Bike to work scheme

Tonymufc

My company will soon be offering the scheme to its employees. Just curious to know if any of you have taken up the scheme and are aware of any pitfalls. Also what did you're company do with the bike after the hire term ended. My understanding is that if they want to they can sell the bike on if they choose.

Captain Nemo

I've had my my Defy 1 for a few months now on the scheme and no pitfalls as of yet. I haven't heard of any companies out there wanting the bike at the end, mine certainly don't.

Yorkshirecoal

My work where doing it through Halfords. That was enough to put me off. The legal issue is that you are on a hire agreement with your work so at the end of paying them back the bike is still belongs to the company. As you are in a contract they cant sell the bike on whilst you are paying for it. The only way for you to get ownership is to then buy the bike from your work when the hire agreement is over i.e. when you finish paying for it.
My lot wanted to charge you between 3 to 5% for the pleasure of getting the bike.
I'd ask your company for the full policy details, what price you would have to pay to get the bike, if they are going to put your wages back after the agreement is over (as we found out there is no rule saying they have to as YOU are agreeing to come out of your contract/employment agreement), if any overtime will be paid at the new wage rate or your current rate.
You will also have to insure the bike either through your house or specialist insurance at your own cost, keep it maintained e.t.c

Sorry if I sound negative as i'm sure it a good scheme if your company are good.

Captain Nemo

And I think that the bike is only theirs to sell if you don't want it at the end.

Tonymufc

Cheers guys. I already own a couple including my pride and joy spesh tarmac comp. I was thinking about doing a bit of mountain biking again and it seemed like the cheapest/easiest way. It is a good company but you just never know type of dirty tricks employers might pull in the current climate. ( credit crunch and all that ). A few others at work are going to take it up so I just might hang fire for a bit and see how it works out for them. Once again cheers guys.

passout

Cyclescheme -
Well I got my Ribble Nero Corsa with Ultegra for effectively less than £600 (spread over a year) on this scheme. The full sale price was £999. I think that it is unlikely to be abused by 99% of companies because they wouldn't gain much except really annoying their employees. Personally I wouldn't hesitate but it's no good if you distrust your employer and/or you don't think your job is secure.

Rockhopper

If you loose your job you have to continue paying back the money but you loose the benfit of the tax breaks so it'd be the full amount you repay.
You don't have to insure it or maintain it if you don't want to, but if it gets stolen then again, you loose the tax break and you have to repay the full amount.
In theory your employer shouldn't arrange what happens at the end of the scheme untill the scheme actually finishes. Its their bike, they can keep it, Ebay it, do what they want. Most likey is that they will sell it to you. They can't give it to you as that would be a taxable benefit, but the revenue have said that 5% of the original price is a fair market value. However your company can charge 50% if they want to.
I guess a lot comes down to your relationship with your employer.

More info here http://www.cyclescheme.co.uk/employee,faqs.htm

BigG67

As the FAQs say your employer can't tell you the % they'd look for at the end or it'd be classed as a taxable benefit.

Also depending on your local bike shop and the nature of your employer you might be able to go beyond £1,000.

If your employer has a credit licence (say a car dealer) then there's no limit to what they can offer. Likewise if your local bike shop is "friendly" they could sell you a carbon framed beauty for £1,000....and you could buy a new inner tube for £800

Of course you'd only get the tax break on the £1,000 not the full £1,800.

drewfromrisca

A few blokes in work were actually charged more than what the bike was worht when they got an evaluation.

Slow Downcp

The company has no obligation to sell it to you at the end of the agreement, nor can the price be set beforehand. Having said that I doubt many companies would introduce a scheme mainly for the employees benefit to then pi55 them off by not selling on for a nominal fee.

AMcD

I've just signed the forms asking for a £1000.00 voucher. My net salary reduction will be £684 over 12 months, so not the 40-50% saving often advertised. What I don't understand is why do the company 'own' the bike when you have effectively paid for it at the end of 12 months (ie my gross salary deduction will be exactly £1000.00 at the end of the 12 months)?

As an aside the bike I wanted couldn't be sorced by Halfords but Halfords said I can take their voucher to a local independent bike shop (who have confirmed this is correct and will sorce the bike for me and accept the 'Halfords' voucher).

rolf_f

Yorkshirecoal wrote:

I'd ask your company for the full policy details, what price you would have to pay to get the bike, if they are going to put your wages back after the agreement is over (as we found out there is no rule saying they have to as YOU are agreeing to come out of your contract/employment agreement), if any overtime will be paid at the new wage rate or your current rate.

I think that this is a bit alarmist. The b2w scheme should have no impact on your wage rates - your basic pay remains unaltered. What happens is that the amount you are waiving comes out as a deduction before tax just as expenses come out as additions before tax. So the scheme should not impact on your hourly rate - it isn't just removed from your basic pay.

