Bike to work scheme

secretsam

Let me get this straight...
1. Employer 'buys' bike
2. You repay them from salary over 12 mths
3. You get tax break from purchase, saving (in my case) 40%

Correct? Means I'd have to stay in current job another 12 months... :twisted:

Big Red S

Yeah, that's the downside - the staying for 12 months.

There is a procedure for if you leave, but I'm not sure exactly how it works.You do keep the bike, and I think you still make something of a saving.

grantus

Pretty much, but at the end of the salary sacrifice period you have to buy the bike (if you want to keep it) from the employer for 5% of the retail price.

www.dalescycles.co.uk in Glasgow have a calculator on their website which shows you at a glance what various bikes would actually cost you.

muthas

Also your employer (like mine) might want to keep the VAT element to pay for the admin charges. Some bike shops may also charge you for the admin fee. On balance it is still worthwhile

alfablue

muthas wrote:

Also your employer (like mine) might want to keep the VAT element to pay for the admin charges. Some bike shops may also charge you for the admin fee. On balance it is still worthwhile

Which seems crooked to me! Admin is minimal, and what about entering into the spirit of encouraging cycling?!? Some employers just can't bear employees getting any benefits they have to be totally tight-ar*ed about it! :evil:

fechman

most employers wont have this as part of your contract which means you can get the bike and not be contratced to tehm for the ful term of the scheme however if you leave they can take the remaing payments for the term be it 12,18months etc on your last salary payment this is certainly what my work states on tehier conditions for the scheme as well as my wifes work

drenkrom

What!?!?? You have that kind of program? Can you send some of that to Canada?

Is there some kin of limit or could you buy a Cervelo SLC-SL on that program?

Got-to-get-fit

Company agrees to join scheme
Company appoints supplier of Bikes
VAT and Nat Ins breaks mean typically a bikes cost is reduced by 40%
Company issues Vouchers - usually up to the value of £1000.00
If company has a license which is easily available they can increase the spend limit to whatever the license dictates
You can contribute further direct to the supplier to get a better bike but whatever extra you decide to spend will be subject to normal taxation
You nominate how long you wish to pay the bike over 12/18/24month
You must insure the bike
You must use the bike for atleast 50% of your journey to work
At the end of the payment period the bike is still on the companies books so they offer to sell it to you for a nominal fee. £10.00 or something
You can spend your vouchers on Bikes and Equipment (so you could buy a bike for 600 and spend 400 on clothing /helmet / pedals / shoes/ lights etc etc

Or if your company appoints Halfords as the partner you could get a Planet X full carbon road bike for £999.00......which is what im gonna do as soon as my company gets its collective arse into gear.

Tony666

and what's more, if your company has this registered as some sort of green scheme like mine does, you don't pay VAT which saves you another 17.5%. Check out the info on Evansa site which has a calculator showing what you could save: http://www.evanscycles.com/ride2work.jsp

drenkrom

That is so cool. I'm bundling up info on this and sending it over to my MP.

thanks!

soltydog

Got-to-get-fit wrote:

You must use the bike for atleast 50% of your journey to work

Our scheme at work said that 50% of the bikes use must be for commuting, but who checks either way ?

I got a new road bike through the scheme which only occasionaly gets used for my commute, but i commute regularly on my hybrid :roll:

Tony666

Guy at work got two bikes - one from home to the station and the other from the London station to work. When I aksed him where he kept the bike he rode from work back to the station to catch his train him he just went :oops: Good job his boss didn't ask the same question!

RufusA

Got-to-get-fit wrote:

Company agrees to join scheme
Company appoints supplier of Bikes

In theory company doesn't have to join any scheme or appoint a supplier, they can simply buy a bike from somewhere - it's a company purchase just like the company buying a bit of furniture.

