Why is cycle to work scheme so popular?

sturmey

Apologies if I am missing something obvious but I do not get why so many people think this is such a great scheme.

There are lots of people I see getting full carbon bikes for £1000 through the scheme which would be a great if they actually owned the bike outright.

But surely the big catch is that at the end of the lease period the bike remains the property of your employer and if you want it you have to buy it from them?

So my questions are: what is happening in practice? Do you have to give the bike back at the end? Do you just get to keep it because employers are not actually bothered? Or are people having to fork out a wad of money to claim ownership of their £1k bikes which they probably never commuted on in all that time?

Any answers appreciated.

scottyjohn

Well, the fact that the payments to the bike come off of your gross salary, not the net, means that you win on the tax front, which I think over the term of the agreement, you only actually pay back about 60% of the actual value of the bike, so its a big discount. I dont think you are charged for the paying up as well, so its an interest free loan, and Ive been assured that the final payment for the bike will be no greater than £50. So all in all a number of reasons why it works out well

Pip13

My employer has stated that we can buy the bike at the end of the scheme for 5% of its value. So about £30 plus VAT. Then the bike is mine. Would not have been able to afford such a good bike without the scheme so think it is a great idea.

Frank the tank

The company I work for are on about having a scheme starting in spring and I'll look into the details of it before I make a decision.

I know this hasn't answered your question, but IF it's a cheaper way to get anew bike it can't be bad.

sturmey

Ok.That sounds promising but it still sounds like an arbitrary decision by the employer as to how much to charge for the bike at the end of the lease. Take it the amount payable at the end would be in writing before you signed up?

Pip13

I dont think they are allowed to say cos then it becomes a hire -purchase scheme. Mine was not confirmed in writing but as am coming to end of scheme have just been advised what they will do. So all depends on your employer. It's prob easier for most to sell you the bike as I don't think many companys would want to be stuck with disposing of all the bikes at the end of the scheme.

N0bodyOfTheGoat

I would love to know for curiosity sake, how many employees have been stitched up by their employers, when using these tax free cycle schemes.

During the salary sacrifice period (typically 12 months) of the employee, the bike is the property of the employee's company. Consequently, the bike should be insured by the employee duuring this period, in case of damage or theft. The company has no legal obligation to transfer ownership of the bike to the employee at the end of the salary sacrifice period for a token percentage of the bike's value, from what I understand.

I can picture a company's fat cats starting up a scheme, getting a significant percentage of the workforce to take up the scheme, but never transfering legal ownership of the bike to the person who specifically chose it! The management then request return of their property and then sell the bikes second-hand for some AGM bubbly!

I hope their is something I'm missing here from a legal point of view, but it appears that us employees could be so easily shafted?

alfablue

In theory there is nothing to stop employers retaining the bikes at the end of the scheme but 1) few employers would want to get into the secondhand bike trade, and 2) employers most probably would suffer very bad publicity if they behaved in this way, and surely a great motivation for employers entering the scheme is their green credentials and the good will towards their staff, I doubt they would wish to jeopardise this, though no doubt somewhere, sometime, a rogue employer will do the dirty!

Monty Dog

Nitrous, you either work for a really bad company or have a very poor view of business - it's not 1983 anymore

Beeblebrox

alfablue wrote:

In theory there is nothing to stop employers retaining the bikes at the end of the scheme but 1) few employers would want to get into the secondhand bike trade, and 2) employers most probably would suffer very bad publicity if they behaved in this way, and surely a great motivation for employers entering the scheme is their green credentials and the good will towards their staff, I doubt they would wish to jeopardise this, though no doubt somewhere, sometime, a rogue employer will do the dirty!

This. It's a very cheap way to help an employer be green, look attractive for prospective new employees and the other benefits for an employee cycling (healthy, happy, not taking an expensive car parking space). The money for the loan comes out of the employee's future pay, which is pretty safe and the company loses nothing since the percentage purchase at the end of the loan should cover costs.

Clever way of using the tax system to get something for nothing (except the tax paying public, who lose some income).

