Changes to Cycle to Work Scheme

simple_salmon

I'm not sure if anyone is aware but new changes to the salary sacrifice tax-free scheme for commuting bikes could mean that many schemes are now no longer legal.

See: http://www.dft.gov.uk/pgr/sustainable/c ... kguidance/

Basically HMRC are clamping down so that any company who offers the scheme MUST also now offer cycles to all employees who are not eligible to take part in Salary Sacrifice.

This usually means anyone under 18 or anyone who would be taken under the minimum wage by taking part; they must now have access to a cycle to use to get to work provided by the employer or the scheme is invalid.

If anyone has any sensible ideas for how this can work in reality I'd love to hear them because it looks like our scheme is about to die...

spen666

This is no different to what was in place before.

It is a tiny pinprick issue and designed to stop the scheme being a way to give bonuses to selected workers avoiding tax implications


You are worrying about nothing

simple_salmon

Unfortunately Spen the company I work for are not so sure. They are very risk averse and although you are correct that it's essentially the same as was in place before, we have had other indicators that they are planning to clamp down - see:

http://www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf

This is much more specific than previous advice. This means that we (my company) are unlikely to take any risk that the scheme is not correct and will probably drop it since we cannot make provision for every single member of staff to have a bike. Previously most companies just didn't offer anything to staff who didn't qualify (i.e. too young or too low paid) - now if there is one person who cannot benefit from a bike then no-one will be allowed to do so.

The notes on the bus scheme are even worse - since our local providers do not have season tickets for specific routes - just areas - we are going to have to drop that too. In fact the company (third party) that run the scheme are suspending it from today.

simple_salmon

spen666 wrote:

This is no different to what was in place before.

It is a tiny pinprick issue and designed to stop the scheme being a way to give bonuses to selected workers avoiding tax implications


You are worrying about nothing

Our third party provider have just confirmed suspension of the bus ticket scheme and will be issuing guidance for cycles on Monday; so it seems I may have something to worry about

spen666

simple_salmon wrote:

Unfortunately Spen the company I work for are not so sure. They are very risk averse and although you are correct that it's essentially the same as was in place before, we have had other indicators that they are planning to clamp down - see:

http://www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf

This is much more specific than previous advice. This means that we (my company) are unlikely to take any risk that the scheme is not correct and will probably drop it since we cannot make provision for every single member of staff to have a bike. Previously most companies just didn't offer anything to staff who didn't qualify (i.e. too young or too low paid) - now if there is one person who cannot benefit from a bike then no-one will be allowed to do so.

The notes on the bus scheme are even worse - since our local providers do not have season tickets for specific routes - just areas - we are going to have to drop that too. In fact the company (third party) that run the scheme are suspending it from today.

The first bit of yourpost that I have highlighted is the key to this.

The scheme could continue to operate as before, but the powers that be who no doubt are not cyclists panic.

Fear is paralysing this country- fear of blame, fear of litigation.

We'd never conquer the world now- the fear of litigation would stop people allowing navies to set sail etc

spen666

simple_salmon wrote:

Unfortunately Spen the company I work for are not so sure. They are very risk averse and although you are correct that it's essentially the same as was in place before, we have had other indicators that they are planning to clamp down - see:

http://www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf

This is much more specific than previous advice. This means that we (my company) are unlikely to take any risk that the scheme is not correct and will probably drop it since we cannot make provision for every single member of staff to have a bike. Previously most companies just didn't offer anything to staff who didn't qualify (i.e. too young or too low paid) - now if there is one person who cannot benefit from a bike then no-one will be allowed to do so.

The notes on the bus scheme are even worse - since our local providers do not have season tickets for specific routes - just areas - we are going to have to drop that too. In fact the company (third party) that run the scheme are suspending it from today.

The need is not to provide every person with a bike, it is to provide them with the opportunity to join the scheme.

