Cycle 2 work scheme & VAT?

Cycling is Forever

Hello

I'm a Newbie here and I'm looking to take advantage of a Cycle to work scheme at my workplace.

I just want to poll a question to the good people here regarding the cycle 2 work scheme.

If you have done the Cycle 2 work scheme or are about to.

Did/or will your employer passed on the VAT deduction/saving to you?

The reason I ask is two fold: The scheme offered by my company is not passing on the VAT savings.

Also I would like to gauge from your responses, whether or not most other companies pass on the VAT saving to their employees.

I understand that it is not mandatory for companies to pass on the VAT deduction to their employees who enter the hire agreement.

But is it considered more "in the spirit" of the scheme that VAT is deducted as well as the savings of income tax & NI?

Without VAT being deducted and assuming the employee is a higher tax payer it is not possible to obtain the "magical" 50% saving through the cycle 2 work scheme.

I realize some of you may say "but your already saving income tax & NI, it's a cheap deal why worry about VAT".
All I say to any comments along those lines is “I agree”, but because the Cycle 2 work is considered a business function and all VAT can be reclaimed.

Is it right that VAT is effectively transferred from the employee to the employer?
I'm trying to get an answer from my employer but no luck so far!

Yours

Cycling is Forever

Yes= VAT deducted
NO= VAT not deducted

poolieboydave

Alright

My company did not deduct VAT which is a bit rubbish, however they did give me 10% of my voucher as accesories (which I did need as I'm an utter newbie) so I've only effectively lost 7.5% overall so am not bothered from the loss of VAT.

I got goods worth just over £600 for about £35 a month which I'm very happy with.

alfablue

IMHO the employer should pass the VAT on to you. They already make some money by virtue of saving on their NI contribution, and contrary to what they might argue, admin costs are not great. Why should they profit by £175 per £1000 voucher??? It is not in the spirit, at all, the scheme is not about being a money maker for employers.

Many employers cannot claim back VAT however (such as my university, the NHS, other public employers). I am paying £590 on a £1000 bike, so saving a healthy 41%, however, I will be paying a 5% purchase fee at the end of the hire period so the saving is slightly less, still, a £1k Carbon bike with Dura Ace for £640 after I pay the purchase fee makes me happy (and more so since the Planet-X now costs £1100).

Finbar Saunders

Mine passes on the VAT saving. So an automatic 17.5% saving before factoring in the income tax savings.

Cycling is Forever

Thanks everyone who has so far voted or replied to my thread here.

Very good point alfablue about the organizations/companies that cannot reclaim VAT.
I was aware of that also the company you work for must be VAT registered.

If you voted NO, please reply here if you know the reason why?

Either your company cannot reclaim the VAT because of the reasons alfablue pointed out or your company is simply not doing it, like mine!

Once again;
If you fall into the category of your company is not passing on VAT.

Do you know why? Have you been told the reasons behind the decision?

Cheers

Anonymous

yes

chaley

Mines a no, local goverment/public employer so not on the vat list, or so they say!
Chaley

andy83

my company wont even entertain the idea of it so aint a clue

miserable sods at work

Cycling is Forever

Bump!

Bad luck andy83 I was talking to a chap who said you can organize a cycle 2 work scheme yourself.
First get you HR dept on side. :roll:

lizro

I work for the NHS and asked HR about this scheme - they said they had condsidered it but it was not viable. So that is a no!
I didn't realise the NHS could not reclaim the VAT. Why can't they?

Cycling is Forever

I assume the NHS does not pay VAT. It would be one arm [NHS] of the state paying the other arm Tax, net gain zero.

You could still do the cycle to work scheme, but your savings would be from income tax and NI.

But losing NI payments is not really a good thing for the NHS!

To say it is not viable is just another way of saying we can't be arsed or we are lazy!

You can set up the scheme yourself contact Halfords Business services.

CIF

alfablue

Cycling is Forever wrote:

I assume the NHS does not pay VAT. It would be one arm [NHS] of the state paying the other arm Tax, net gain zero.

You could still do the cycle to work scheme, but your savings would be from income tax and NI.

But losing NI payments is not really a good thing for the NHS!

To say it is not viable is just another way of saying we can't be arsed or we are lazy!

You can set up the scheme yourself contact Halfords Business services.

CIF

NI pays for benefits, not the NHS. I agree, they can't be arsed, many NHS trusts do offer the scheme, name and shame them!

mickmcg

alfablue wrote:

Cycling is Forever wrote:

I assume the NHS does not pay VAT. It would be one arm [NHS] of the state paying the other arm Tax, net gain zero.

You could still do the cycle to work scheme, but your savings would be from income tax and NI.

But losing NI payments is not really a good thing for the NHS!

To say it is not viable is just another way of saying we can't be arsed or we are lazy!

You can set up the scheme yourself contact Halfords Business services.

CIF

NI pays for benefits, not the NHS. I agree, they can't be arsed, many NHS trusts do offer the scheme, name and shame them!

the main problem public sector orgs apparently keep raising is that of them owning the bike through the scheme and the discounts given - all about liability if you fell off due to poor maintenance (who would be responsible) and that the discount is efectively a benefit

all balls really considering its a govt backed scheme but what do you expect!

alfablue

Yeah its balls all right - how come many public sector organisations and some NHS trusts do offer the scheme without worries. The contract you sign requires that you maintain the bike. It's just excuses, and a "can't do" mentality that pervades some of these organisations!!!