N0bodyOfTheGoat

Monty Dog wrote:

Nitrous, you either work for a really bad company or have a very poor view of business - it's not 1983 anymore

Maybe I'm a little jealous that we don't have a scheme at work, not to mention my negative thinking breaking loose

alfablue

Beeblebrox wrote:

alfablue wrote:

In theory there is nothing to stop employers retaining the bikes at the end of the scheme but 1) few employers would want to get into the secondhand bike trade, and 2) employers most probably would suffer very bad publicity if they behaved in this way, and surely a great motivation for employers entering the scheme is their green credentials and the good will towards their staff, I doubt they would wish to jeopardise this, though no doubt somewhere, sometime, a rogue employer will do the dirty!

This. It's a very cheap way to help an employer be green, look attractive for prospective new employees and the other benefits for an employee cycling (healthy, happy, not taking an expensive car parking space). The money for the loan comes out of the employee's future pay, which is pretty safe and the company loses nothing since the percentage purchase at the end of the loan should cover costs.

Clever way of using the tax system to get something for nothing (except the tax paying public, who lose some income).

I think you are agreeing with me? (don't quite understand "This").

Employers also benefit by paying less in employers NI contributions. They can make a net profit from using the scheme.

doyler78

Beeblebrox wrote:

alfablue wrote:

In theory there is nothing to stop employers retaining the bikes at the end of the scheme but 1) few employers would want to get into the secondhand bike trade, and 2) employers most probably would suffer very bad publicity if they behaved in this way, and surely a great motivation for employers entering the scheme is their green credentials and the good will towards their staff, I doubt they would wish to jeopardise this, though no doubt somewhere, sometime, a rogue employer will do the dirty!

This. It's a very cheap way to help an employer be green, look attractive for prospective new employees and the other benefits for an employee cycling (healthy, happy, not taking an expensive car parking space). The money for the loan comes out of the employee's future pay, which is pretty safe and the company loses nothing since the percentage purchase at the end of the loan should cover costs.

Clever way of using the tax system to get something for nothing (except the tax paying public, who lose some income).

Clever but Its actually quite a poor system because:

1) higher rate tax payers get bigger savings than their basic rate counterparts;

2) whole sections of people can't make use of the scheme because they are self employed or are on low wages and the scheme prohibits anyone from using the scheme when any sacrifice takes their wage below the national minimum wage;

3) ownership of the bike by the employee not automatic, rules around how it is to be used, therefore it makes some suspicous of the scheme making adoption of the scheme harder;

4) the employer is the original owner and not the employee therefore warranties for bikes are usually to the original owner only so those fantastic lifetime frame warranties are probably worthless to the employee as they aren't the original owner;

5) £1000 limit (level at which most schemes run though not a limit within the scheme as there is actually no limit) for encouraging new people to cycling isn't a lot when you factor in everything that a new cyclist will need ie bike, all the gear and accessories which make cycling more pleasant and therefore more likely to keep them cycling. Contrary to how cycling is often promoted it is far from cheap though less expensive than driving however cheaper doesn't mean cheap.

There are many more issues however these are the biggies for me. Still happy to have the scheme and to be using it.

Beeblebrox

alfablue wrote:

Beeblebrox wrote:

alfablue wrote:

In theory there is nothing to stop employers retaining the bikes at the end of the scheme but 1) few employers would want to get into the secondhand bike trade, and 2) employers most probably would suffer very bad publicity if they behaved in this way, and surely a great motivation for employers entering the scheme is their green credentials and the good will towards their staff, I doubt they would wish to jeopardise this, though no doubt somewhere, sometime, a rogue employer will do the dirty!

This. It's a very cheap way to help an employer be green, look attractive for prospective new employees and the other benefits for an employee cycling (healthy, happy, not taking an expensive car parking space). The money for the loan comes out of the employee's future pay, which is pretty safe and the company loses nothing since the percentage purchase at the end of the loan should cover costs.

Clever way of using the tax system to get something for nothing (except the tax paying public, who lose some income).

I think you are agreeing with me? (don't quite understand "This").

Employers also benefit by paying less in employers NI contributions. They can make a net profit from using the scheme.

Heh, sorry - 'This' is indeed agreeing with you, a sort of 'quoting for truth' (QFT) thing.

Phantomkipper

I'm just looking for bike number 2 on the Cyclescheme at work (there are a few variations on the same theme) and my experience has been positive. First one went through simply - just waiting for the settlement figure - expect it to be around £40.00 - 5% of the voucher.

