Cycle to Work Scheme Sale Values

MonkeyMonster

Lo chaps, friend of mine is wanting to use the ol cycle to work scheme and i may do later in the year. So the company buys the bike and you "rent" it for a year and then buy it from them. How much have people had to pay at this final stage? Has the % saved on vat ever really made you *that* much profit over what you then need to pay to buy it from them after the year is up?

Make sense?
Cheers

Jay dubbleU

Final 'buy' price on my Giant which was 350quid was 23.00. Monthly payment over 12 months were 27.00 taken off before tax and NI - hope that helps

MonkeyMonster

Wow, you only saved 3 pounds...

12 * 27 being 324...

So is the biggest reason most of you guys who've used this system is that it spreads the payments - you don't easily have the readies to buy the bikes outright

This is exactly what I wanted to know cheers jw Anyone else?

davis

You don't just save VAT, you don't pay income tax or NI contributions on your salary sacrifice either; the payments come off your pay packet before the deductions are applied.

I spent the full 1000 quid, and paid 71 GBP per month before tax and NI; final buy price was 71 GBP again. I reckon the monthly payments probably cost me about 40 GBP per month in "cash in my pocket", so I guess that makes 551 quid-ish for 1000 quid of bike.

I think it's a truly excellent deal for a new bike.

federa

my final buy price was £20, from a voucher of 700.

tailwindhome

MonkeyMonster wrote:

Lo chaps, friend of mine is wanting to use the ol cycle to work scheme and i may do later in the year. So the company buys the bike and you "rent" it for a year and then buy it from them. How much have people had to pay at this final stage? Has the % saved on vat ever really made you *that* much profit over what you then need to pay to buy it from them after the year is up?

Make sense?
Cheers

One of the technical aspects of the scheme is that the employer cannot specify at the start of the scheme what the final purchase price will be. However from other threads I've seen the 'purchase' price is normally fairly nominal compared to the 'resale' value which could be achieved on for example ebay.


The benefit of the scheme is, as stated earlier the VAT, NI contribution and Tax. I'll find a worked example later but this is effectively a 40% to %50% reduction in the RRP of the bike. You also benefit from an interest free loan.

Going through a 3rd party scheme (which levies a charge to the retailer) you may be charged extra by a retailer on tight margins (Planet X) or restricted to buying 'full price' bikes.

You may well find you can get a better deal by buying a discounted bike.

YMMV

McConvey Cycles - Belfast wrote:

Savings Example based on normal Tax Bracket


Your tax calculation:



Total cost of bike and accessories: £650.00

VAT saving on bike and accessories (NB helmets are exempt from VAT): £89.36

Net cost of bike and accessories: £560.64

Income tax saving over hire period: £112.13 [being 20% of 560.64]

NI saving over hire period: £61.67

Final cost of bike & accessories: £386.84

Total saving: £263.16

Gross monthly salary sacrifice, based on 12 month hire period: £46.72

Net monthly salary sacrifice, based on 12 month hire period: £32.24

Percentage saving over RRP: 40.5%

**Please note :A Fair Market Value payment is payable upon cessation of the agreement or at the end of the lease period this is normally around 3% of the value of the bike

andyb78

Tax break, pure and simple. £1000 for a Boardman (had to go through Halfords :oops: ) but in reality, only cost me £700 tops.

tailwindhome

MonkeyMonster wrote:

Wow, you only saved 3 pounds...

12 * 27 being 324...

So is the biggest reason most of you guys who've used this system is that it spreads the payments - you don't easily have the readies to buy the bikes outright

This is exactly what I wanted to know cheers jw Anyone else?

No you've got that wrong

The £27 came out of his gross PRE tax and NI income.

Had he been paid that money as normal he would have paid tax on it (say £5.40 at 20%) and NI (say £2.97 at 11%). Therefore the bike is only costing him £18.63 a month.

12 * 18.63 being £223.56 total cost

shouldbeinbed

The Fair Market Value price is suggested by my employers completely off the record is around 5% of the purchase price or 1 final payment the same as the 12 monthly ones.

I'm still convinced my payroll dept have cocked it up and I'm paying over the odds, but even worst case I'll be saving 15% and buying a bike I'd never afford in one go or on a loan.

UKScooby

The scheme rules say 'fair market value' - but how is this defined. Yes - 5% is often mentioned. So that's £50 on my maximum £1k spend.

