The VAT thing/discount is dependent on your company's VAT status and if they want to pass the benefit on. They don't have to. Still - at the end of the rental period the company are supposed to sell you the bike at an appropriate value. At their discretion. The guideline is 10% of "market value". But it will probably never be policed.
As for health benefits for a worker who needs a company car for the job. Why do you need a bike to take exercise? Could you not go for a 30 minute walk at lunchtime? I did on one of my jobs when I couldn't ride in working week. Be honest you just want to use C2W to fund a new bike.
I haven't really got much against bikies adding to their collection but like just about everything that any Government try to do the original intent ends up "perverted". Surely the idea was to get more people on to bikes and out of cars? Not to increase cycle sales and add to the stables of a lot of dedicated cyclists. I'm playing devil's advocate here. My last job offered C2W and I was planning my Boardman Hybrid. TBF it would have been used to commute as I travelled to work by Bike & Train. But at the same time it would have added to my stable and been used as well for touring work.
Good point above about minimum wage workers not being able to afford the C2W scheme and yet surely a lot of these are the sort of people who the scheme should really be aimed at. Generally if you're earning £6/hr or whatever you probably live quite close to the workplace, cos who can afford to spend much on transport at that wage? Maybe the Gov should approach someone like Madison and try to get some sort of "Government" bike made. This could be issued to workers earning below £12K/£15K whatever as a loan on the understanding that it was to be used for commuting. 12 monthly return for inspection and upkeep/wear and tear at the holders cost. It would be untrendy with something like Nexus/Alfine gearing and maybe belt drive. Return to employer at end of employment. Some sort of insurance scheme through the government at cost to user again, £2/week ish to cover loss for stolen/accident etc. User liable for cost if not locked/stored etc responsibly.
Just an idea.