That is a very different risk to provision for everyone to have a bike. Whatwould be the uptake of the scheme by these extras- especially if the other rules were applied ie used for commuting etc

this is not a dig at you Salmon, but those in charge at your employer and other employers

simple_salmon

spen666 wrote:

simple_salmon wrote:

Unfortunately Spen the company I work for are not so sure. They are very risk averse and although you are correct that it's essentially the same as was in place before, we have had other indicators that they are planning to clamp down - see:

http://www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf

This is much more specific than previous advice. This means that we (my company) are unlikely to take any risk that the scheme is not correct and will probably drop it since we cannot make provision for every single member of staff to have a bike. Previously most companies just didn't offer anything to staff who didn't qualify (i.e. too young or too low paid) - now if there is one person who cannot benefit from a bike then no-one will be allowed to do so.

The notes on the bus scheme are even worse - since our local providers do not have season tickets for specific routes - just areas - we are going to have to drop that too. In fact the company (third party) that run the scheme are suspending it from today.

The need is not to provide every person with a bike, it is to provide them with the opportunity to join the scheme.

That is a very different risk to provision for everyone to have a bike. Whatwould be the uptake of the scheme by these extras- especially if the other rules were applied ie used for commuting etc

this is not a dig at you Salmon, but those in charge at your employer and other employers

I don't think you are right and neither do the tax advisers we've been talking to. The new guidance states on page 11:

"Where employees are paid at NMW [National Minimum Wage] employers could consider offering a loan bike without salary sacrifice, or a pool of bikes for those staff, to avoid them being excluded from the offer of a cycle."

In other words, this isn't about making the scheme available to all and it is about making a bike available to all.

The important point is that for under 18s and those on NMW they cannot legally take part in salary sacrifice no matter how it is set up. These guidelines make it clear that for those staff you MUST have an ALTERNATIVE scheme in place or your ss scheme is no longer compliant.

It's worth noting that some of the advice we've been getting is from a company whose role is providing these schemes; when they start to pull the plug then you need to start taking this seriously.

spen666

simple_salmon wrote:

spen666 wrote:

simple_salmon wrote:

Unfortunately Spen the company I work for are not so sure. They are very risk averse and although you are correct that it's essentially the same as was in place before, we have had other indicators that they are planning to clamp down - see:

http://www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf

This is much more specific than previous advice. This means that we (my company) are unlikely to take any risk that the scheme is not correct and will probably drop it since we cannot make provision for every single member of staff to have a bike. Previously most companies just didn't offer anything to staff who didn't qualify (i.e. too young or too low paid) - now if there is one person who cannot benefit from a bike then no-one will be allowed to do so.

The notes on the bus scheme are even worse - since our local providers do not have season tickets for specific routes - just areas - we are going to have to drop that too. In fact the company (third party) that run the scheme are suspending it from today.

The need is not to provide every person with a bike, it is to provide them with the opportunity to join the scheme.

That is a very different risk to provision for everyone to have a bike. Whatwould be the uptake of the scheme by these extras- especially if the other rules were applied ie used for commuting etc

this is not a dig at you Salmon, but those in charge at your employer and other employers

I don't think you are right and neither do the tax advisers we've been talking to. The new guidance states on page 11:

"Where employees are paid at NMW [National Minimum Wage] employers could consider offering a loan bike without salary sacrifice, or a pool of bikes for those staff, to avoid them being excluded from the offer of a cycle."

In other words, this isn't about making the scheme available to all and it is about making a bike available to all.

The important point is that for under 18s and those on NMW they cannot legally take part in salary sacrifice no matter how it is set up. These guidelines make it clear that for those staff you MUST have an ALTERNATIVE scheme in place or your ss scheme is no longer compliant.

It's worth noting that some of the advice we've been getting is from a company whose role is providing these schemes; when they start to pull the plug then you need to start taking this seriously.

Salmon that is soo wrong

Are you going to have to force employees to take bikes biecause 1 out of 100,000 wants a bike?