But I know that our local NHS primary care trust and our local Borough Council both operate 3% policies. So what's good enough for the public sector is good enough for the private sector.

I have heard of £1 policies - to create a legal contract - but its harder to justify if the taxman calls. I will stick to 3% as scheme administrator. Otherwise the company would be making money from the deal (they already are - the Ers NIC saved pays for both the admin and financing costs in full thanks to present low interest rates).

PS - don't forget to 'self administer' - saves even more money as the retailers will give you the 10% - or more - discount to benefit the employee.

metalmonkey

For me its worked out an amazing deal...

I got a lot of gear when it was on sale including my bike which is lush to ride. To buy in one go would have cost me a lot of money. I took the full £1000 voucher however with the sale prices, a further 10% added and a cock up by the shop its been awesome.

I guess I about £65 there abouts comes, off my pay but when its worked out for Tax and NI it works out about £45 when you work that I'm not paying tax on the bike and gear. I have been told the most people pay for the final valuation is 5%, but even less if your bike is dirty ect So you know to do, get dirty before the final valuation.

Hope that helps.

Christophe3967

5% is par for the course, but its not set in stone for tax reasons. Most basic rate taxpayers see savings of 40% on the cost of the bike providing that your employer is VAT registered (NHS trusts and charities aren't usually) or just under 50% if you're a high rate taxpayer.

Other than that, the main issues to consider are whether you intend to stay with your employer for 12 months (if you leave early you'll still be liable to pay the outstanding amount without tax relief) and whether you have insurance cover (if the bike is stolen or damaged its still your responsibility).

Clever Pun

£1000 on mine I paid £70 pcm before tax which equated to about £40 out of my net... no final buy price... hmm that seems a little low, might have been 100 and 70 come to think of it

they've stopped it now though otherwise I'd get myself a cross

Canny Jock

Clever Pun wrote:

£1000 on mine I paid £70 pcm before tax which equated to about £40 out of my net... no final buy price... hmm that seems a little low, might have been 100 and 70 come to think of it

they've stopped it now though otherwise I'd get myself a cross

No, the first sounds right, from memory I'm paying £72 pre-tax which works out at about £42 equivalent, over 12 months for a £1000 bike. With 5% final payment, that's a huge bargain.

mikey_748

Got my £1250 Giant reduced to £1000 in the LBS sale and then it cost me £530 in repayments including a final £50 payment (5% on Cyclescheme and they have no interest in seeing the bike)

1 year on now looking to buy a frame only for the £1k to spec up with bits I fancy...

Happy days

the_hundredth_idiot

My employer spreads the payments over 24 months - so my £1,000 voucher (which came with a 15% additional "accessories" voucher - erm, that'll be my pedals, cycle computer, new set of lights and a decent new lock) is costing me £41.67 pm from my gross salary (or £24.58 pm net once tax and employee NI is knocked off). So I've got £1,150 worth of bike and accessories for a net cost to me of £590 - a near 50% saving. And my employer still saves the employer's NI of 12.8% (I'm assuming the 15% accessories voucher is the VAT saving).

Apparently, HMRC are starting to get a bit picky about the question of fair market value at the end. I understand there have been a couple of legal challenges from HMRC and the 5% or so which is typical is perhaps not going to be enough going forward. My employer's approach is just to quietly forget about it - i.e. no final payment required. Strictly, I believe this means ownership remains with my employer indefinitely; in practice, it makes no difference as there is no way my employer would ever ask for the bike to be returned to them.

bendertherobot

Mine ends this month and I'm just going to keep "hiring" until payroll can answer my queries.

My payment is £65 per month over 18 months. So that's £1170 on a £1000 bike. Hmm, a little odd but all they've said so far is the above the £1k is admin. Weird.

I acknowledge that it doesn't COST me £65 per month but I do PAY that per month of course. Mine are being a bit picky on the fair market value, apparently I have to get a valuation. It's likely to be valued at £500 or so (Full carbon Lemond in excellent condition).

I've sent them an email asking them why the beneficial scheme is going to cost me the best part of £1800. I'd have been better at 30 per cent APR!

tailwindhome

bendertherobot wrote:

Mine ends this month and I'm just going to keep "hiring" until payroll can answer my queries.