There was no stipulation about having to use the bike for work, if you don't want to.
No minimum or maximum miles per year.
No one checks to see if the bike or accessories are suitable for your personal commute
Price per month agreed before hand (can be calculated on their homepage)
Simple buy back to complete the purchase
Lots of cycling to enjoy.

Lets say you bought a bike which cost you £500 over a year - why would an employer want to take it from you and rip you off? Seems v. unlikely that an employer would antagonise employees like that. Or am I just too optimistic?

Can't see any downside at all, except...... You will have to pay up the remaining unpaid amount if you leave your job before its finalised - probably even if you are made redundant.

biondino

There was no stipulation about having to use the bike for work, if you don't want to.

I think this is in the terms and conditions. Obviously whether anyone could force you to prove it is a very different matter, but as far as I can remember this stipulation does exist.

5) £1000 limit (level at which most schemes run though not a limit within the scheme as there is actually no limit) for encouraging new people to cycling isn't a lot when you factor in everything that a new cyclist will need ie bike, all the gear and accessories which make cycling more pleasant and therefore more likely to keep them cycling.

£1000 is completely enough to encourage a new cyclist to cycle. It may not be ideal for someone who wants to buy a £3k bike but that's not the point of the scheme. At most, you could argue £400 minimum for a decent quality bike and £200 for accessories. Precisely zero noob cyclists will be put off by the fact that they can't get tax relief over a grand.

doyler78

biondino wrote:

5) £1000 limit (level at which most schemes run though not a limit within the scheme as there is actually no limit) for encouraging new people to cycling isn't a lot when you factor in everything that a new cyclist will need ie bike, all the gear and accessories which make cycling more pleasant and therefore more likely to keep them cycling.

£1000 is completely enough to encourage a new cyclist to cycle. It may not be ideal for someone who wants to buy a £3k bike but that's not the point of the scheme. At most, you could argue £400 minimum for a decent quality bike and £200 for accessories. Precisely zero noob cyclists will be put off by the fact that they can't get tax relief over a grand.

I knew that one get jumped on but I still think to get a bike, all the cycling gear to cope with the full range of weather conditions we get here, to get lights if they plan on riding during the winter and if they involve unlit roads that cost will be very expensive (let's face your noob going to the LBS will not be thinking about using a modded torch), all the accessories they need to be able to deal with punctures on the road (pump, levers, spare tube - minimum), if they intend to use the bike to carry stuff such as work clothes then they will be probably convinced of the need for panniers so the bags and racks for that.

Now they can of course cut costs but my point is that the more you cut costs the more you pay on the bike and the less likely someone is to have a pleasant experience on the bike and that is important because it will determine whether some people stick with cycling or not. For every person that joins the bikeradar forum and tells how addictive this cycling lark is there are probably more who give up because they had a bad experience. After all there are a couple of million bikes sold in the UK every year. How many of those are people who buy a bike a never, or rarely ride them?

Yeah it probably will not stop anyone using the scheme however the point of the scheme is not to get people to buy bikes but to make the costs of cycling more affordable for all and thus encourage people to cycle commute to help tackle the growing problems of obesity and to help cut carbon emissions. If they don't cycle regularly after getting their bike then the scheme is a failure.

doyler78

double post

Slow Downcp

The £1k limit doesn't apply if the company has a consumer credit licence - which in itself is not expensive.

Re using for work, the terms of the scheme are that the bike is mainly used for commuting - not exclusively, and not always - so it's easy to get around this even if you don't commute by bike.

amaferanga

If a newbie cyclist can't get all they 'need' for £1000 then there's nothing stopping them buying extra stuff outwith the cyclescheme is there? So they get a good bike plus most of the stuff they'd need for say £600 with the savings on cyclescheme then could (if they want) spend another £400 on accessories. At the end of the day they've spent £1000 instead of £1400 and have the same stuff. Quite why this would be a 'problem' of the sceme is beyond me? And as already pointed out, many employers allow for more than £1000 (my current employer allows up to £1500, my previous employer didn't seem to have any limit at all).

Geoffroid

I understand that employers are selling bikes back to employees after one year at very low prices. However, this is a taxable benefit in kind. If enforced properly this makes the scheme somewhat less attractive. The following is from the department for transport website:

http://www.dft.gov.uk/pgr/sustainable/c ... 732?page=1

Can the employee keep the cycle at the end of the loan period?
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.

