Bike to work scheme

craker

I just got some xc wheels on my scheme - £285 (LBS). I've spotted them on Chain Reaction for ~£210. The savings are not too obvious once people start discounting - in my experience LBSs wont do discounts on cycle to work scheme stuff.

There are internet retailers affiliated to Cyclescheme (Merlin for example) so it may be worth being flexible about what you want in order to get a proper bargain.

ex-pat scot

AMcD wrote:

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).

Fantastic!
I got a Brompton via the Halfords scheme. They couldn't supply one so subcontracted it to LBS.
When that contract expires (another 12 months, unfortunately) I'll be straight back to sign another contract. Next time I'll work out a road bike that Halfords can't supply, then do a "flexible deal" with LBS. Perhaps a Kinesis frame and a fancy pair of wheels?

Which bike were you after, that Halfords couldn't supply?

rolf_f

Bear in mind that it is meant to be strictly complete bikes and safety kit. Bike parts are clearly not allowed under the scheme (on the basis that if you add those parts to another bike, what happens at the end of the scheme? Who owns what? etc etc). Doesn't stop some shops bending the rules but I wouldn't count on it.

Escargot

TommyEss wrote:

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.

I'm not sure that is correct for all schemes.

My employer runs the scheme through Evans and have stipulated in their T&C's that the final purchase/return price is 4% of the voucher price + VAT on the 4%. So if the voucher was for £500 the final purchase price would be £23 (assuming VAT @ 15%).

Also to quote directly from the FAQ

Who does the bike belong to?
You will be leasing the bike from your company for 18 months. At the end of that period, your company will transfer ownership to you after a final payment for the outright purchase has been made via payroll.


Also from the scheme description document:

The final payment for the outright purchase of the bike/accessories at the end of the 18 month period will be 4% + vat of the cost of the original voucher once this payment has been made certificates of ownership will be produced and sent to employees

It says nothing about whether you will/will not be able to buy the bike.

Again I guess all schemes are different and personally I have not heard anything bad about the one my company runs (it's been going for a number of years now).

In terms of salary we have a requirement that we earn at least £16k pa to be eligible and it does not affect pensions etc as it is taken after the pension contributions (we have a Smart Pension arrangement).

Personally I think the scheme is great and if there are any minor differences then the 40% I've saved on my bike will have far outweighed anything else.

TommyEss

Yes - but that indicates what the cost would be at the end should you be offered the chance to purchase the bike at the end of the scheme.

It's a subtle difference - but your company has no legal obligation to sell you the bike at the end of the loan period, under the terms of any of the myriad schemes taking advantage of the Government introduced "Bike 2 Work" scheme. Cyclescheme, Halfords Bike2Work, Evans Bike2Work or whatever they call it are all just different ways of administrating the same Government initiative, designed to get more people on to bikes.

They set the rule about it being for complete bikes and safety equipment only, they bestowed a cover-all credit limit of £1000 to any company partaking in the scheme (which can be upgraded at cost to the company) and they very clearly stipulate that if at the beginning of the scheme a cash price for purchase at the end of the scheme is tabled, then the scheme is invalid - it would change from a 1 year bike hire scheme with the tax benefits of paying the hire charges through salary sacrifice before tax, to a hire-purchase scheme, which for tax purposes would then be a benefit-in-kind, and as such would be fully taxable, and so you wouldn't save any money off the bike at all.

That's the key point of all of this.

Of course, the way the cyclist "wins" is that what company in their right mind would want to sit on 20+ one year old ~£1000 bicycles that have been used and abused and significantly reduced in value?! Of course they're going to want to shift the assets pretty quickly, and the quickest way is to the guy/gal who hired the thing in the first place.

But, no where does it say "And at the end of the £12 months you make a final payment of £XX and the bike is yours"

Looks like your company wording is fine - they're indicating an expected cost on the widley assumed 5% initial purchas value as a fair market value. But they're not guaranteeing you, personally, will be able to buy the bike.

But you will...!

Escargot

Personally I think you're being a little pedantic. You say that it's an indication but I cannot see how more explicit you can be by saying that the final cost will be 4% +VAT of the voucher price. They know what your voucher price is so it is very clear what the final purchase price is ? I cannot see where the "indication" is as it's all fixed (appart from the VAT). Clearly they cannot give a written fixed price as everyone will have a different voucher price.

You may be right about the employer having no obligation to sell you the bike but the scheme is offered on the basis that you can decide to do either. That means you have the option to keep the bike or hand it back.

To quote again from my T&C's

When this Hire Agreement has ended, a final payment will be due for either the outright purchase of the bicycle/accessories or for the associated costs of their return

The HR mailing also says:

This scheme will take the form of a salary sacrifice arrangement which means that employees will not pay income tax or NI on the amount sacrificed and as such this scheme will allow employees to purchase bikes at significant discounts on high street prices.

