No sooner has the Office of Tax Simplification told the Government that the Cycle to Work Scheme should stay than the European Court of Justice (ECJ) has handed down a ruling that makes it 20% more expensive for employees.
As a reminder, the scheme allows employers to provide employees with bicycles with which to get to work with a huge tax saving for all.
However, the ECJ has confirmed that when employers provide a bicycle it is a provision of a benefit through salary sacrifice.
This makes the 'transaction' a supply of services and therefore subject to 20% VAT which needs to be passed on to the employee.
HMRC are being slightly lenient - if it can be called that - in that the ruling will not apply until 1 January 2012.
Happy New Year, then!
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