# Cyclescheme, Cycle2work etc. and HMRC P11D stuff



## MrGrumpy (17 Feb 2014)

Ok anyone explain this in laymans terms please in terms of buying a bike through one of these schemes?

_If Company A decides to transfer the ownership to employees after the 18 month hire period, a sum of £1 will be taken from your net salary to transfer the goods from the hirer to the employee. Then Fair Market Value of the goods as set out below by HMRC will be calculated and the value will be added to your P11D whereby your tax code will be slightly adjusted to accommodate the taxes due. 
Transfer of Ownership - Example based on £450 purchase price:
If you have purchased a bike for £450 you would have 18 monthly salary deductions. 
Under HMRC guidance the fair market value of the bike after 18 months will be £72 (16% of the original value).
P11D explained – P11Ds are used to report benefits provided to employees by Company A that are not put through the payroll._


This I assume is a pay a wee bit extra tax on the fair market value of the asset ?


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## Cameronmu917772 (17 Feb 2014)

Hay bud.
My partner has done this for an £800 rock hopper. Apparently it's pretty simple hmrc take the money from you pay slip every month and its really very little I think my partner is paying £42 a month.
And anyone I know that has done this in the past has never had the company asking for the bike back at the end of the hire :s it is defiantly worth doing if you can get it. I can't and have a really bad addiction  lo
The boys in the shop will take you though any queries you have because its worth the sale to them and they know a lot more about it. What I would say though is remember you can get your helmet bike lock etc on it but clothes and bike racks arnt included (I'm sure that's it) anyway the boys in the shop can manipulate the invoice so you can get some extras in there aswell.

What kind of bike are you after?


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## adscrim (17 Feb 2014)

That's my understanding of it. You hear of a large number of employers actually charging the market value for the transfer of the asset, but the HMRC guidance is that you should be taxed on the difference between the transfer value and the market value as per the supplied valuation matrix. I don't think it makes any reference to what you should pay, just how it should be treated.

I assume the extract you include is from your own company scheme - this is the only place you should look for information. Almost all information you get from other peoples schemes will be incorrect in relation to yours.


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## MrGrumpy (17 Feb 2014)

Hi yes it is from our own scheme, omitted the name  After 18 months they transfer ownerhsip to me for a £1 and then the next bit was confusing me, but it looked like it is tax thing in which case, I doubt I would even notice it.


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## 400bhp (17 Feb 2014)

MrGrumpy said:


> Hi yes it is from our own scheme, omitted the name  After 18 months they transfer ownerhsip to me for a £1 and then the next bit was confusing me, but it looked like it is tax thing in which case, I doubt I would even notice it.



Your P11D is where the company have to declare to HMRC things that they have paid for but you are benefitting from. You will receive a copy of this. 
The C2W end payment can be done this way. What it means is that you are liable to pay tax and NI on the amount that will be declared on the P11D. So, in reality you will pay about 1/3 of the £73 in tax if you are lower rate tax payer. In all likelihood the taxman will take this out of next years tax allowances (i.e. it will reduce your tax free allowance by about 1/3 of £73)


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## wilkotom (17 Feb 2014)

MrGrumpy said:


> Hi yes it is from our own scheme, omitted the name  After 18 months they transfer ownerhsip to me for a £1 and then the next bit was confusing me, but it looked like it is tax thing in which case, I doubt I would even notice it.


 
Yep. Taking the example above, you'll be taxed as if your annual salary was £72 higher for the tax year your bike transfers from the company to you. At the standard tax rate, that's an extra £14.40 in tax, so just over a quid extra in tax, per month.


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## MrGrumpy (17 Feb 2014)

well it will be the 21% ( £1000) and being a high rate tax payer anyway its going to make sod all difference So what ever tax and NI is due for £210, still seems like a better deal than others whom have the option of shelling out the fair market value ?!


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## BRounsley (17 Feb 2014)

It depends on who and how it’s run but tipicaly it's a loan agreement.

