partnership with HMRC, which might be a problem. (I would say it could also be a challenge worth taking up, not just for cycling, but for any other lifestyle choice which might be judged worth encouraging via the tax system, but that is a much larger discussion). The app would need to work by recording “allowable miles” against an individuals NI number, and sending this information directly to HMRC for inclusion in the total personal allowances. There should be nothing for the tax payer to do other than record the miles, in the way that cyclists record themselves on Strava, or whatever. (That suggests another requirement – linkage with such established apps.)

    What would an “allowable mile” be? As long as this can be calculated by the app, then complicated calculations are not show-stoppers – so, for example, it should be possible for an algorithm to exclude a large number of laps of a velodrome on one day. But I don’t think it would be a show-stopper either if some non commuting cycling got counted – it still helps people get healthy, the total lifetime amount of the allowance is capped, so abuse would not be open ended, and it removes possible discrimination against people not working for companies set up as in the British Cycling proposals. So, don’t obsess about these particular details, just make sure there is a smooth integration with HMRC systems.

    FWIW, I am a cyclist, and commuted by cycle most of my working life.

  10. I’ve commuted to work by bike for years. I think incentives for larger companies to set up schemes are good. Many small firms can’t do it for lack of space, suitability of premises, admin time etc so I would like to see local councils funded to add cycle centres to eg. car parks with secure bike parking and changing facilities. Milton Keynes uses purpose built mobile containers. Personally I wouldn’t go for a tracking app – it sounds too complex and unreliable. However I’m not sure if tax incentives can overcome many people’s feeling that cycling on the road is too dangerous. So really infrastructure is key.

  11. Pleased to read these proposals. They could work for me as a self-employed potential cyclist! Completely agree that small employers can’t handle any more admin. It would seem better to give individuals the responsibility to deal with the scheme, as they are the ones who will benefit. Simplicity is the key. I like the idea of the £500 lifetime allowance. And why not similar rewards for walking or running to work, or taking exercise in general? It’s important to think of incentives for non-taxpayers too, including low-paid workers, unemployed and retired people, though that may be beyond this brief.

  12. The ever-tinkering spirit of Gordon Brown lives on.

  13. Interesting piece. I prepared the proposal for the the Irish Cycle to Work scheme, using the UK proposals as a base, but then ignoring all of the stupid additional rules. Here is a link to the Irish Revenue page http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/faqs/cycle-work.html

    Ireland also has tax deductible a tax deductible scheme for Annual Public Transport passes, to encourage the use of commuting by Public Transport.

    At the time, I couldn’t persuade Revenue to run with it, but I was acquainted with a Green Party TD (MP), gave it to him & he ensured that the change was introduced. Unfortunately, the Deputy, Ciarán Cuffe, subsequently lost his seat, but he can contacted on twitter @CiaranCuffe

    I understand about 60% of adult bikes in Ireland are now bought using the scheme.

    Contact me if you want any further details.

  14. Thank you. I’ll pass that on…

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