Got-to-get-fit wrote:

VAT and Nat Ins breaks mean typically a bikes cost is reduced by 40%
Company issues Vouchers - usually up to the value of £1000.00
If company has a license which is easily available they can increase the spend limit to whatever the license dictates
You can contribute further direct to the supplier to get a better bike but whatever extra you decide to spend will be subject to normal taxation
You nominate how long you wish to pay the bike over 12/18/24month

Company doesn't HAVE to lend the employee money and get the employee to pay it back again. My employer buys each employee a bike, and just lets them ride it, no salary sacrafice.

Got-to-get-fit wrote:

You must insure the bike

The bike belongs to the company still, so in theory the company should provide the insurance, although some companies may require employees to have their own insurance for when company equipment is in their own home.

Got-to-get-fit wrote:

You must use the bike for atleast 50% of your journey to work

As someone else said, it's 50% or more of the bikes use must be company business including travel to/from the company. I cycle 6 miles of a 30 mile journey to work but that makes up around 70% of my bikes use!

Got-to-get-fit wrote:

At the end of the payment period the bike is still on the companies books so they offer to sell it to you for a nominal fee. £10.00 or something

Two points of caution here. 1) If the company specifies the final sale price in the contract, then it's not a valid lease so you don't know what the price will be until the end of the period. 2) If the company sells it to you for any less than the "Market Value" then it could be classed as a benefit in kind and could get taxed as such. I would suspect than any £1000 bike would be worth more than a tenner after 12 months!

Got-to-get-fit wrote:

You can spend your vouchers on Bikes and Equipment (so you could buy a bike for 600 and spend 400 on clothing /helmet / pedals / shoes/ lights etc etc

There are restictions on what you can spend it on. Safety equipment (helment, hi-vis, pannier to safely carry a bag, lights) and security are allowed, but probably not shoes or other clothing.

I agree with the thrust of what you posted, and what you described is exactly how it operates for most companies, BUT there are alternatives, AND if you had a nasty tax inspector you could end up paying more than just buying the bike yourself.

Also many schemes operated by shops etc. exclude bikes on special offer, and remove some of the flexibility of getting free accessories or a discount off the bike, and if you sacrafice salary you may also be reducing your pension entitlement etc.

Worth checking carefully for yourself as the actual savings may be less than they superficially appear.

YMMV - Rufus.

Chirg

Just to be clear everything RUFUSA says is correct for when a company buys a bike and gives you use of it. Not many companies do this as it costs them money.

Got-to-get-fit is pretty much correct in everything that he/she says for a salary sacrife scheme. There is more chance of persuading a company to go for this arrangement!

If you want to get technical have a look at this link....
http://www.dft.gov.uk/pgr/sustainable/c ... ge=1#a1000

For those on an existing scheme the advice from RUFUSA about the final sale price is really important. Our friendly tax inspectors are on the look out for sales at less than market value after lots of contracts were poorly drawn up by those selling the administration of such schemes to companies.

Got-to-get-fit

Thanks CHIRG, i though RUFUSA was going to make me write out 100 times "i must get my facts straight" and sit in the dunces corner for the rest of the night.

My thoughts are based on the salary sacrafice scheme as my firm would defo be too tight to just go ahead and buy me a bike ...RUFUSA do you work for Santa Claus incorporated

So what is the final word on what you pay back at the end of the contract to release the bike from the companies books and take total ownership myself?

Say i chose a £1000.00 bike ....what would i be expected to pay back once the salary sacrafice part had ended?

RufusA

Got-to-get-fit wrote:

Thanks CHIRG, i though RUFUSA was going to make me write out 100 times "i must get my facts straight" and sit in the dunces corner for the rest of the night.

Not at all - sorry if I came across that way. I just get a bee in my helmet about scheme providers who dictate to employers how they must operate the cycle to work scheme and in my opinion often give misleading or incomplete information.

The impression given is that this is a cheap way for an employee to BUY a bicycle - this is IMHO inherantly misleading.

In effect all you are doing is paying a hefty chunk of money to RENT a bike off your employer for a year in the hope that maybe, perhaps the employer will provide a way of you getting the bike at the end of the period. This is not a certainty, and CANNOT be guaranteed:

dft wrote:

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.