No, the wording is that you have to give everyone the opportunity to participate in the scheme- not give them a bike. The majority will not take it up. especially if company makes checks on who uses them to commute on.

Your company are not reading the wording, they are just taking the most risk adverse option to avoid the possibility of a mistake

simple_salmon

Spen - you CANNOT give everyone the opportunity to participate in the scheme - that is the point; under 18s are not covered by a consumer credit licence and those on NMW are not allowed to sacrifice salary because it will take them underneath.

Please read the documents, it's very clear that the message is everyone must be given the chance to use a works provided bike IF you wish to operate a ss scheme.

We have people from a very well known legal firm offering us advice.

We have been successfully running the scheme for over a year - we don't want to change it but we may be forced to - as I stated the company who run our ss scheme for bus tickets has already suspended their operations.

spen666

simple_salmon wrote:

Spen - you CANNOT give everyone the opportunity to participate in the scheme - that is the point; under 18s are not covered by a consumer credit licence and those on NMW are not allowed to sacrifice salary because it will take them underneath.

I agree you have to give them the #OPPORTUNITY to use a bike provided by the employer.

That is different from having to provide them with a bike

Please read the documents, it's very clear that the message is everyone must be given the chance to use a works provided bike IF you wish to operate a ss scheme.

give them a CHANCE - not give them a bike- how many would take up the scheme- especially if they have to use bike for commuting?

The numbers likely to take up the chance are minimal and will make little difference in practice

however- risk adverse employers will just say no

We have people from a very well known legal firm offering us advice.

We have been successfully running the scheme for over a year - we don't want to change it but we may be forced to - as I stated the company who run our ss scheme for bus tickets has already suspended their operations.

There is no need to suspend scheme- justmake provision to provide a chance ofr others to use a company bike on similar terms to those on the C2W scheme- ie for C2W putposes.

The take up will be minimal andf will inviolve companies in little expense


What is of more interest to me is that these employees on min wage U18 etc are not being given same terms as C2W scheme employees, but are getting better terms as govt are effectively saying if they took up offer bike is free to them.

shouldbeinbed

many companies have a fleet of cars signd out or used on an ad-hoc basis by employees.

why not pool bikes as suggested.

I reckon a figure in the region of 0-1 would be sufficient to cover demand.

alternatively the company offers the c2w scheme with the relevant legal caveats on qualification and alongside advertise that if some one not qualified to participate wants to be provided with a company owned bike and safety equipment and pay a 'maintenence fee' every month then they would look into it with exactly the same criteria as a qualifying participant.

Insurance being on the same rules as c2w is. the bike is owned by the company (pending consideration of allowing the user to pay an FMV after a set period of payments to buy the bike second hand) but riding and parking it is the assumed responsibility of the user and insurance is provided personally by them.

spen666

shouldbeinbed wrote:

many companies have a fleet of cars signd out or used on an ad-hoc basis by employees.

why not pool bikes as suggested.

I reckon a figure in the region of 0-1 would be sufficient to cover demand.

Exactly

That is exactly the point I have been trying to make.

alternatively the company offers the c2w scheme with the relevant legal caveats on qualification and alongside advertise that if some one not qualified to participate wants to be provided with a company owned bike and safety equipment and pay a 'maintenence fee' every month then they would look into it with exactly the same criteria as a qualifying participant.

Insurance being on the same rules as c2w is. the bike is owned by the company (pending consideration of allowing the user to pay an FMV after a set period of payments to buy the bike second hand) but riding and parking it is the assumed responsibility of the user and insurance is provided personally by them.

rake

another change that should be made is if you dont ride it to work it cant be considered tax reclaimable. why not have a 'reside from work' housing scheme and never pay tax again.

richk

rake wrote:

another change that should be made is if you dont ride it to work it cant be considered tax reclaimable. ...

Isn't that the case already? Doesn't the majority of a bikes usage (during the hire perioed, measurement method unspecified) have to be used for all (or part) of a journey to/from work? Aren't you making a suitable declaration to that effect at the outset? Only nobody has the time/resources to actually check - which would have to be over the whole loan period. If found out, then it's probably (I'm guessing) tax evasion/fraud?

simple_salmon

In terms of pool bikes - I have tried to set this up here before but was met with a wall of 'issues' from our insurers; I may try again but would prefer alternatives if possible.Some points regarding pool bikes:

1. I agree with Spen wrt the differing terms compared with C2W. It had also occurred to me that people would be receiving a free bike to use so it isn't at all fair.
2. Take up here would probably be quite high. Around 10% of our staff (2500 - 3000) report that they regularly cycle to work and car parking is becoming harder. We also spend tens of 1000s of £ every year promoting and facilitating cycliing.
3. Pool bikes are usually short term use, not long term commuter use. They have different needs wrt servicing and hence different insurance issues; so not the same as C2W at all really.

Other solutions I'm thinking about in order for our scheme to be considered compliant are interest-free loans to purchase a bike or access to cheap refurbished cycles from our Dr Bike provider. Both of these would require users to pay for the bike which is more like C2W.

I'm waiting for more advice so I'll update if and when I get it.

bails87

10% of staff regulary commute by bike? But how many of those earn NMW or are under 18? Those are the ones that this change applies to.

As for saying it's not fair, high earners can take a pay cut to NMW if they want a free bike

rake

why doesnt the government just subsidise cycling at point of sale if its trying to be green. no contracts needed.

simple_salmon

The stupid thing about this at the moment is that we don't have any staff on NMW or U-18; but as we also don't have a policy to say we wouldn't employ anyone like that (especially U-18; all our wages are well over NMW as I understand) it's probably best to have alternatives in place.

The other currently grey area is people who work are but are not salaried - of whom we have many. Still waiting to find out how they fit into all this.

As for being high earners; tbh our C2W members cut from high to low and I would expect those wanting to use a pool bike to do so as well.

This isn't about a hierarchy thing (I have noted the smiley though )

Basically a system that says 'Everyone benefits or no-one benefits' seems a nonsense to me; cutting off your nose to spite your face.

I'd be very interested to hear from someone who is currently trying to get HMRC approval for a new scheme...

bails87

Don't get me wrong, I think I agree with you!

But if you have zero employees who would be exempt/excluded from C2W, then you have no need to provide free bikes, pool bikes, or anything else. So nothing has changed. Or have I misunderstood?

Surely if any current employee wants a bike through C2W then they can get one, anyone else who wanted one, but couldn't (at present, nobody) would need the opportunity of a free loan bike or access to a 'pool'.

The opportunity to have free loan bikes only applies to excluded staff, so if one/some start then buy a £200 Carerra Subway? Going from your current stats, you'd only need one bike for every ten employees. I see how it could be difficult, (as do people far more qualified than me), but I really don't see how it's a problem. As you're not employing anyone that the change applies to then just carry on, surely?

simple_salmon

What you're saying makes sense Bails and it may be that we can continue as we are. The difficulty would arise IF we were to employ someone excluded and that could, in theory, happen at any time.

The difficulty arises if our local tax office deems we should have a scheme in place to cover that - at the moment I just don't know.

We also do have many non-salaried staff - who by definition cannot take part in salary sacrifice and no-one I've yet spoken to knows if we have to cover them as well :?

TBH I started the thread to let other people know of the changes since I cannot be the only person affected

john-e-big-guns

All of the people I know that have been able to get on this scheme have used it for a weekend best...and ride to work on their old hack the odd time when the weather is fine ....and are all on good salery " Nice work if you can get it"

simple_salmon

john-e-big-guns wrote:

All of the people I know that have been able to get on this scheme have used it for a weekend best...and ride to work on their old hack the odd time when the weather is fine ....and are all on good salery " Nice work if you can get it"

And we wonder why the HMRC are starting to clamp down :?

hoolio

Hi simple salmon, I'm not trying to have a dig at you, but you've used the phrase "clamping down" a few times and I just want to clarify whether you know of any instances of the HMRC actually auditing the C2W schemes regarding bike use / qualification?
I understand that to qualify for the scheme the majority of the use of the bike should be for commuting, but I've never heard of ANY checks on this.

