Cycle Schemes - are they still worth it?

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The fat commuter
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Re: Cycle Schemes - are they still worth it?

Postby The fat commuter » 14 Jan 2015, 6:40am

Had a look whilst at work last night - our Cycle 2 Work scheme is run by CycleScheme - http://www.cyclescheme.co.uk/

How it works is you choose your bike and accessories and you get a voucher for that amount. I think that the voucher is in multiples of £100 for our scheme - but the calculation at work allowed you to use non rounded numbers.

Anyway, suppose you get vouchers to the value of £1,000 - that would be £83.33 a month that comes out of your gross salary. This means that you save on tax and national insurance of 32% or 42% depending on whether you're a normal or higher tax payer. At the end of the year, depending on the value of the voucher (less vat), you pay either 3% or 7% and you then keep the bike for a further three years. If the voucher was for less than £500 - you pay 3%, if over £500 you pay 7%. Then, after three years, you can hand the bike back and get your 3%/5% back or you keep the bike and that's it.
There was another option where you paid 25% at the end of year one - but I can't see why you'd want to do that.

So, on a £1000 voucher, you'd save either £320 or £420 and would then have to pay a further £70 - in other words you'd save either £250 or £350. I think that that's how it works. The link above seems to go into detail.

The good news for me is that I can take out this scheme at any time - I thought that it was a once a year thing - it isn't. Guess what I'm going to be doing on my rest days next week. Expect to see a thread shortly saying, "Is this bike OK?"

PH
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Re: Cycle Schemes - are they still worth it?

Postby PH » 14 Jan 2015, 8:28am

The fat commuter wrote:So, on a £1000 voucher, you'd save either £320 or £420 and would then have to pay a further £70 - in other words you'd save either £250 or £350. I think that that's how it works. The link above seems to go into detail.

If I've understood the VAT thing, and I'm hoping someone will correct me if I'm wrong, you save that as well. So on a £1,000 voucher you'd save £450 or £550.

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honesty
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Re: Cycle Schemes - are they still worth it?

Postby honesty » 14 Jan 2015, 9:00am

As I understand it VAT registered businesses are able to claim the vat on the certificate back. We're not vat registered here so not sure what that benefit means to the end user though, maybe there's a bit of extra saving?

PH you may be thinking of pre 2012 where those were the savings you could make, but the government clarified the vat regs.

Psamathe
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Re: Cycle Schemes - are they still worth it?

Postby Psamathe » 14 Jan 2015, 9:34am

What would happen if you leave the job within the 4 years (some) scheme(s) seem to run for. Or get made redundant. Or the company goes bust.

Seems to me a far simpler scheme would be a bit like the French system for subsidising energy efficient schemes. You pay for whatever the work is (full price, incl taxes, etc.) and your invoice states "Complies with scheme <scheme reference number>"; which you then submit with your tax return and get the appropriate %age off your income tax bill (and you get a refund if you have tax/scheme allowance due). That way the gov. could set the refund at e.g. 30% which everybody would get (none of the "better off/higher income get more subsidy" yet again), no paperwork running over several years, no charges for all the scheme management, etc. Maybe restrict people to e.g. 1 bike per year under the scheme.

Ian

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honesty
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Re: Cycle Schemes - are they still worth it?

Postby honesty » 14 Jan 2015, 9:49am

Psamathe wrote:What would happen if you leave the job within the 4 years (some) scheme(s) seem to run for. Or get made redundant. Or the company goes bust.


You have to pay the full amount of the voucher or hand the items back basically. Not sure for a company going bust....

Psamathe wrote:Seems to me a far simpler scheme would be a bit like the French system for subsidising energy efficient schemes. You pay for whatever the work is (full price, incl taxes, etc.) and your invoice states "Complies with scheme <scheme reference number>"; which you then submit with your tax return and get the appropriate %age off your income tax bill (and you get a refund if you have tax/scheme allowance due). That way the gov. could set the refund at e.g. 30% which everybody would get (none of the "better off/higher income get more subsidy" yet again), no paperwork running over several years, no charges for all the scheme management, etc. Maybe restrict people to e.g. 1 bike per year under the scheme.

