Cycle to work
phreak
Posts: 2,941
Has anyone here used this scheme to get a new bike? Are there any intricacies one should be aware of?
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Comments
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do a search - lots of threads on here.
i have just received a new bike from the halfords scheme. 600 quid giant bike for about 300 quid. cant be bad (just means i have to rely on halfords team assembling it correctly :shock: )0 -
Yes and Yes.
Some bike companies will help you set it up (if you are setting it up for your firm) such as Evans and Halfords to name two.
The main points are that
- if its over £1,000 the company needs a consumer credit licence.
- The salary sacrifice is usually taken over 12 to 18 months
- There should be no agreement at the start of the salary sacrifice as to a final value payment to buy the bike, as this makes it hire purchase and the tax breaks wouldn't apply.
- The generally accepted payment for the bike at the end of the agreement is about 5% of the original purchase price, but to my knowledge this is just convention and hasn't been tested in court yet.
- The bike needs to be used for the commute to work for at least 50% of the time so no unicycles
- The scheme needs to be available to all employees of the organisation
Other than all of the above it is a genuine situation where the government is giving you something, in an effort to get people fitter and reduce your 'carbon footprint'.0 -
The generally accepted payment for the bike at the end of the agreement is about 5% of the original purchase price, but to my knowledge this is just convention and hasn't been tested in court yet.
That's interesting. On the website it mentions a commercially acceptable price, akin to if the bike was being sold on the open market.0 -
Good summary carlstone!
The final value of the bike is what IMHO makes or breaks this scheme.
There can be no agreed value, or even a stated intention to buy the bike at the end of the period otherwise it becomes a hire purchase agreement, and all the tax savings are lost.
The 5% figure is plucked out of the air, and IMHO totally flawed, based on a valuation used for the Home Computer Initiative. The Tax office HAVE NOT agreed this figure and IMHO if it did go to court the defendents would have a very hard case justifying it!
A computer after 3 years may reasonably be worth only 5% of its original value.
A bicycle after 1 year most definitely is worth more than 5% of it's purchase price! IMHO a 50% figure is more realistic - would you sell a £1000 bike for £500 or £50 after 12 months use?
If you pay less than the market value for the bike at the end of the period, then there are tax implications (benefit in kind).
So for it to be tax neutral you need to "rent" the bicycle over the course of a year, then pay another 50% of the original price of the bike to your employer to take over ownership of the bike. Effectively paying 150% of the purchase price (less tax savings). Add to that the fact you may not be entitled to any discounts from the retailer, the employer has complicated things to do in it's accounts WRT fixed assets, disposals etc. and it all becomes less attractive.
I luckily have a generous employer who lets me use a company bicycle indefinitely without any rent needing to be paid, so need not worry about these things. 8)
As I've frequently stated the whole scheme is a badly thought out piece of legislation, but provided everyone plays the game, does the dance and turns a blind eye at the right places it meets its objectives and is a way for employees to get bicycles and save tax!
YMMV - Rufus0