Worth checking but it shouldn't be a concern.

AMcD - the saving is, I think, about 33% for a typical non higher rate taxpayer. Roughly you save an amount equivalent to the total cost of NI and PAYE as a proportion of your overall wages. PAYE is approx 22%, NI about 11% though that stops somewhere between 30 and 40k. The higher the tax you pay, the more the savings so the more you earn, the bigger the discount (mostly). Don't think 50% is realistically achievable.

As for ownership - if your company didn't own the bike the government couldn't give you the tax break. Similarly, they have to be vague over purchase price because otherwise it comes under hire - purchase regs which also don't allow the tax breaks.

Rockhopper

AMcD wrote:

I've just signed the forms asking for a £1000.00 voucher. My net salary reduction will be £684 over 12 months, so not the 40-50% saving often advertised. What I don't understand is why do the company 'own' the bike when you have effectively paid for it at the end of 12 months (ie my gross salary deduction will be exactly £1000.00 at the end of the 12 months)?

As an aside the bike I wanted couldn't be sorced by Halfords but Halfords said I can take their voucher to a local independent bike shop (who have confirmed this is correct and will sorce the bike for me and accept the 'Halfords' voucher).

You are not paying for it monthly, you are renting it from your employer. Very distinct differenced as rental agreements like this are tax deductable, hire purchase or loan schemes are not.

Slow Downcp

Rolf F wrote:

I think that this is a bit alarmist. The b2w scheme should have no impact on your wage rates - your basic pay remains unaltered. What happens is that the amount you are waiving comes out as a deduction before tax just as expenses come out as additions before tax. So the scheme should not impact on your hourly rate - it isn't just removed from your basic pay.

Worth checking but it shouldn't be a concern.

AMcD - the saving is, I think, about 33% for a typical non higher rate taxpayer. Roughly you save an amount equivalent to the total cost of NI and PAYE as a proportion of your overall wages. PAYE is approx 22%, NI about 11% though that stops somewhere between 30 and 40k. The higher the tax you pay, the more the savings so the more you earn, the bigger the discount (mostly). Don't think 50% is realistically achievable.

The basic rate of pay is affected as it is a salary sacrifice arrangement - it also affects pension contributions if your employer pays a percentage of pay. Some lower paid workers may not be allowed to use the scheme if the deduction takes their wages to below the minimum wage.

The saving depends on whether the company passes on the VAT saving. Also some companies may charge an admin fee. If there's no admin fee and the VAT saving is passed to the employee, the savings are 40% for a basic rate payer and around 50% for higher rate.

rolf_f

Slow Downcp wrote:

The basic rate of pay is affected as it is a salary sacrifice arrangement - it also affects pension contributions if your employer pays a percentage of pay. Some lower paid workers may not be allowed to use the scheme if the deduction takes their wages to below the minimum wage.

The saving depends on whether the company passes on the VAT saving. Also some companies may charge an admin fee. If there's no admin fee and the VAT saving is passed to the employee, the savings are 40% for a basic rate payer and around 50% for higher rate.

I understand that it affects your pay but it doesn't affect your salary - your salary is still the same; you are just getting a deduction from it. It isn't as though your salary drops from, say 25000 to 24500. It does affect pension though not to a degree that would be noticeable. Your company cannot say (as Yorkshirecoal implied) that at the end of the scheme your salary is now 24500 like it or lump it. So overtime should also be unaffected.

There can be another admin fee from the cycle shop as well.

I don't think you can get 50% for the higher rate - just checked on our works spreadsheet (don't think we get done for the VAT) and the normal rate tax payer saves about 37% (not accounting for the final purchase cost) and the higher rate 42% (or does this imply my company doesn't save me the VAT even though it seems to imply that it does). The latter saves less than you think because the NI savings are minimal (people think that higher rate tax payers are paying an extra 18% tax whereas in reality the difference is barely more than 5%).

Best to just say that the savings are substantial!!

Slow Downcp

Higher rate tax payer would save 15% VAT, and then 40% tax and 1% NIC (assuming over the upper earnings limit also). So for ever £100, the pre VAT amount would be £86.95 on which 41% would be saved = £51.30 so saving is 48.7%. However as the upper earnings limit for Class 1 NIC is higher than the upper tax rate, some NIC saving is made at 11% so the saving is higher than 50%.

A calcuation can be checked here if you think your company is not telling the whole truth:

http://www.evanscycles.com/ride2work/saving-calculator

hopper1

I'm looking at this from a slightly different perspective...
I have a limited company, employing just me...
Can I register for c2w?
At least I wouldn't have to worry about my employer keeping the bike, or holding any info back, or over charging me...

I can't cycle to work, as I work on Offshore Drilling Rigs! :oops: , but they wont know!...

