Capital cycle

The cycle-to-work scheme is becoming increasingly popular and several employer clients now operate the scheme often through one or other of the main providers of such schemes.

As I understand it the employer acquires the cycle reclaims the VAT and then hires it to the employee and deducts the rental from the employee’s gross salary under a salary sacrifice arrangement.

The employee has the option at the end of the hire period (usually 12 months but could be 18 months) to buy the cycle at the then market value.

The provider’s experience is that employees usually take up this option but it is early days yet to gain clients’ own experience on this point.

The tax-free benefit in kind is not in doubt. My question concerns the accounting and tax treatment of the cost of the cycle in the clients’ accounts and corporation tax...