Can e-bikes be a low-cost solution for employers and employees?

E-bikes are becoming increasingly popular with employees. But what are the tax implications and how they differ from bicycles and mopeds or motorbikes

What is an e-bike?

Accountants and tax professionals may find clients approaching them with increasing regularity in connection with how best to provide employees with e-bikes. The main issue facing advisers is understanding how to differentiate an e-bike from a moped or a classic bicycle/tricycle, and helping the client decide whether they can be provided under a ‘cycle to work’ salary sacrifice scheme which carries tax benefits.

Who can ride an e-bike?

Anyone over the age of 14 can legally ride an e-bike – as long as it is classified as an EAPC. The e-bike doesn’t need to be registered, taxed or insured. EAPC riders are not subject to the requirements to take road safety tests, although all cyclists and other road users must follow the Highway Code. An e-bike can be ridden anywhere a traditional pedal cycle can be ridden, but not on pavements.

Quite how this, and the approval process, is policed is anyone’s guess – but for the purposes of this article I will call it a form of self-assessment. A debate was sparked by a recent Panorama programme which can be watched on the BBC iPlayer, with Cycling Weekly and others unsurprisingly pushing back.

Definition of an e-bike

The official term for an e-bike is ‘Electrically Assisted Pedal Cycle’ (EAPC).  hey can be two- or three-wheeled bicycles or tricycles which are propelled by a combination of the rider and an electrical motor. The e-bike must have pedals which can propel the bicycle, and an electric motor which cannot exceed 250w of continuous rated power. In addition, once a speed of 15.5mph is reached (only permitted if the e-bike is approved*), the electrical assistance function automatically switches off.

Part of the approval process for an e-bike is the restriction on speed to a maximum of 15.5 mph.  It is vital, to preserve them as e-bikes, for the motor not to be de-restricted to enable the e-bike to travel in excess of this limit. If that happens, the e-bike becomes a moped or motorcycle, and the regulatory status and tax status changes in addition to the rider’s minimum age (16 for mopeds and scooters of up to 50cc/ 17 for motorbikes of up to 125cc), together with the requirement to pass road safety tests for motorbike and moped users, wear a helmet and purchase tax and insurance for the vehicle.

Markings on the bike must show:

•    The continuous rated power output; and the bike manufacturer; and one of:
•    The battery’s voltage; or 
•    The maximum speed the motor can propel the bike

If an e-bike was first used before January 2016 the purchaser should contact DVLA to check if it is classified as an EAPC.  

So-called ‘twist and go’ cycles, which are powered by an accelerator built in to the handlebars, must have been approved as EAPCs by the Vehicle Type Approval Authority and be classified as low-powered mopeds at the manufacturing stage of production to qualify.

E-bikes and tax

Employers are permitted to provide cycles and EAPCs tax-free to employees under the Cycle to Work Scheme. The following additional tax points are worth noting: Any bicycle or e-bike not provided to employees through a cycle-to-work scheme is to be treated as a benefit in kind. Capital Allowances can be claimed where e-bikes and motorcycles are purchased for employee use (sole traders can also claim them, but Capital Allowances are restricted if privately used).