The scheme works by allowing employers to purchase the bicycles, including appropriate clothing and accessories, who then loan the bicycles to their staff as a tax-free benefit.

The scheme stipulates that the bicycles are used for work-related purposes, such as commuting. The employees are charged for the use of the bicycle every month for at least a year, after which time the employee has the option of purchasing the bicycle for a nominal sum.

The employees' payments are free from income tax, National Insurance and VAT.

In total, this can equal a saving of up to 50% off the recommended retail price of a bicycle and so represents a substantial benefit for the employee.

Setting up the scheme is fairly complex, but there are a number of companies specialising in setting up and administering schemes.