Slow Downcp

hopper1 wrote:

I'm looking at this from a slightly different perspective...
I have a limited company, employing just me...
Can I register for c2w?
At least I wouldn't have to worry about my employer keeping the bike, or holding any info back, or over charging me...

I can't cycle to work, as I work on Offshore Drilling Rigs! :oops: , but they wont know!...

In theory, yes.
How you explain the commute is another matter - maybe use the bike to cycle to the helicopter pad when you go out, and lock it there until you return?

TommyEss

Hopper - if you are paid through PAYE then yes, theoretically you can - most of the contractors at my place though reckong they can't make it work, and have just taken a small amount out of their company to fund their carbon addiction!

hopper1

TommyEss wrote:

Hopper - if you are paid through PAYE then yes, theoretically you can - most of the contractors at my place though reckong they can't make it work, and have just taken a small amount out of their company to fund their carbon addiction!

I did take a dividend to feed my carbon addiction, recently, but thought that, as I have myself on PAYE scheme, that c2w could assist my winter bike...

Awaiting response to my email from my accountant...

TommyEss

hopper1 wrote:

Awaiting response to my email from my accountant...

Sounds like a good idea to me!! I don't think the contractors I'm with are on PAYE, so that's their sticking point.

Hope it works out for you!

AMcD

Rolf F wrote:

AMcD - the saving is, I think, about 33% for a typical non higher rate taxpayer. Roughly you save an amount equivalent to the total cost of NI and PAYE as a proportion of your overall wages. PAYE is approx 22%, NI about 11% though that stops somewhere between 30 and 40k. The higher the tax you pay, the more the savings so the more you earn, the bigger the discount (mostly). Don't think 50% is realistically achievable.

As for ownership - if your company didn't own the bike the government couldn't give you the tax break. Similarly, they have to be vague over purchase price because otherwise it comes under hire - purchase regs which also don't allow the tax breaks.

Thanks Rolf and Rockhopper - now understand. And the average of 33% is just a bit more than I calculated I would save so pleased about that.

Harry B

TommyEss wrote:

hopper1 wrote:

Awaiting response to my email from my accountant...

Sounds like a good idea to me!! I don't think the contractors I'm with are on PAYE, so that's their sticking point.

Hope it works out for you!

A mate of mine is in exactly the same situation and is accountant okayed it.

I've just finished my scheme and been asked to pay 5% to keep the bike. Seems a bargain to me. I've also been told that i can do the scheme again if I want but do I really need 5 bikes?

rolf_f

Slow Downcp wrote:

Higher rate tax payer would save 15% VAT, and then 40% tax and 1% NIC (assuming over the upper earnings limit also). So for ever £100, the pre VAT amount would be £86.95 on which 41% would be saved = £51.30 so saving is 48.7%. However as the upper earnings limit for Class 1 NIC is higher than the upper tax rate, some NIC saving is made at 11% so the saving is higher than 50%.

A calcuation can be checked here if you think your company is not telling the whole truth:

http://www.evanscycles.com/ride2work/saving-calculator

Really weird is this - just shows the online calculators are only approximate and you do need to go by whatever your work indicates. Our own calculator gives me a saving of 37% whereas Evans says 31% or 40% dependant on the VAT deal (so it looks like I do get the VAT discount). Evans indicates if I was a higher rate taxpayer that I'd get 51 - 57% off but on my companies calculator it indicates a discount of 42%!

The pension might make some difference but it is odd that the two options on Evans encompass what I get at normal rate tax payer yet the higher rate gives a far higher range on Evans.

Slow Downcp

It really depends on individual circumstances, if on the brink of 40% tax or upper NIC limit then it does skew the results.

I've definitely saved at least 50% on all three bikes I've bought through the scheme as I check my tax and NIC calculation with and without the scheme every April.

TommyEss

Yep - we got our personalised link for our company, and on a grand I save 34.9% - not too shabby, but goes to show the Evans one is indicative only. I assume this is down to pension etc.

Tonymufc

5% of the bikes value! Interesting ( said whilst stroking chin, Dr Evil styley ).

hopper1

Accountant just ok'd it!

Now, which LBS do I go to first....

TommyEss

hopper1 wrote:

Accountant just ok'd it!

Now, which LBS do I go to first....

Schweeeeeeet!!

kaimag11

From my point of view this scheme has been great.. My company lets me keep the vat and charge me £20 at the end of the year. with a letter saying the "bike" is mine.

TommyEss

Remember they're not legally allowed to tell you how much you can buy it for, or even that you can definitely buy it, at the end of the rental period, for fear that it will breach the rules surrounding hire purchase/loan agreements.

Also, according to the letter of the rules - it's money for a bike and equipment - not a bike or equipment...

Just don't go shouting too loudly about it on t'internet - you never know who might be reading!! :shock: