government not removing vat fomr bikes

lugsey2k5

just recieved an email about the partition.

"VAT is a broad-based tax on consumer expenditure generally and reliefs from it have always been strictly limited. When the UK joined the European Community in 1973, it meant signing up to the general agreements which covered the application of VAT throughout the EC. Under these and subsequent agreements, signed by successive governments, we are allowed to keep our existing VAT zero rates but not to introduce new ones. This means that we cannot remove VAT from bicycles and other human powered vehicles or their parts and spares.

The Government is taking practical steps to increase levels of cycling, as a means of contributing to many of our key priorities including improving the health of the nation, improving the environment and helping to reduce urban congestion. In 2005, the Department for Transport launched Cycling England, an independent expert body to co-ordinate cycling across the country with a budget of £5m a year for a three-year period to allocate to cycling programmes. This was increased to £10m a year in June 2006 with the additional funding being targeted on funding safe links to school and additional cycle training in schools. Cycling England has a free expert advisory service to support local authorities to help them get the best value out of their expenditure (around £60m in 2006/07) on cycling. £17m (with match funding) is also being invested in six Cycling Demonstration Towns over 3 years, to showcase best practice, and test whether by investing at levels seen in successful European cycling cities we can start to see similar levels of cycling in England."

sounds like a con to me. just excuses to make more money.

DarkStarr

we are allowed to keep our existing VAT zero rates but not to introduce new ones. This means that we cannot remove VAT from bicycles and other human powered vehicles or their parts and spares

New petition - reduce the Vat rate on the above to 0.1%

baccaman21

Sounds like a plan.

madmole

Why do we have a government?, they have given ALL their power to Europe and left us powerless to do what we want in our own country

Why are we the only country that abides by every EU rule as well. All the others ignore any they dont agree with

AndyGates

Zero VAT is for essentials, really; I'm not sure that four of my five bikes are even vaguely essential. Might as well say zero VAT for handbags.

Shadowduck

Well, at least the fuel's zero rated.

hamboman

There's no way the government can remove tax from bikes because it would be breaking European law. Simple as that, so there really is no point signing a petition. Especially as online petitions are usually ignored.

Father Faff

This point may have been made elsewhere but you can of course get bikes free of VAT and also with a further one third off the remaining balance via the Cycle to Work scheme that any enlightened employer should adopt. Rather than bang on at the government who can't do anything about EC VAT rules you'd be better putting your efforts into getting your employer to introduce a scheme. If they administer it themselves it also saves their company 12.8% in employers national insurance. They'd be stupid not to!

J@mi3

ok, so how about giving an international VAT free zone status to our favourite bike store's premises'?

hednesfordxcer

you could declare your area a independent country, and not join Europe, then set your own vat rates

StefanH

Father Faff wrote:

This point may have been made elsewhere but you can of course get bikes free of VAT and also with a further one third off the remaining balance via the Cycle to Work scheme that any enlightened employer should adopt. Rather than bang on at the government who can't do anything about EC VAT rules you'd be better putting your efforts into getting your employer to introduce a scheme. If they administer it themselves it also saves their company 12.8% in employers national insurance. They'd be stupid not to!

This is a bit misleading. You can get bikes free of income tax and national insurance and the employer may pass on their reclaim of VAT to the employee, but they are not obliged to.

LaurenceGough

DarkStarr wrote:

we are allowed to keep our existing VAT zero rates but not to introduce new ones. This means that we cannot remove VAT from bicycles and other human powered vehicles or their parts and spares

New petition - reduce the Vat rate on the above to 0.1%

Good plan I concur!

I signed and was upset at this response, this response is bad and just what the government wants, shame on you...

StefanH

Maddening when you realise that the MP's involved in joining us with the EEC were duped into believing it was only a trade agreement and not, as it turned out, a bloodless coup of our legal system.

Father Faff

StefanH - you are correct that it is up to the employer whether they refund VAT but I was hardly trying to be misleading, why would I want to mislead anyone!?

Any DECENT employer will have a Cycle to Work scheme AND pass on the VAT saving to the employee. Crap employers will neither have a Cycle to Work scheme nor pass on VAT savings. The trick is to get your employer behaving decently!

What I said is that more effort should be made to get employers to introduce the scheme - it is a major tax break offered by the government for cyclists and we should be grateful for it. It also benefits cycle shops as they sell more bikes and more expensive bikes at that.

alfablue

I think it is highly immoral for rogue employers to trouser the VAT in cyclescheme deals - the scheme saves them money anyway, and it is not there to line the pockets of employers, it is to encourage cycle commuting.