However, at the end of the loan period, the employer may choose to give the employee the option to purchase the equipment. Typically this would be offered at substantially less than the original value of the equipment, but to prevent a taxable benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the fair market value of the equipment. No tax relief is available to the employee for the purchase so, where the price is recovered from salary, it must be deducted from their net salary. VAT will also be payable on the purchase price by the employee on the supply by the leasing company or the employer as owner of the equipment.

Alternatively, the employer may wish to allow their employees to continue to use the cycles and cyclists' safety equipment you have supplied after the initial loan period has ended, without transferring ownership. As long as the employee continues to meet the conditions of the tax exemption (see section 4 above) no tax charge will arise.

For fuller guidance on transfer of ownership, you may wish to refer to the HMRC website http://www.hmrc.gov.uk.

alfablue

It may not be problematic, I read a paper by Evans on valuing secondhand bikes (not specifically in relation to this scheme) and the assessments were at very low values, so the typical 5% is not at all unrealistic. HMRC would have a lot of work and potentially many disputes on their hands if they tried to challenge these valuations, and all for a very small amount of potential revenue.

top_bhoy

alfablue wrote:

It may not be problematic, I read a paper by Evans on valuing secondhand bikes (not specifically in relation to this scheme) and the assessments were at very low values, so the typical 5% is not at all unrealistic. HMRC would have a lot of work and potentially many disputes on their hands if they tried to challenge these valuations, and all for a very small amount of potential revenue.

If someone would sell me for £50, a one year old bike with an original cost of £1000, I'd gladly accept. 5% for a one year old bike is totally unrealistic. A minimum £300 would be a more realistic figure at that original cost level.

alfablue

Below is the Evans document. 15% is as good as it gets unless the bike is in showroom condition, one in fair condition may get 6%. If you take the difference between the potential 15% value and the typical resale fee of 5%, that leaves a possible 10% benefit in kind, worth between £22 and £40 to the employee depending on tax rate and assuming a £1k original price. For a £500 bike and lower tax rate, we're talking about £11. To obliterate any such liability the employee merely needs to rack up loads of miles and go easy on the cleaning and maintenance. Realistically, the HMRC would probably spend more to collect these sums than they would gain, as each bike would need individual evaluation. I think the intent of the scheme is to turn a blind eye to these issues, and I would not be too paranoid about being shafted!

Category 1 - SHOWROOM CONDITION

ie just wheeled out of the showroom and never been used - this has already lost it's manufacturers warranties, as these only apply to the original owner plus it won't be of the spec that the buyer would have had the choice if still in the showroom. The document says "it has generally been the policy when pricing second hand bikes for sale to start at 50% of the original price for a showroom condition machine, descending from there to account for things like wear, demand and how long it has been since the bike was a current model."

Category 2 - EXCELLENT CONDITION

You have had the bike for the last year but only ridden it a couple of times.

The document says "15% of the original price is a likely outcome. Once could offer it up for more but reasonably expect to accept this kind of amount. If the bike is an absolute current model ie. same colour and specification as its unused shop floor equivalent, it could get a bit more, probably 17%"

Category 3 - GOOD CONDITION

A typical commuters bike that is one year old, been used regularly, has been excellently maintained and serviced and possibly parts exchanged, been cleaned and lubricated throughout useage.

The document says "commuter bikes are more likely to be left outside when they are not ridden, and users rarely have the same opportunities for after-ride care as the weekend mountain bike receives. A bike commuted on for a year in good condition can be expected to fetch around 10% of the original shop price. Using the same criteria described about, another 2% may be obtainable if the bike is still the current model"

Category 4 - FAIR CONDITION

Bikes that have received less attention than those described as good. These are unlikely to be clean, tyres may be worn and under-inflated, recalibration is required of the components, ends of the pedals are scuffed, but still recognisable as a recent acquisition after one year.

The document says "Historically, it has always been extremely difficult to sell such a bike..............we believe that it is near to impossible to put a price on these bikes, but recognise that sometimes it has to be done. 6% of the original would be likely to receive attention and possibly a sale"

Category 5 - POOR CONDITION

This is a bike that despite being only a year old, will demonstrate all the signs of being uncared for. The chain and moving parts will be coated in a thick, black muck that accumulates over a long period of time. Tyres will be worn and under-inflated, scrapes and scratches to the paintwork, rust in evidence.