HMRC don’t run the scheme you just pay them any tax on anything deemed a taxable benefit over and above the C2W tax break.

If the bike is old enough then you can write the bike off as being worthless so no taxable benefit when you own the bike at the end.

There are a couple of ways of doing this.

1) Just run the scheme over many years. You paid the single bike off over 3 + years

2) The second is for you to rent the bike, after the 18 months, for an allotted time that the bike is old enough to be classed as being worthless. You get charged a nominal amount as rent. I believe Cyclescheme do this.

One thing to beware with C2W is most companies palm this off to a 3rd party. Often the C2W tax break is not that great once everyone takes there cut.

These 3rd party companies are either a large bike shop (like Halfords) or a company that’s a middleman like “Cyclescheme”.

You can see the appeal for a shop like Halfords, they’re going to sell many more bikes for the cost of giving you interest free credit (I think Halfords sold 3 million bikes last year).

The “Cyclescheme” model is a more interesting one. They partner with bike shops and cover their costs (and profits) and the cost of providing interest free credit, buy getting a kickback (referral fee) from the bike shop. This means you the buyer will pay full RRP for your bike, as the sale has to still give a profit to the bike shop while paying the kickback to Cyclescheme.

So that 40% tax saving in often near to 20% in reality when using a middleman as you’re paying full whack for the bike and you’ll have the settlement thing at the end.

Interestingly PlantX has the below on their website. 
“CYCLESCHEME LEVY A 10% COMMISSION ON ALL ORDERS PAID FOR USING THEIR VOUCHERS, WE ARE UNABLE TO ABSORB THIS FEE AS WE ALREADY OFFER THE BEST POSSIBLE PRICES AND THEREFORE THESE ORDERS ARE SUBJECT TO A FEE OF 10% OF YOUR TOTAL VOUCHER VALUE.”

I’ve personal came to the conclusion I’d miss out on the interest free loan as a better bargain can be had getting a sale bike.


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## MrGrumpy (17 Feb 2014)

Well in the past it was only C2W and run through Halfords, 18 month agreement on a £500 bike with a final £35 payment at the end. Now we use both C2W and Cycleplus and the terms are similar albeit its a nominal £1 after 18 months and you own the bike. Also my employer also offers 10% discount on your bike to work via Halfords or 5% via anyone else and this is of the payments. So still seems like a good idea and even if it would seem the tax code changes it is still next to nowt so everyones winner :0 

As for Planet X and also Dolan bikes whom I looked at they do want to charge an admin fee for buying a bike which has put me off. Also if it turns out my LBS want to charge me an admin fee I will not be best pleased !


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## BRounsley (17 Feb 2014)

It’s just a shame that companies (like when I used to work at HP) don’t run the scheme in house allowing employees to get the best deal from any bike shop. They take the easy route and use a 3rd party company.
So we have are companies like Cyclescheme which are now worth £10,000,000 (that’s asset not including profit and running costs) for printing vouchers and sorting loans while d*cking LBS out of 10%
http://companycheck.co.uk/company/05363678
I think the government should can “cycle to work” and just make bikes VAT free (as in realty most people only save that amount).


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## MrGrumpy (17 Feb 2014)

I think the two I mentioned are not bad compared to cyclescheme, I have heard some not so good things about that.


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## wilkotom (17 Feb 2014)

MrGrumpy said:


> well it will be the 21% ( £1000) and being a high rate tax payer anyway its going to make sod all difference So what ever tax and NI is due for £210, still seems like a better deal than others whom have the option of shelling out the fair market value ?!


 
Remember that NI contributions drop to 1% at about the same time higher-rate tax kicks in. So you'll pay 41% of (21% of £1000) = £86 over the year, so about an extra £7 a month in tax.

(May be less, not sure if NI is calculated like this, or just income tax)


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## GrumpyGregry (17 Feb 2014)

Nowt to stop Planet-X from setting themselves up as scheme providers a la EBC if it nips their sack so.


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