To me the key issues here are that I have a "choice" and that the word "purchase" is used. I realise what you are saying (and this may be true techically) but I honestly don't think my employer would say that we can "purchase" bikes at significant discount if they had any intention to take the bike back after 18 months. That would be misleading and I'd say I would have a case for mis-selling a scheme.

Maybe they are wrong to word it like that but either way I fully intend to keep the bike and will be pretty cheesed off it they want to take it back :?

simple_salmon

Hi Escargot - Tommy is exactly right in what he says - you cannot be guaranteed to buy the bike at the end and an over officious HMRC rep COULD pull your scheme if he thought the wording was wrong.

The chances of that happening are slight but as someone who has set one of these schemes up I know how careful you have to be. I've also been told that HMRC don't like salary sacrifice because it means they get less tax so it's not beyond the realms of possibility of someone actively looking for a reason to shut a scheme down.

Personally I'd be wary of claiming a scheme was mis-sold. It could highlight a potential problem and you'd end up paying the whole tax amount on it.

It's a tax minefield out there and yes, I am paranoid :?

TommyEss

Hi Escargot - yeah, sorry - it is pedantic, but this is HMRC we're talking about - my Dad's had some very protracted negotioations with them about excise duties (he's a freight forwarder) and trust me, in the nicest possible way, they're very anal!

From what you've quoted of the wording of your scheme, it looks like, technically speaking, your company have made a bit of a boo-boo in their wording, and on that basis, if someone from HMRC were to look into it further, there is a chance they could take the view that what your company has in place is not a Bike 2 Work scheme, but is a Hire-Purchase scheme.

If they did a formal investigation, and reached that conclusion, you'd be up shit creek without a paddle, as they would then be able to claim all the tax relief you've enjoyed back off you.

And from what I've heard, HMRC are a lot more forceful in getting the money you owe them than they are any money they may owe you!

I'm not trying to have a go - I'm just saying how I read it - I work for an American company who are very VERY paranoid of the legal aspects of anything they enter into, and it took them 4 months to come with the wording of our agreement :shock:

TommyEss

Sorry - and for the purposes of your current situation - I'd keep your head down, finish the scheme your currently in, say thanks very much at the end, and get out!

Monkeypump

Rolf F wrote:

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.

Even higher rate taxpayers will only get a discount of ~49%. I don't think it's possible to save more than 50%.

AMcD

ex-pat scot wrote:

AMcD wrote:

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).

Fantastic!
I got a Brompton via the Halfords scheme. They couldn't supply one so subcontracted it to LBS.
When that contract expires (another 12 months, unfortunately) I'll be straight back to sign another contract. Next time I'll work out a road bike that Halfords can't supply, then do a "flexible deal" with LBS. Perhaps a Kinesis frame and a fancy pair of wheels?

Which bike were you after, that Halfords couldn't supply?

Hi, I wanted a Trek Pilot 2.1 WSD 2010 in the brown / bronze shade (most important!). They're due to be in in November I think. I'm going to the shop today just to try some sizes in other bikes as I will have to choose between a 47cm or 50cm in the Trek Pilot.

Escargot

TommyEss wrote:

Hi Escargot - yeah, sorry - it is pedantic, but this is HMRC we're talking about - my Dad's had some very protracted negotioations with them about excise duties (he's a freight forwarder) and trust me, in the nicest possible way, they're very anal!

From what you've quoted of the wording of your scheme, it looks like, technically speaking, your company have made a bit of a boo-boo in their wording, and on that basis, if someone from HMRC were to look into it further, there is a chance they could take the view that what your company has in place is not a Bike 2 Work scheme, but is a Hire-Purchase scheme.

If they did a formal investigation, and reached that conclusion, you'd be up shoot creek without a paddle, as they would then be able to claim all the tax relief you've enjoyed back off you.

And from what I've heard, HMRC are a lot more forceful in getting the money you owe them than they are any money they may owe you!

I'm not trying to have a go - I'm just saying how I read it - I work for an American company who are very VERY paranoid of the legal aspects of anything they enter into, and it took them 4 months to come with the wording of our agreement :shock:

No probs I agree the HMRC are pretty anal about everything and I've no doubt my company has probably got it slightly wrong (HR get things wrong, surely not )

It's supposed to be a 'hire agreement'. Not sure how this differs from the bike2work scheme but as Evans produce the documentation in conjunction with our company then it may well be that it's Evans that have got the technicalities wrong :?

Either way I guess the comforting thing is that many have happily used the scheme as a means of buying a discounted bike to commute to work so am 99% that all will work out fine in our case.

As you've said before though it could be a more complex so is down to the company that offers the scheme.