The document says "this bike is effectively worth nothing at all, in that it will likely be impossible to find a buyer.........5% of the original price is a reasonable expectation with an additional 2% mentioned earlier if it is a contemporary model"

biondino

Top Bhoy, Alfablue's right - you're thinking of retail prices which is totally different. I have it on good authority you could go as low as 2.5% of the original price without risking the taxman's ire.

doyler - I think the likelihood of any noob buying ALL the gear they could ever need to ride a bike in all circumstances is unlikely to the point of not happening ever! Even though it makes pretty good sense financially, at that point they simply don't know what gear they're going to need beyond the obvious.

sportbilly1976

erm,

the Cycle to work scheme is to get people biking to work. Therefore the bike required to do this are NOT carbon frame racers with which to enter races / sportives / L'Etape.

Go to Halford / Evans and you can pick up a very good reliable hybrid bike for £500 or so...then £200 for equipment etc.

Of course there is nothing stopping you purchasing a £1k frame with which to build your own bike and come to an agreement with the bike shop as to what they fill on the voucher

Re sale price...they cannot specifiy this in advance as then the bike will become a taxable benefit for your P11D, but in practise around 5% is the maximum that most schemes would charge.
Also, if your company can reclaim the VAT, then a £1000 bike is effectively being bought GROSS for £850 if the employer chooses to pass on the VAT savings in full.

All in all it is a very good scheme for employers and employee by encouraging people to bike a commute of circa 5 miles or so....also remember that the word "commute" can also apply to a persons home to their local train station if they have secure sheds.....

doyler78

There are whole series of reasons why I don't think £1K per year is really enough to get a person cycling for one full if riding through all four seasons. In all liklihood they probably wouldn't do that in their first year however there will be those that are put of by the costs of getting all the winter gear. Really £200 to buy all the accesories and clothing. Well £200 wouldn't buy me all that I require. That would just cover my lights and a pair of shorts. We can argue over the sums but it just doesn't wash with me and I suspect my argument doesn't wash with the majority here. That's life.

It was issue amongst several others which I raised and as for encouraging people to cycle does anyone actually really believe this scheme does that with an real level of success. Personally it is current cyclists buying themselves new bikes that they probably wouldn't have bought in the first place without the scheme. Hardly helps the green agenda either does it

It doesn't meet its own targets because it relly isn't fit for purpose. Buying a bike doesn't equal riding a bike. Far more needs to be done to convert bike sales to regular cycling.

alfablue

I agree (partly), I could spend £500 to get adequate all round gear, however there are many people who are converted to cycle commuting because of the scheme, so the scheme is a step in the right direction, however small or large that step might be. Also the potential increase in cycling, even if only for leisure, must have a knock on effect for the profile, awareness and acceptability for cycling, which must surely make it a more popular and safe activity.

amaferanga

Well my LBS told me that they get a good number of new cyclists buying bikes through cyclescheme, as well as those that are already cyclists like myself. We'll see if it makes any difference to how people get to work - something like 75% of employees at my work use a car regularly to get to work. I'm pretty sure 75% of employees don't live outside the city, away from bus routes and with no other means of getting to work other than a car.

Unfortunately most people in this country are plain lazy and driving is without a doubt the laziest way to get to work. If they buy a bike on the cheap then MAYBE they will cycle to work (sometimes). If they don't have a bike then they'll likely stay lazy and drive.

Pip13

I got my first bike on the c2w scheme. Have one month left to go then gonna get another bike.

Agree, that as a newbie a year ago I did not get all the right equipment at the time, but the fuel savings I have made have allowed me to buy what I need as when I need it. I have even just sold my car so its the bike or nothing. Prob would not have done all this a year ago without the scheme cos it has saved me money.

You also don't have to use it to cycle to work. A few colleagues of mine got bikes on the scheme but have never biked to work.

But then maybe the scheme is not for everyone?

MrChuck

I think £1K is easily enough to get people going. If somebody only has a few miles to go they don't need that much specialist clothing, but even if those people go back to the car when it's wet (which a lot of people will) the days they cycle are a step in the right direction. Bear in mind that a lot of people will just be taking their first steps and will still regard funny-looking clothes and a commute of more than, say, 4 or 5 miles whatever the weather as lunacy.