Got-to-get-fit wrote:

RUFUSA do you work for Santa Claus incorporated

I'm the director of a very small company - so to me I'm Santa Claus!

Got-to-get-fit wrote:

So what is the final word on what you pay back at the end of the contract to release the bike from the companies books and take total ownership myself?
Say i chose a £1000.00 bike ....what would i be expected to pay back once the salary sacrafice part had ended?

You will probably only be expected to pay back a token amount - THIS CANNOT BE GUARANTEED.
However for there to be no tax implications - you have to pay back "Market Value". How much is a 12 month old £1000 bike worth? I guess it depends on the bike / mileage and condition but I would suspect £400 - 500 wouldn't be unreasonable!

If you followed it to the letter of the law you could end up paying £600 (with tax savings) to rent a £1000 bike, then paying £500 to buy it off the employer at the end of the period! Factor in the limited range of providers, and other restrictions and it doesn't look such a good deal!

If the employer went bust at 11 months the administrators might decide to sell off all the employed bicycles and employees would have paid for 11/12's of a bicycle and be left with nothing!

Luckily most employers / schemes bend the law but if HMRC decided they needed a little extra tax revenue they could easily investigate and the whole thing would fall down like a badly balanced house of cards.

HTH - Rufus.

RufusA

muthas wrote:

Also your employer (like mine) might want to keep the VAT element to pay for the admin charges. Some bike shops may also charge you for the admin fee. On balance it is still worthwhile

That is *REALLY* mean, unless the employer is unable to reclaim the VAT for some reason.

The employer is already saving around 11% (based on reduction in Employer's Class 1 National Insurance). Isn't that enough?

Rufus.

AcademicX

Got-to-get-fit wrote:

You can contribute further direct to the supplier to get a better bike but whatever extra you decide to spend will be subject to normal taxation

I don't think this is the case any more......according to details sent to me when I purchased a bike through the Halfords scheme:

"Unfortunately, you are unable to top-up over the amount you elect using your own funds...." This change is following recent HMRC and DfT advice regarding the Cycle2Work scheme.

The Halfords scheme was a very straightforward process (unlike the 24 months it took to convince my employer to adopt the scheme). I'm now the proud owner of an Ultegra-equipped Uncle John crossbike courtesy of my employer, Halfords & Planet X

RufusA

AcademicX wrote:

"You can contribute further direct to the supplier to get a better bike"

I don't think this is the case any more......according to details sent to me when I purchased a bike through the Halfords scheme:

"Unfortunately, you are unable to top-up over the amount you elect using your own funds...." This change is following recent HMRC and DfT advice regarding the Cycle2Work scheme.

Which makes sense - and is a fine example of the blurring of information that schemes used to give out.

The *employer* is buying the bike, if you top-up then it's part your bike and part the employers??!! If you own part of the bike then there is a presumption you'll take full ownership. The salary sacrifice with your employer therefore becomes a hire purchase agreement, and you therefore get stuffed for tax and NI on it!

However I am sure an enterprising LBS could find a way of reducing the price of the bike to something equal to the employer's voucher price if the person were to say buy a very over priced accessory at the same time

HTH - Rufus.

SBothwell

RufusA wrote:

That is *REALLY* mean, unless the employer is unable to reclaim the VAT for some reason. The employer is already saving around 11% (based on reduction in Employer's Class 1 National Insurance). Isn't that enough?

Apparently not - the company I work for introduced this scheme, keeping the VAT for themselves. When I questioned the fact that the projected savings for employees were only 30-some%, I was told "Employees are saving 36% of the cost of the bike, we don't see why the company shouldn't also make something out of the deal".

Of course, the 36% saving didn't include the credit charge made by the scheme provider, or the final payment to take ownership of the bike. When I worked it out, the company actually made more money from the scheme than an employee would save, overall. I bought a bike elsewhere, for a better discount... (Kind of defeats the intent of the scheme when employers act in this way, IMO).