Matteeboy

Alfa - The company only saves on VAT - nothing else.
The employee saves up to 50% from tax and NI benefits.

I know because being a director of my own company, I am the employer AND employee and I set up the CycleScheme system here!

alfablue

Matteeboy

You save NI as an employer (12.8% of the voucher amount I believe). Although the Cyclescheme site isn't explicit, the Halfords scheme (running under exactly the same TAx/NI rules) states

Now you can offer your employees the benefit of Cycle2Work. It will cost your business nothing, other than a little admin, and you will make NI savings as well.

.

Furthermore, why do you think the savings calculator (for EMPLOYEES) on the chyclescheme web site inculdes the item "My employer can/can't claim back VAT" and then includes the associated discount for the EMPLOYEE!

If the scheme is just for you as your company's sole employee then no problem, but the fact is that the scheme

1) saves employers and employees on NI contributions (at the relevant rates respectively), and

2) implies that the employer SHOULD (if the employer is not seeking to profit from the scheme, which is NOT what it is meant for) pass on the reclaimed VAT back to the employee. The advertised headline figure of 50% savings is simply NOT possible without passing the VAT saving back to the employee - why on earth would you think that slice was meant to be a gift for the employer??????

If the employer does not pass the VAT on, then the employer is effectively making money out of the employees purchase, how is that fair or right???

Matteeboy

Alfa - I got the forms, filled them in, got two bikes, left it to my accountant!

alfablue

fair enough Matteeboy, I just felt the assertions you made (obviously unwittingly incorrectly) needed clarification for other employers/employees.

Matteeboy

To be honest Alfa, I did look into it carefully - I think an employee can actually derive more benefit from the scheme than an owner/employee like us.

alfablue

I respect that you may have looked at it carefully, but have a look (again?) at the Cyclescheme calculator:

Scenario 1) Best case, employee gets bike for £1000, earns £41k, employer reclaims VAT (and lets employee get it!).

Saving 49.8%

Scenario 2) As above, but employer cannot reclaim VAT (or swipes it for his own back pocket)

Saving 41%

Scenario 3) As 1) but employee earns £37.5k

Saving 34.5%

Scenario 4) As 3) but employer can't reclaim VAT or trousers it

Saving 23%

These savings mean the same bike costs the employee 1) £502; 2) £590; 3) £655 and 4) £770

Add on a notional 5% buy out fee at the end, and the costs are £552; £640; £705 and £820

Scenario 1) represents the greatest saving possible under the scheme. Employees a lot further down the payscale may save a little more than the lower 23% figure because of the upper limits on NI contributions, but no basic rate tax payer can save 50%, neither can any tax payer for whom the employer retains the VAT or can't claim it back.

I have looked into the scheme thoroughly too, as I was instrumental in encouraging my employer (of 3000+ staff) to take it up.

Matteeboy

Alfa - Okay, you've looked at it a lot more carefully than me!!

Got to admit that with our company doing rather well, I just signed up and paid out. Seemed good to me but not sure what we saved!

alfablue

I think its a good deal for most people, just a few people above the NI thresholds but still lower rate tax payers, and for whom the VAT is unavailable it becomes marginal when discounts become unavailable or surcharges added; for example Spa Cycles do good prices on Dawes Galaxies - I was after an Ultra but they said that there was a 12 1/2% surcharge for cyclescheme (which is slightly cheeky as cyclescheme charge 10% commission) - this had the effect of both pushing theprice over £1000 but also, if it had been available to me, the actual saving possible would have been only £67

Father Faff

Employers make the most saving if they administer the scheme themselves - if they hive it off to Halfords or anyone else then it is likely to be less beneficial to them as Halfords/whoever will almost certainly charge a commission.

The employer will effectively have to give an interest free loan for the period they decide but they will save approximately 12.8% of that loan through not paying Employers NI on the loan amount (the salary sacrifice of the employee). So if bike is £1000 quids worth the employer will save £128 over the period of the loan repayment/salary sacrifice.

If they also don't pass on the VAT savings they would effectively make (£1175 x 12.8%) + £175 = £325.

alfablue

Father Faff wrote:

Employers make the most saving if they administer the scheme themselves - if they hive it off to Halfords or anyone else then it is likely to be less beneficial to them as Halfords/whoever will almost certainly charge a commission.

The commission is usually paid by the vendor, the likes of Halfords, Evans and Wiggle cover the cost themselves, Cyclescheme charge the vendor 10%.

If they also don't pass on the VAT savings they would effectively make (£1175 x 12.8%) + £175 = £325.

and if they did this, they would be saving more than the employee: crooked!