How long do you think the Tax free bike scheme will last?

DonDaddyD

This came up at work - the details I won't bore you with.

So I put it to the board, given the current economic climate how long do you think this will last?

I actually have no opinion on this, beyond should I take advantage of it, or stockpile my salary sacrifice just in case.

However, I am worried that should I enter the scheme and then a month after receiving my bike I find myself being made redundant, I then have potentially a full price bike to pay off with my redundancy pay...

tailwindhome

DonDaddyD wrote:

given the current economic climate how long do you think this will last?

No reason to believe its going anywhere, I'm sure the VAT and PAYE costs to HMRC is tiny in the bigger scheme of things

stockpile my salary sacrifice just in case

Don't understand this bit :?:

I find myself being made redundant, I then have potentially a full price bike to pay off with my redundancy pay

I'm not sure about this bit but I would have thought that you would still get the bike for the reduced price, you would be repaying the money in one lump sum however.

If this caused hardship you would just sell the bike on fleabay

I do however agree that if you believe your position to be at risk* then buying a bike you WANT rather than NEED may be foolish

* you don't seem to be very busy at work so it is possible

DonDaddyD

WheezyMcChubby wrote:

DonDaddyD wrote:

stockpile my salary sacrifice just in case

Don't understand this bit :?:

I mean save what I would normally spend. In this case the salary sacrifice I would make if I entered the cyclescheme

I'm not sure about this bit but I would have thought that you would still get the bike for the reduced price, you would be repaying the money in one lump sum however.

My understanding was that if you leave employment and therefore break the conditions of the hire agreement you pay the full amount on the bike, including the tax.

* you don't seem to be very busy at work so it is possible

Hey, not you as well!

Electricpics

The government Home Computing Initiative was chopped pretty much without warning, putting at least one PC manufacturer out of business. If the scheme's axed it wouldn't affect anyone already paying for their bike as that's between them and their employer and they (should) have already reclaimed the VAT from the invoice.

Must admit there were concerns about redundancy where I work (which have now thankfully passed - for now) but I just decided that the lump sum to pay for the bike would just have to be covered by my redundancy if the worst happened.

Rich158

I'm in the same position, just ordered a new bike, and the threat of redundancy looms. Never one to throw caution to the wind I went for it anyway, if I end up being made redundant then I'll just have to pay the cash back out of my redundancy, if that covers it.

On the other hand your employer may take the view that they'll write off outstanding debts on the bike scheme out of goodwill, that's what my place did last year, I'm just hoping they take the same view if they have to make any more cuts this year :?

soy_sauce

one of my workmate had an idea. use the scheme to get a new bike (the most expensive one the better) then take it apart and sale the component individually. it works out you actually make profit of it.

so if you are getting redundancy, take the bike apart to sell individual component to cover the cost of the "pay-out"

BoardinBob

henry_ho_yin wrote:

one of my workmate had an idea. use the scheme to get a new bike (the most expensive one the better) then take it apart and sale the component individually. it works out you actually make profit of it.

so if you are getting redundancy, take the bike apart to sell individual component to cover the cost of the "pay-out"

And at the end of the year, the employer asks for the bike back...

soy_sauce

BoardinBob wrote:

henry_ho_yin wrote:

one of my workmate had an idea. use the scheme to get a new bike (the most expensive one the better) then take it apart and sale the component individually. it works out you actually make profit of it.

so if you are getting redundancy, take the bike apart to sell individual component to cover the cost of the "pay-out"

And at the end of the year, the employer asks for the bike back...

thats a good point but does any employer actually ask for the bike back?
lucky for me, i got told that by the end of the year i can just keep the bike and don't need to pay that "market value fee".

also how would the employer know what bike did you get via the scheme?

interesting..... :roll:

Bassjunkieuk

I'm no legal expert and I'm basing this on what I know about the scheme as is.
One of the ways that you save on the cost of the bike is by saving on tax and NI payments you would have made out of your salary by making the salary sacrifice BEFORE the NI and tax is calculated - less pay = less (as a percentage) goes on each of these. Simply saving that salary sacrifice won't necessarily provide the same savings unless you invest it into a high interest savings account. Feel free to correct me if I'm wrong on this but that's how I understood it.

As for the being made redundant part I'd hope that there is a clause in the scheme to cover this as it's the employer that has forced the employee out of work and should be treated differently to if you quit or get fired (for mis-use of the internet for example ;-) )

I actually took part in the PC@Home scheme when I was working for a large PC retailer and when I left (to start a new job) my whole last paycheck was wiped out paying off the remainder of the cost, I was aware that I was liable for the outstanding balance but thought I'd get the option of how to pay it off rather then it just being taken straight out of my last pay.

Electricpics

Bassjunkieuk wrote:

I'm no legal expert and I'm basing this on what I know about the scheme as is.
One of the ways that you save on the cost of the bike is by saving on tax and NI payments you would have made out of your salary by making the salary sacrifice BEFORE the NI and tax is calculated - less pay = less (as a percentage) goes on each of these. Simply saving that salary sacrifice won't necessarily provide the same savings unless you invest it into a high interest savings account. Feel free to correct me if I'm wrong on this but that's how I understood it.

That's exactly how it works. The other saving comes from 100% of the VAT being reclaimed by the employer, reducing the cost of the bike.

