Cycle to Work Schemes (and the taxman)

[moolarb]

I've been looking into this C2W thing and wondered how it worked. This post seems to fit what I'd worked out.

The company buys a £1000 bike and leases it to me for a year. For this I pay them £600 or whatever. At the end of the year I may be offered the bike at a fair market value. I would hope that a £1000 bike would be worth say £500 at eth end of the year. So I should pay £1100 for a £1000 bike?

Have I missed something?

it's down to the employer to use common sense - if they offered it to you for £500 you wouldn't buy it, and they'd be left with a bike that they've no use for

the final payment is usually set out in the T's & C's and is normally no more than an admin fee, say £30

 

[Bman]

Thats the problem stated in the OP.

If the company gives you the bike (or sells it to you at less than "market value") Its classed as a "benifit in kind" and is therefore taxable.

Companies are not supposed to just give the bike away for a nominal fee. Thats why I was so concerned about this scheme in the first place.

 

[Flying Dodo]

I did read the OP, but it didn't make much sense to me and I was hoping I could use the C2W scheme to get me a good bike..
Only problem is i'm 17 years old and only work part time, about 20 hours a month, which also means I earn less than £6000 per annum. Does this mean I don't qualify for this scheme?

Unfortunately, probably so, as doing the scheme could mean after the salary sacrifice, your salary would drop below the minimum wage - which isn't allowed.

 

[Flying Dodo]

it's down to the employer to use common sense - if they offered it to you for £500 you wouldn't buy it, and they'd be left with a bike that they've no use for

the final payment is usually set out in the T's & C's and is normally no more than an admin fee, say £30

Would a 1 year old bike with a lot of wear and tear really still be worth £500?

I'll make sure I have photos showing just what a bad state my bike will be in, when the scheme runs out - just in case.

 

[killiekosmos]

I did read the OP, but it didn't make much sense to me and I was hoping I could use the C2W scheme to get me a good bike..
Only problem is i'm 17 years old and only work part time, about 20 hours a month, which also means I earn less than £6000 per annum. Does this mean I don't qualify for this scheme?

You need to be 18 to sign a credit agreement so you are excluded. Also if the cost of the bike - salaty sacarafice - would take you below minimum wage then you can't joint so you are further excluded.

It's these reasons why HMRC are tightening up - apparently scheme must be available to all.

 

[killiekosmos]

It's not as big a loss, moneywise, as it may appear on the surface. Like a lot of government initiatives it was big on headline benefits but the reality was quite different. For a lot of people the main benefit was deferred payments. A lot of the savings were swallowed up by having to pay full retail, or an admin fee on top, and not having access to any discounted deals, plus the final payment. If you have cash up front then you can easily get deals that rival the C2W scheme for price. As usual the biggest winners would have been those able to go as high as they liked pricewise, if their company had the necessary credit licence. Funnily enough that would have involved a lot of financial institutions, times have been tough for the bankers you know.

The crying shame is that the facility really did get folks thinking bikes that probably wouldn't have considered them otherwise.

I'll be interested to see how they try to argue the toss re benefits in kind/P11D stuff. That could create all sorts of shennanigans as people try to wriggle out of stuff.

I think this is a bit of a generalisation. The bike I got was at same price as most other shops were selling it at (Defy 4). I saved tax and NI and VAT so (depending if I get to buy it at end) I'll have saved around 40% and get to pay in installments. Shop even upgraded to Defy 3.5 FOC as could not get delivery of a '4'

 

[killiekosmos]

Uuggh! I'm not so worried about the C2W scheme, personally (I've finished paying mine), I'm more concerned about the chidcare vouchers. They make a big difference to us, and if this gets pulled, we will be significantly worse off.

It does seem like a underhand way of killing the schemes..

and this might save it - all salary sacrafice schemes are under threat but HMRC seems to offer ways to resolve issues:
* for under 18s get someone to sign as guarantor
* for low paid, limit value of bike and/or extend payment terms
* if all else fails lend out pool bikes

I intend to try to persuade my employers to keep salary sacrafice schemes going. We do claim to encourage sustainable transport so we need to prove it!

 

[Norm]

I did read the OP, but it didn't make much sense to me and I was hoping I could use the C2W scheme to get me a good bike..
Only problem is i'm 17 years old and only work part time, about 20 hours a month, which also means I earn less than £6000 per annum. Does this mean I don't qualify for this scheme?

As said, the hire agreements are not available to under 18s.

it's down to the employer to use common sense - if they offered it to you for £500 you wouldn't buy it, and they'd be left with a bike that they've no use for

the final payment is usually set out in the T's & C's and is normally no more than an admin fee, say £30

This is very wrong. The final payment can not and must not be set out in the Ts and Cs. If it is, the scheme is automatically excluded.