I can see that the wording of the guidance has changed slightly, but as far as I can see the intention of that is to make the scheme available to more people who do not fall into salary sacrifice (minimum wage).

I'm genuinely not trying to troll here, I have a professional interest in HMRC focus (albeit more on the fringes of what I do).

simple_salmon

hoolio wrote:

Hi simple salmon, I'm not trying to have a dig at you, but you've used the phrase "clamping down" a few times and I just want to clarify whether you know of any instances of the HMRC actually auditing the C2W schemes regarding bike use / qualification?
I understand that to qualify for the scheme the majority of the use of the bike should be for commuting, but I've never heard of ANY checks on this.

I can see that the wording of the guidance has changed slightly, but as far as I can see the intention of that is to make the scheme available to more people who do not fall into salary sacrifice (minimum wage).

I'm genuinely not trying to troll here, I have a professional interest in HMRC focus (albeit more on the fringes of what I do).

I don't know of any instances of where HMRC have made post-scheme checks but I would be very interested to know if any scheme has been refused by HMRC particularly in light of the new guidelines that ALL staff members must be allowed to apply with good reasons given if they are turned down. This includes hourly paid casual staff.

There also seems to be a requirement to have a pool bike system in place AND have third party evaluation of the cycle at the end of the loan period - the 5% of value will no longer be applicable or £1 or £20 or whatever people were being quoted.

Of course this means that if you look after the bike for 12 months then you will have to pay more to keep it than if you run it into the ground - where is the incentive and who is going to evaluate them anyway?

spen666

simple_salmon wrote:

hoolio wrote:

Hi simple salmon, I'm not trying to have a dig at you, but you've used the phrase "clamping down" a few times and I just want to clarify whether you know of any instances of the HMRC actually auditing the C2W schemes regarding bike use / qualification?
I understand that to qualify for the scheme the majority of the use of the bike should be for commuting, but I've never heard of ANY checks on this.

I can see that the wording of the guidance has changed slightly, but as far as I can see the intention of that is to make the scheme available to more people who do not fall into salary sacrifice (minimum wage).

I'm genuinely not trying to troll here, I have a professional interest in HMRC focus (albeit more on the fringes of what I do).

I don't know of any instances of where HMRC have made post-scheme checks but I would be very interested to know if any scheme has been refused by HMRC particularly in light of the new guidelines that ALL staff members must be allowed to apply with good reasons given if they are turned down. This includes hourly paid casual staff.

There also seems to be a requirement to have a pool bike system in place AND have third party evaluation of the cycle at the end of the loan period - the 5% of value will no longer be applicable or £1 or £20 or whatever people were being quoted.

Of course this means that if you look after the bike for 12 months then you will have to pay more to keep it than if you run it into the ground - where is the incentive and who is going to evaluate them anyway?

You appear to be trying to find problems and reasons for this scheme not to be operated.

Its the same sort of logic that insists kids wear helmetsa, eye goggles and gloves to play conkers.

Not everything is 100% certain or clear cut. Risk management is exactly that- its not avoiding risk its managing it

simple_salmon

Thanks Spen; if only you'd been in our meeting this morning with the people who run the cycle+ scheme you could have put them right and solved all the problems.

Can you set up a scheme under the new guidelines jumping through all the hoops that I've just been presented with by HMRC and then let me and other institutions know how you did it?

Cheers.

simple_salmon

As an example of one of the problems I'm 'trying to find':

If someone buys a £1000 bike and looks after it for 12 months they will have to pay the full market value of the bike + VAT as evaluated by a third party.