As for the being made redundant part I'd hope that there is a clause in the scheme to cover this as it's the employer that has forced the employee out of work and should be treated differently to if you quit or get fired (for mis-use of the internet for example ;-) )

There isn't any such clause in my employer's scheme - if you leave, for whatever reason, you pay, because there's no way to take a salary sacrifice when employees are taken off the payroll.

Electricpics

BoardinBob wrote:

thats a good point but does any employer actually ask for the bike back? lucky for me, i got told that by the end of the year i can just keep the bike and don't need to pay that "market value fee".

also how would the employer know what bike did you get via the scheme?

interesting..... :roll:

Not sure what's going to happen at our place as the first bikes don't come to the end of their agreements until the end of May. I'll be making enquiries during March otherwise the muppets in HR won't have a clue. That said, they won't want to be stuck with about a hundred bikes!

As for how the employer knows what bike you got, it's clearly detailed on the lease agreement, with the amount you'll be paying back.

DonDaddyD

I work in the public sector so my employer cannot reclaim the VAT.

I'm thinking of entering the scheme this year. I really want to do more than just commute this year but feel (i) I need to be fitter (ii) I need a better bike.

soy_sauce

Electricpics wrote:

BoardinBob wrote:

thats a good point but does any employer actually ask for the bike back? lucky for me, i got told that by the end of the year i can just keep the bike and don't need to pay that "market value fee".

also how would the employer know what bike did you get via the scheme?

interesting..... :roll:

Not sure what's going to happen at our place as the first bikes don't come to the end of their agreements until the end of May. I'll be making enquiries during March otherwise the muppets in HR won't have a clue. That said, they won't want to be stuck with about a hundred bikes!

As for how the employer knows what bike you got, it's clearly detailed on the lease agreement, with the amount you'll be paying back.

yeah, but that only the amount but not the actually detail of the bike. as you can use the money for locks, helmet and so on. they would not know that what bike you actually got via the scheme and therefore if the employer want the bike back instead of give/"sell" to to you, how do they know that you are returning the same bike that you got via the scheme but not a cheaper one which you got in a Xmas sale?

biondino

I guess it's no use to say you really don't *need* a better bike? Yours is fine until you start racing competitively, basically. Don't get me wrong, I understand why you'd want one, but you'll actually get fitter with a worse bike than you would do with something that seems to carry you along by itself. I know this from experience

Electricpics

DonDaddyD wrote:

I work in the public sector so my employer cannot reclaim the VAT.

That's very unusual. The vast majority of public secor organisations are registered for VAT because almost all of them provide services that they have to charge VAT on. Even if they didn't there are special rules for circumstances such as the Cycle to Work scheme which is heavily promoted within all of the large public sector bodies in my area - emergency services, NHS, local authorities etc.

DonDaddyD

Electricpics wrote:

DonDaddyD wrote:

I work in the public sector so my employer cannot reclaim the VAT.

That's very unusual. The vast majority of public secor organisations are registered for VAT because almost all of them provide services that they have to charge VAT on. Even if they didn't there are special rules for circumstances such as the Cycle to Work scheme which is heavily promoted within all of the large public sector bodies in my area - emergency services, NHS, local authorities etc.

Taken from cycle scheme. The organisation my company is with:

Some employers - for example NHS trusts, charities and some financial institutions - cannot claim back VAT, and so cannot pass the VAT saving on to you. Your savings under the scheme will be reduced. If you enter an employer code, the VAT status will be set automatically.

alfablue

The NHS and Universities (in which I work) cannot reclaim the VAT.

DonDaddyD

biondino wrote:

I guess it's no use to say you really don't *need* a better bike? Yours is fine until you start racing competitively, basically. Don't get me wrong, I understand why you'd want one, but you'll actually get fitter with a worse bike than you would do with something that seems to carry you along by itself. I know this from experience

I don't mind training on my Giant SCR3 and I agree with you to some degree that training on a worse bike would make me better cyclist on a better bike.

But when do I get to ride the better bike?

Out of curiousity would you even consider riding around IOW on your Trek?

Electricpics

DonDaddyD wrote:

Taken from cycle scheme. The organisation my company is with:
Some employers - for example NHS trusts, charities and some financial institutions - cannot claim back VAT, and so cannot pass the VAT saving on to you. Your savings under the scheme will be reduced. If you enter an employer code, the VAT status will be set automatically.

I've seen that but I can't think of any public sector organisation in my area that can't reclaim VAT, including the NHS trusts.

biondino

DonDaddyD wrote:

I don't mind training on my Giant SCR3 and I agree with you to some degree that training on a worse bike would make me better cyclist on a better bike.

Out of curiousity would you even consider riding around IOW on your Trek?

Very good point. Yes, had the Focus been out of action I'd have been fine doing the IOW on the Trek (which is itself not at all a bad bike, especially with the upgrades), but I'd have probably enjoyed it less. Bear in mind though that I had my Trek for 3 years before I got the Focus.

DonDaddyD wrote:

But when do I get to ride the better bike?

This is so beautifully put I don't think it needs an answer! Chapeau

Eau Rouge

One of the big advantages of the scheme is that it reduces how much NI your employer has to pay for employing you since your taxable salary is reduced (and isn't the employer version larger than the employee too?)

Before the current situation, this was probably enough in itself to keep the scheme going, since the government is aware that UK PLC needs to compete with other EU countries to attract and keep large multi-national employers and reducing their costs is essential in doing that.
In the current climate the above applies even more, and the added bonus of the scheme increasing consumer spending on non-essential items (the key to ending the recession) while also being vaguely "green" means it's probably staying.