I think this is a bit of a generalisation. The bike I got was at same price as most other shops were selling it at (Defy 4). I saved tax and NI and VAT so (depending if I get to buy it at end) I'll have saved around 40% and get to pay in installments. Shop even upgraded to Defy 3.5 FOC as could not get delivery of a '4'

+1 but that's mostly because the scheme I set up avoided third parties like Cycle Scheme and dealt direct with the LBS's. I did my own deals, maximised any discounts and got them to chuck in as many goodies that I could, then took them a cheque from my employers.

 

[MacB]

I think this is a bit of a generalisation. The bike I got was at same price as most other shops were selling it at (Defy 4). I saved tax and NI and VAT so (depending if I get to buy it at end) I'll have saved around 40% and get to pay in installments. Shop even upgraded to Defy 3.5 FOC as could not get delivery of a '4'

(quote from Norm)+1 but that's mostly because the scheme I set up avoided third parties like Cycle Scheme and dealt direct with the LBS's. I did my own deals, maximised any discounts and got them to chuck in as many goodies that I could, then took them a cheque from my employers.(end quote from Norm, yes I will work out how to multi quote some time)

Guys I was deliberately generalising as they're are a heck of a lot that just go the Cyclscheme route. I'm not imagining people paying full retail + a %age on top for the Cyclescheme fees. That people get good deals and actually save 40% I don't disagree, but would be suspicious if this was claimed as the majority.

Say you have a £1k voucher that covers a £900 bike plus 10% admin fee. So your saving is down to 33% straight away, then add in the final purchase price, could knock it down to 25-28%. Look around at the deals you can get on £900 bikes, especially of the previous years model. Add in the fact that you can shop wherever you like and the benefit really is deferred payments.

But don't think I'm knocking the idea, I think it's excellent just not thought through well enough nor made available broadly enough.

 

[killiekosmos]

MacB - it's not the scheme that's at fault , more that some companies are charging OTT for arranging it. Like Norm's experience with LBS, my employer went out to tender and LBS won (I got on selection panel as token cyclist). They run everything, forms paperwork and prices are exactly same as cash customers. They work hard at getting extra or repeat business, offer good advice about bike choice etc etc.

A similar thing happened with the Home Computing Initiative, employer went with Fujitsu but when you saw their customised catalogue it was old stock and/or inflated prices with compulsory 3 year maintenance insurance and anti-virus software. What they wanted £1000 for, I got equivalent from Tesco for £500. However, not the government's fault, just a greedy supplier (who got very very little uptake as staff shared price comparisons from Google)

 

[MacB]

MacB - it's not the scheme that's at fault , more that some companies are charging OTT for arranging it. Like Norm's experience with LBS, my employer went out to tender and LBS won (I got on selection panel as token cyclist). They run everything, forms paperwork and prices are exactly same as cash customers. They work hard at getting extra or repeat business, offer good advice about bike choice etc etc.

A similar thing happened with the Home Computing Initiative, employer went with Fujitsu but when you saw their customised catalogue it was old stock and/or inflated prices with compulsory 3 year maintenance insurance and anti-virus software. What they wanted £1000 for, I got equivalent from Tesco for £500. However, not the government's fault, just a greedy supplier (who got very very little uptake as staff shared price comparisons from Google)

Agreed which is why I praise the idea of a cycle to work scheme. I do despair of the fact that every well intentioned idea immediately has people trying to subvert the essence, and intent, to try and make a bit extra. I think most of us would love to have the setup yourself and Norm have experienced. Yet my previous company, a multinational, wouldn't even consider the scheme full stop. I'm hoping that C2W is a forerunner of superior, and much further reaching, schemes.

Just some random thoughts but maybe something like zero VAT rating for bikes of £1k or less? A C2S(school) scheme, discounts for shoppers travelling by bike?

 

[Bromptonaut]

This is very interesting as my employer (a large Govt Dept) has claimed since their scheme started that a requirement to get each bike valued was mandated by HMRC. I was very sceptical at the time but it seems I owe the lady in HR an apology.

It occurs to me that I'd be better off accepting the bike as BIK and paying the tax (I only pay basic rate).Or would that invalidate the SS?

 

[Bromptonaut]

Sorry, after thought. Does the OP (Chris) have link to the updated HMRC guidance?

 

[catalan chris]

try this link:-

http://www.dft.gov.uk/pgr/sustainable/cycling/cycletoworkguidance/

 

[GrumpyGregry]

the all staff thing is a red herring. I bet they amend the advice to say all qualifying staff i.e. over 18 and paid more than minimum wage.

Otherwsie EVERY SINGLE salary sacrifice scheme, for childcare, pension contribs., etc., will be invalid. Not going to happen.

Companies that want to access the scheme will continue to do so. Those who didn't want to do it in the first place, and are gagging for a reason to ditch it will behave accordingly. Some people just don't like the idea of grassroots level staff getting any sort of benefit. I've even heard one FD saying they wouldn't support the scheme as it discriminates against the bulk of their staff who don't want to buy bikes but who drive to work. Give me strength.