MikeParkin65

I work in Local Government and my £930 (retail) built up Tifosi is costing £760 from my gross salary so about £650 net. So I think they are taking the VAT off. Got to say I took more interest in how much I was saving rather than where is was being saved from!

Its taken us a good 4 years to convince our employer to join the schemen though!

Cycling is Forever

Bump again!

Well it has been over a week and a frustrating week at that.
I've contacted my HR dept and I still can't get an answer as to why the company [my company] has not passed on the possible VAT savings!

The only answer is; "the company has decide not to reclaim the VAT".

I asked, But why not?
(A normal vat registered company would reclaim on any other business purchase that incures VAT.)

So to sum up

HR depts are not very good sorry if you work in HR
No one wants to answer a direct question with a direct answer.
:roll:

I'll hopefully have a look at some more bikes to buy on the weekend and make my mind up soon.

Cheers

Cycling is forever

ExeterSimon

Consider yourself lucky...my HR department just plain refused to start a scheme.

Maybe they've kept the VAT to offset the admin charges?

fossyant

We are waiting for our scheme to come in...I want a Pearson Touche with Halo's.....hurry up....

prawny

My company don't give me the VAT back which didn't come as a surprise at all, they're bar stewards :evil:

But y'know cheap bike

landrew

VAT can only be reclaimed where a company makes taxable sales. For most public sector organisations the majority of their income is from the Government so they have little or no taxable income to reclaim the VAT on purchases. Therefore they bear the cost of VAT on purchases.

Some organisations have a mix of VATable and non-VATable income and can reclaim a proportion of their VAT back on purchases. An example of this is education institutions who may provide training to the private sector.

blackworx

I'm a payroll geek for an NHS Scotland body (Scottish Ambulance Service). Our service has a Green Transport initiative using a 3rd party provider (cyclescheme.co.uk) but I know management were against it because of the admin hassle it involves. I believe it took a united staff side in cooperation with the unions to make sure it happened. For all those NHS folk whose trust is not taking part, speak to a union rep (even if you're not in a union) and get them to take up the cause for you - it's highly unlikely you'll be in the minority of staff who want a scheme started. (The minority I'm guessing you WILL be in is that of those who actually use their bike to get to work, but that's another story...)

As far as VAT goes, the story is as simple as this:

If your employer is VAT registered (i.e. they have a VAT number) then they do not pay VAT on the bike the same way you would if you went into the shop and handed over your own money. Most employers are savvy/honest enough to pass the savings on to you as a scheme member. If your employer doesn't, then an "I'm going to keep annoying you with this until you sort it out" attitude will more than likely get you somewhere. Again, speak to your union rep if you have one. After all, them not passing on the savings to you means they are pocketing your money.

If your employer is not VAT registered (biggest example of this is NHS) then you don't get that extra saving, but for anyone on an average wage (i.e. not in the 40% tax bracket) the savings are still roughly 30%. If you're in the 40% tax bracket you get even more savings (I think your bike ends up almost half price even without the VAT saving) ... Oh, and lend us a tenner? I need new brake blocks

Hope that helps and good luck to all those with unenlightened HR/payroll departments!

Cycling is Forever

Yesterday I got a reply from HR, pretty much killing any hope.

The company I work for confirmed they would not be reclaiming the VAT because they would have to prove and document that any bike purchased through the scheme was being used for travel to work.

On this basis it would be "administratively cumbersome" and I read that to mean "anything difficult isn't worth doing".

Also they decided that if they didn't claim back the VAT on the purchase they wouldn't have to charge VAT when transferring the ownership at the end of the hire period.

Having spoken to various different people in the pass at Halfords about whether one had to record your journeys to work? Their stock answer was "no one has ever asked to look at any evidence".

So I consider the documentation and admin reasons to be a bit flimsy.
I tried to argue with HR that no one is documenting or proving the bike use for savings on income tax & NICs and surely the same applies for VAT?

I also pointed out that VAT should only be paid on the market value price at the end of the hire period and only if the employee take ownership.

I did ask my HR to contact Halfords to get their input, but frankly I think it has fallen on deaf ears now!
Personally I think a lot more people at my company would have joined the scheme if VAT savings were available.

Some employees just see the monthly deductions and think "no" not for me.
If you knew and could see you would be getting the bike VAT free up front. Then possibly employees could see the better deal and then would be more inclined to join. IMHO

Sorry for the long rant! :x

As for me I've narrowed my bike choices down to either a
Bianchi Nirone 7 Veloce
or
condor Italia veloce

I'm in the Campagnolo camp


CiF

Cycling is Forever

Well I've signed up now for the cycle to work scheme, no going back now!

Voted no

BoardinBob

Checked the figures from my employer who run the scheme through Halfords. Example figures for a basic rate tax payer

Voucher: £1,000

12 months actual charge: £670

Actual savings: £330


I'm assuming from those figures that they aren't passing on the VAT savings?

blackworx

BoardinBob wrote:

Checked the figures from my employer who run the scheme through Halfords. Example figures for a basic rate tax payer

Voucher: £1,000

12 months actual charge: £670

Actual savings: £330


I'm assuming from those figures that they aren't passing on the VAT savings?

Correct.

Unlucky yours is through Halfords. It's typical of non-cyclists in charge of setting up these schemes. They automatically think "where would I go to buy a bike?" answer: Halfords. Blehhhhh.