Cycle to work

grantus · June 2007

Ok, here goes.

Can someone who uses the scheme tell me how easy it is to use in practice.

Also, what is the pay sacrifice thing you need to enter into and how much/how long do you do it for?

What is the benefit of the scheme? Do you actually pay for the bike or is it your employer?

So many questions, so little time! :-)

Cheers

gkerr4 · June 2007

I don't use it, but there are a few people at my work that do - it sounds simple enough.

he pay sacrifice thing simply means that you pay for the bike from your salary before tax and NI deductions - from your gross salary in other words. How long you enter into is is up to your employer but it is usually 12 - 18 months.

The benefit of the scheme is the salary sacrifice bit - for an upper rate tax payer this can mean effectively buying the bike for just under 50% of it's retail value - I think a œ1000 bike will be yours for around œ480 - but neatly spread into 12 payments so œ40 / month. Your employer 'buys' the bike for you by giving you a voucher in advance and then effectively leases it back to you. at the end of the lease period they then sell it to you for the final payment - usually a nominal sum.

hope this helps

AcademicX · June 2007

Graham has pretty much covered most of the points. We use the Halfords scheme at work. Seems straight forward enough (its a little bit like taking out a hire-purchase agreement). I've just ordered a PlanetX Uncle John cross-bike (for commuting purposes), but Halfords claim to be able to source from most UK suppliers.

Brief details of the Halford scheme.

RufusA · June 2007

It depends a little on the exact scheme your employer is using but broadly speaking:

You find out the details of the scheme from the employer - this usually limits you to an approved shop / chain to select the bike and a financial limit (this is normally œ1000 due to ease with the DFT's group consumer credit license).

You visit the approved shop, try out various bikes, and select the bike you want, helmet, lights, locks, racks etc. The shop prepare this as a written quote which will usually get sent to the "cycle scheme" providers.

They then invoice your employer, your employer will usually tell you what the "salary sacrifice" will be i.e. if the total cost is œ600 gross, then that's œ510 after the VAT has been taken off, so you may sacrifice œ21.25 per month out of your salary for the next 2 years.

The employer once they've done the paperwork pay the scheme. The scheme pay the shop, the shop orders the bike in, then phones you to tell you it's ready, usually 2 weeks later depending on whether everyone is on the ball or not.

You cycle out of the shop and enjoy the bike.

Your gross salary is reduced by œ21.25 for the next two years, which can be œ12 - œ16 less take home less (depending on tax and NI rates).

However:

1) The bike isn't yours - it belongs to your employer. If you leave the job they can ask for the bike back.
2) At the end of 2 years you may be offered the chance to buy the bike back. Some schemes suggest a rate of 5% of the original purchase price, BUT if this is below market value, there may be a "benefits in kind" tax charge.
3) You *must* use the bike for 50% or more of the time for commuting to work, or on work business.

HTH - Rufus.

A - W · June 2007

I think it depends on how good your employer are. Some find it more hassle then it's worth for instance mine. It involved them doing something only me and maybe one other were going to use. I would also becareful about the figure to buy the bike from the employer.

andrewc3142 · June 2007

All you need to know:

http://www.cyclescheme.co.uk/

It doesn't need to be Halfords or Evans.

My employer, although fairly large, decided against it on the basis it was too complicated.

AINSLEY WILLS · June 2007

I used a similar scheme to purchase a new home computer and it's excellent. With the money being taken at source you don't notice it going out every month.
Savings to be had for sure but all the prices I've worked out it's never been 50% or above but I think it goes off salary too.
I was looking at a œ350 Ridgeback as a first bike and it came in at œ230, still a great saving.

I have a year left on the comuter so I'm not going to opt for this option this year I'll just pay cash. Plus I'm always concerned about how these things affect ones pension.

laertes · June 2007

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by RufusA
3) You *must* use the bike for 50% or more of the time for commuting to work, or on work business.

<hr height="1" noshade id="quote"></blockquote id="quote">

I am not entirely sure this bit is accurate, the wording I saw is ambiguous. I think that if you use a bike for commuting, you must use your cycle scheme bike 50% of the time. But you can use the bike a little or a lot, e.g. occasionally going to the train station on it, and meet the terms of the scheme.

I am not 100% sure, and cannot access the FAQ on the cycle thru this internet connection

RufusA · June 2007

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by laertes

I am not entirely sure this bit is accurate, the wording I saw is ambiguous. I think that if you use a bike for commuting, you must use your cycle scheme bike 50% of the time. But you can use the bike a little or a lot, e.g. occasionally going to the train station on it, and meet the terms of the scheme.
<hr height="1" noshade id="quote"></blockquote id="quote">

On re-reading what I wrote I can see that it was ambiguous. I wasn't trying to imply that half your commuting has to be by bike, just that half the bike usage has to be commuting.

The regulations are the Income Tax Earnings and Pensions Act 2003 - Section 244:
<blockquote id="quote">quote:<hr height="1" noshade id="quote">
244 Cycles and cyclist's safety equipment

(1) No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision for an employee of a cycle or cyclist's safety equipment if conditions A to C are met.

(2) Condition A is that there is no transfer of the property in the cycle or equipment in question.

(3) Condition B is that the employee uses the cycle or equipment in question mainly for qualifying journeys.

(4) Condition C is that cycles are available generally to employees of the employer concerned or, as the case may be, cyclist's safety equipment is so available to them.

(5) In this section "cycle" has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52), and "cyclist" has a corresponding meaning.
<hr height="1" noshade id="quote"></blockquote id="quote">

So my reading of this is that you could only use the cycle for 1 hour a year and most drive to work. BUT that 1 hour has mostly got to be on work related business.

HTH - Rufus.

grantus · June 2007

Thanks a lot guys,

Grantus

Unknown · June 2007

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by A - W

.... I would also be careful about the figure to buy the bike from the employer.
<hr height="1" noshade id="quote"></blockquote id="quote">

Mine has it written into the rules : 5% of the original purchase price

flappy · June 2007

Having just been involved with setting this up for my company RichK's comment about having the 5% written into the rules could be an issue. The purchase option is at the discretion of the employer and MUST be a separate transaction after the agreement has ended otherwise the tax benefits could be withdrawn.

Quote from the link below:
"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."

Full details below:

http://www.dft.gov.uk/pgr/sustainable/c ... mentat5732

thereisnospooncp · June 2007

TFL charge 3% or œ20 whichever is the greater.

http://lifeonthetube.blogspot.com/

thefesteringsore · June 2007

I'm going to try and push for the scheme at my work.

I need to put together a document and fire it off to the HR people. What I really need is info for the employer; the financial implications etc.

Any help would be appreciated.

Cycle to work

Comments

Categories