Ian
[/quote]

beardy
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Re: Cycle Schemes - are they still worth it?

Postby beardy » 14 Jan 2015, 11:09am

You have to pay the full amount of the voucher or hand the items back basically. Not sure for a company going bust....


Would the payments already made be taken off that, or are they just hire fees and the whole of the voucher sum is needed?

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honesty
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Re: Cycle Schemes - are they still worth it?

Postby honesty » 14 Jan 2015, 11:18am

beardy wrote:
You have to pay the full amount of the voucher or hand the items back basically. Not sure for a company going bust....


Would the payments already made be taken off that, or are they just hire fees and the whole of the voucher sum is needed?


Its the outstanding balance. The interesting thing here is this just closes off the agreement, you'd still need to do one of the 3 end scenarios for finishing a cycle to work scheme. Also, I was slightly misleading with the original post, you can only hand the bike back after paying off the remaining agreement amounts...

Postboxer
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Re: Cycle Schemes - are they still worth it?

Postby Postboxer » 14 Jan 2015, 11:54am

It is far too complicated, I wish I'd done it back when I had a job, but I didn't like the job so wasn't sure I would stay as long as I did. The fact that you didn't have a right to the bike at the end of the scheme put me off.

stork
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Re: Cycle Schemes - are they still worth it?

Postby stork » 15 Jan 2015, 4:11pm

Are the schemes worth it? It depends.

You'll generally pay a higher headline price than the cash price you might otherwise be able to negotiate, indeed some suppliers under some schemes charge full RRP. You save 32% or thereabouts as a standard-rate taxpayer, but then you have the end-of-hire charge to account for. There's no VAT advantage any more, although there used to be.

Ask yourself:

How much would I have to pay to buy this bike outside the scheme? Look at all options and discounts available (e.g. cashback websites, negotiated discounts, affiliate discounts (CTC, British Cycling)). Also look at second-hand options, including ex-scheme bikes which can offer good value (most schemes won't let you acquire a second-hand bike, although the legislation doesn't prohibit it).

How much will I have to pay for the 'hire'? Normally, this will be the full agreed price spread over the 'hire' period and payable through monthly salary sacrifice. But the employer doesn't have to charge anything at all for the hire/loan. If they're prepared to lend you a bike free of charge, then it's obviously a good deal. Again 'schemes' are unlikely to do this but an enlightened small employer might.

What is the 'end of hire' arrangement? The employer doesn't have to sell the bike to you at HMRC market value. They can give it to you free of charge (in which case you then pay tax at your marginal rate on the nominal value) or they can sell it at any other price they choose (in which case you pay tax on the difference between the price and the market value). If they wait long enough, while continuing to loan you the bike, then the market value becomes negligible, with the consequent effect that the tax charge no longer applies.

What other effects and risks are there? For example, salary sacrifice can affect pension contributions/entitlements and other salary-related benefits, and early withdrawal/termination (e.g. due to a change of job or redundancy) can be costly.


I was looking for a cycle (actually a trailerbike) under the scheme, which was eligible as far as the legislation was concerned, even though my scheme administrator and employer were iffy about it. However, the shop they deal with then offered the trailerbike at a 20% discount to RRP for web orders only (which weren't included in their scheme), and my employer also offered a 10% discount at the same retailer. All told, the price to me was lower than it would have been through the scheme. But there are still cases where the scheme is worth using.

One does wonder, however, whether these schemes have been a relevant factor in hiking the prices of bikes over the past decade or so. Prices seem to have increased well above general inflation at least in certain parts of the bike market, with most retailers and manufacturers aspiring to offer something around the magic £1000 mark (this being the limit for most schemes due to credit legislation), which might only have cost £500-£600 before the tax break came into existence.

pete75
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Re: Cycle Schemes - are they still worth it?

Postby pete75 » 19 Jan 2015, 12:33pm

Looking at the regulations there's nothing to stop an employer buying a bicycle and then "loaning" it for no charge to an employee. They're under no obligation to charge nor does incur any tax liability for the employee. Have discussed this with my employer and when my current CTW bike year "expires" she will provide me with a bike with no charge. There's also no limit if the bike is supplied without charge so looking at getting something for more than £1000.

