Cycling to work - government incentive on tax free bikes?!

[doyler78]

My lease contract with the company offers me the option of buying the bike at the end of the lease period.

If that really is the nature of your contract then my understanding of the scheme is that you are not entitled to benefit from the scheme and your employer is party to tax evasion.

The scheme is very specific in that there must be no right to buy at the end of the scheme. What you have said clearly implies that you have been given such a right. Your employer has turned the scheme into a higher purchase scheme.

[Paul Smith SRCC]

That is implied on the Department of transport website

Personally I think the whole thing needs to be simplified

Paul Smith
www.bikeplus.co.uk

My lease contract with the company offers me the option of buying the bike at the end of the lease period.

If that really is the nature of your contract then my understanding of the scheme is that you are not entitled to benefit from the scheme and your employer is party to tax evasion.

The scheme is very specific in that there must be no right to buy at the end of the scheme. What you have said clearly implies that you have been given such a right. Your employer has turned the scheme into a higher purchase scheme.

[doyler78]

That is implied on the Department of transport website

Personally I think the whole thing needs to be simplified

I have taken the relevant section from the link you provided and it confirms the interpretation that I have given is correct. For clarity it says:

Code: Select all

There should be no automatic entitlement for the employee to take ownership of the cycle and cyclists' safety equipment at the end of the loan period. If the loan agreement (technically a hire agreement under the Consumer Credit Act 1974 (CCA)) allows for ownership of the cycle and cyclists' safety equipment to pass to the employee upon the exercise of an option, the doing of any other specified act by either party to the agreement, or the happening of any other specified event, the resulting agreement is likely to be hire purchase in which case the tax exemption available for a loaned cycle may not be available.

However, at the end of the loan period, the employer may choose to give the employee the option to purchase the equipment.

If a contract allows automatic rights to buy the bike at the end of the contract period then it is likely not to fall within the scope of the scheme. What it says is that an employer at the end of the period may wish to allow the employee to buy but that can only be decided by the employer at the end of the loan period - not before the end. If a contract starts with a right to buy at the end then an automatic right to buy has been given and that would put the employer on very shaky ground.

The scheme as it is couldn't be any more simple. Are there better ways of offering such incentives. Yes I am sure there are. Why apply VAT to bikes in the first place for them to be claimed back through scheme? The system favours higher wage earners and those not working in the public sector therefore the message is that rich get richer and government isn't too bothered about giving equal benefits to its many employees but I guess its better than nothing and only wish my employer, NHS in Northern Ireland, would adopt the scheme. Strange though that they promote it to other organisations but won't allow us to benefit from it however government hypocracy has never been something they have shyed away from

[ianr1950]

My employer signed up to the Cyclesheme after I asked them to and the finance department had no problems whatsoever setting up the scheme.
They were unsure at first but they informed me that it was pretty straight forward.
The FMV which the Cyclesheme says is 5% plus the VAT which still makes it a very good deal indeed.
I have just ordered a second bike which is a custom build for my winter bike and there has been no problem with that either. I received the voucher from Cyclescheme in two weeks from filling in the relevant forms.

[2Tubs]

My lease contract with the company offers me the option of buying the bike at the end of the lease period.

If that really is the nature of your contract then my understanding of the scheme is that you are not entitled to benefit from the scheme and your employer is party to tax evasion.

The scheme is very specific in that there must be no right to buy at the end of the scheme. What you have said clearly implies that you have been given such a right. Your employer has turned the scheme into a higher purchase scheme.

I shall double check. I have to be honest and say that I don't remember reading the clause in the contract but I have just double checked and it is on the company intranet.

I'll check the contract when I get home.

I doubt we're guilty of Tax evasion, I work for the Inland Revenue. Err, perhaps a fool hardy admission.

Gazza

[ianr1950]

The Cyclescheme wording is that the employer can offer you the choice of buying the bike at fair market value at the end of the purchase period. You can choose not to purchase it whereby the employer will still charge you the fair market value to dispose of the bike probably to a charity.
The fair market value can only be assessed at the end of the purchase period and not at the start or during it as this would then be deemed hire purchase and this does not attract tax relief.

[Sporty Stu]

I'm about to buy a bike through the Cycle Solutions scheme to cycle to work - can anyone recommend the best value for money hybrid bike I should go for bearing in mind the max value of the bike can be up to £1000?

(I already have a good mountain bike but don't fancy riding that on the roads to work...)

Thanks