Is it beyond the realms of likelihood that a £1000 bike is worth more than £220 after that time? If so then the tax saving for most people (i.e. in the lower tax bracket) is outweighed by the final payment.

How is the scheme now worthwhile?

Slow Downcp

simple_salmon wrote:

As an example of one of the problems I'm 'trying to find':

If someone buys a £1000 bike and looks after it for 12 months they will have to pay the full market value of the bike + VAT as evaluated by a third party.

Is it beyond the realms of likelihood that a £1000 bike is worth more than £220 after that time? If so then the tax saving for most people (i.e. in the lower tax bracket) is outweighed by the final payment.

How is the scheme now worthwhile?

If the value is set at, say, £350 (not unreasonable for a year old bike), and this is not paid by the employee, then a BIK will arise. The employee would have to pay tax on £350 (£70 @ basic rate), so not that much more than the 5% many places charge anyway

simple_salmon

Slow Downcp wrote:

simple_salmon wrote:

As an example of one of the problems I'm 'trying to find':

If someone buys a £1000 bike and looks after it for 12 months they will have to pay the full market value of the bike + VAT as evaluated by a third party.

Is it beyond the realms of likelihood that a £1000 bike is worth more than £220 after that time? If so then the tax saving for most people (i.e. in the lower tax bracket) is outweighed by the final payment.

How is the scheme now worthwhile?

If the value is set at, say, £350 (not unreasonable for a year old bike), and this is not paid by the employee, then a BIK will arise. The employee would have to pay tax on £350 (£70 @ basic rate), so not that much more than the 5% many places charge anyway

So the employer pays for the bike; the employee pays the tax is that what you're saying? If so, how many employers would be willing to do that? We've currently got 70 bikes in our scheme and I can't see us buying each one and giving it to the employee.

Sorry if I've misunderstood. I'm not trying to put barriers up here I'm just being realistic and warning people that the scheme is no longer going to be as easy to set up and administer OR as attractive as it has been. Unless I and all the people involved in our scheme have misinterpreted something.

Slow Downcp

simple_salmon wrote:

Slow Downcp wrote:

simple_salmon wrote:

As an example of one of the problems I'm 'trying to find':

If someone buys a £1000 bike and looks after it for 12 months they will have to pay the full market value of the bike + VAT as evaluated by a third party.

Is it beyond the realms of likelihood that a £1000 bike is worth more than £220 after that time? If so then the tax saving for most people (i.e. in the lower tax bracket) is outweighed by the final payment.

How is the scheme now worthwhile?

If the value is set at, say, £350 (not unreasonable for a year old bike), and this is not paid by the employee, then a BIK will arise. The employee would have to pay tax on £350 (£70 @ basic rate), so not that much more than the 5% many places charge anyway

So the employer pays for the bike; the employee pays the tax is that what you're saying? If so, how many employers would be willing to do that? We've currently got 70 bikes in our scheme and I can't see us buying each one and giving it to the employee.

Sorry if I've misunderstood. I'm not trying to put barriers up here I'm just being realistic and warning people that the scheme is no longer going to be as easy to set up and administer OR as attractive as it has been. Unless I and all the people involved in our scheme have misinterpreted something.

The employee still pays the same monthly payments, so the cost to the company at the end of the 12 months is zero (they actually save the Eers NIC). They 'waive' the final valuation payment and enter it on the employee P11d as a BIK, which then gets taxed via the following year tax code.

spen666

simple_salmon wrote:

As an example of one of the problems I'm 'trying to find':

If someone buys a £1000 bike and looks after it for 12 months they will have to pay the full market value of the bike + VAT as evaluated by a third party.

Is it beyond the realms of likelihood that a £1000 bike is worth more than £220 after that time? If so then the tax saving for most people (i.e. in the lower tax bracket) is outweighed by the final payment.

How is the scheme now worthwhile?

Just live with it and stop your negativity you will be putting people off a scheme that has worked fine and does work fine for 1000's of others

Some people try to make things work instead of looking for problems

Just do it