Psamathe
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Re: Cycle Schemes - are they still worth it?

Postby Psamathe » 19 Jan 2015, 12:51pm

pete75 wrote:Looking at the regulations there's nothing to stop an employer buying a bicycle and then "loaning" it for no charge to an employee. They're under no obligation to charge nor does incur any tax liability for the employee. Have discussed this with my employer and when my current CTW bike year "expires" she will provide me with a bike with no charge. There's also no limit if the bike is supplied without charge so looking at getting something for more than £1000.

I would have thought it would depend on who uses it how much. If many different employees use it then it is a true shared resource. But if it is used by only one employee and primarily for non-company business then I would have thought it would come under most other things and be treated as a "perk" and thus become taxable.

I know when I worked our company used to give/loan employees quite a lot and it all had to be recorded and declared to HMRC. Of course company might buy it and just not "do anything" as far as HMRC are concerned except declare it as a depreciating asset. But I suspect accountants may question quite why a company was buying an asset unrelated to its business ...

(But maybe there are new loopholes I am unaware of).

Ian

pete75
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Re: Cycle Schemes - are they still worth it?

Postby pete75 » 19 Jan 2015, 3:53pm

Psamathe wrote:
pete75 wrote:Looking at the regulations there's nothing to stop an employer buying a bicycle and then "loaning" it for no charge to an employee. They're under no obligation to charge nor does incur any tax liability for the employee. Have discussed this with my employer and when my current CTW bike year "expires" she will provide me with a bike with no charge. There's also no limit if the bike is supplied without charge so looking at getting something for more than £1000.

I would have thought it would depend on who uses it how much. If many different employees use it then it is a true shared resource. But if it is used by only one employee and primarily for non-company business then I would have thought it would come under most other things and be treated as a "perk" and thus become taxable.

I know when I worked our company used to give/loan employees quite a lot and it all had to be recorded and declared to HMRC. Of course company might buy it and just not "do anything" as far as HMRC are concerned except declare it as a depreciating asset. But I suspect accountants may question quite why a company was buying an asset unrelated to its business ...

(But maybe there are new loopholes I am unaware of).

Ian


A means of transport such as a vehicle is unrelated to very few businesses indeed.

Section 5 of the governments guidance to this scheme starts with the following. Note the first two sentences.

"To help employees take advantage of this tax-free benefit, an employer can simply
buy a cycle and cyclists’ safety equipment and loan it to an employee for qualifying
journeys to work. This arrangement means that the employee's normal salary
arrangements are not affected and is sometimes referred to as a ‘salary plus’
arrangement. It may be, however, that the employer wants to recover the cost of
providing the cycle and safety equipment loaned to the employee. Usually this would
be done through a salary sacrifice arrangement. "

toomsie
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Re: Cycle Schemes - are they still worth it?

Postby toomsie » 18 Mar 2015, 8:12pm

Whenever government get involved it seems to always increase the price.

blackbike
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Re: Cycle Schemes - are they still worth it?

Postby blackbike » 18 Mar 2015, 10:12pm

The Cycle to Work scheme has never been worth it from the encouraging cycling perspective.

All it has really done is make buying good quality bikes easier for the typical affluent middle class cycling enthusiasts who would have bought them anyway.

To broaden the appeal of cycling it would probably be better to have a free entry raffle for prizes of bikes restricted to people from less affluent postcodes.

DavidT
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Re: Cycle Schemes - are they still worth it?

Postby DavidT » 18 Mar 2015, 10:32pm

My employer made a point of "giving" the member of staff the bike at the end of the period, which would then be treated as a benefit. Therefore I had to pay tax on the benefit of the residual charge, rather than the actual charge itself. At least I think that's what happened :wink: It seemed a reasonably positive gesture and avoided concern over the full residual charge being suddenly allocated.

When I took advantage of this scheme I just saw it as getting a slightly discounted bike (through the ins and outs of the tax benefit), and basically a free loan. It was also much easier suggesting to Mrs T that I was getting another bike, at around £30-£40 a month straight out of salary rather than spending several hundred out of our precious main budgets.... :D