My payment is £65 per month over 18 months. So that's £1170 on a £1000 bike. Hmm, a little odd but all they've said so far is the above the £1k is admin. Weird.

I acknowledge that it doesn't COST me £65 per month but I do PAY that per month of course. Mine are being a bit picky on the fair market value, apparently I have to get a valuation. It's likely to be valued at £500 or so (Full carbon Lemond in excellent condition).

I've sent them an email asking them why the beneficial scheme is going to cost me the best part of £1800. I'd have been better at 30 per cent APR!

Something aint right here

bendertherobot

Damn straight, and they keep ignoring my emails on the subject. I suspect they've realised that they can't charge me to admin the scheme.

merlinghnd

Great scheme and as a higher rate tax payer I save more than a standard rate tax payer (which is patently unfair). I am on my 3rd bike through Halfords a pay a final fee of 3% plus VAT which works out at about £35. My company also pays the VAT on the bike so a £1000 bike means I pay back £825 BEFORE tax and NI. Therefore with the final payment it costs me about £540 spread over 12 months. Remember yopu can also buy clothing and accesories as well within your limit.

Rich158

Clever Pun wrote:

£1000 on mine I paid £70 pcm before tax which equated to about £40 out of my net... no final buy price... hmm that seems a little low, might have been 100 and 70 come to think of it

they've stopped it now though otherwise I'd get myself a cross

That's about right, it's what I paid on my last two :roll: I probably paid in the region of £550 for a 1k bike Now I just look on it as a bike tax that automatically comes out of my wages each month

Sigurd

What if the employer sets a relatively high final value? Is the employee obliged to make the final payment and take ownership?

tailwindhome

Sigurd wrote:

What if the employer sets a relatively high final value? Is the employee obliged to make the final payment and take ownership?

Not as I understand it.

merlinghnd

The fact is that the Employer does own the bike until the final payment is made. You are in effect leasing the bike for the year, it only becomes yours when the final payment is made. If you loose/damage the bike for any reason, you still have t pay it off.This payment based on the fair value of the bike has to be made to stop you being liable for tax as a benefit in kind.

I think that if I was an employer, why would I want to rip off my own employees and risk having a load of used bikes being dumped on me. If my employer wanted a large final payment, I would refer them to this site to give them what is an acceptable value, in my case as I said before 3% plus VAT.

I think this is agreat scheme and more should get onboard. I have spent £1000 3 times as I feel it is so good, one day it will be withdrawn and I would kick myself for missing the boat. The Government had a similar scheme to purchase computers which disappeared overnight after a Budget.

bendertherobot

.1.

colintrav

Where does it say in the rule book about getting old bikes fixed through the scheme ...

As wanting to get my old bike fixed through the scheme ,basically from everything added to the frame , Custom job

wicked2627

With my £1000 voucher, I received a further £150 to spend on free accessoories.

Plus I bought a boardman Ltd Ed pro so adding up the costs of all the components and stuff, I received a massive bargain. Well chuffed!

After tax, pay packet only £50 a month lighter.

simple_salmon

As of 18th December HMRC are starting to get picky about the Fair Market Valuation and it is conceivable that you could be paying a lot more than 5%.

It's a complete nonsense but there you go. There is a discussion about this over in Campaign.

Pat Murray

simple_salmon wrote:

As of 18th December HMRC are starting to get picky about the Fair Market Valuation and it is conceivable that you could be paying a lot more than 5%.

It's a complete nonsense but there you go. There is a discussion about this over in Campaign.

See your spreading your misinformed opinion here! God knows how you work as "Transport Coordinator" you couldnt coordinate the preverbial in a brewery!

As I said on the Campaign Forum I am with Spen here, nothing has changed the law is exactly the same. The guidance may have been clarified, nothing more. A quick google shows that this guidance was actually given in April 2008 http://www.hmrc.gov.uk/consultations/be ... 170408.htm ). Strange but in that two year period no one has shown any evidence of HMRC clamping down?

What is quite worrying is that someone as yourself who clearly has no understanding of tax is trying to give such negative advice which may put off people. Let’s look at the advice:
Like child care vouchers and other salary sacrifice schemes ehe scheme needs to be offered to all employees, in the case of those on NMW / hourly paid etc, fine have a couple of pool bikes as others have advised.

The bike needs to be sold at “a fair market value” – so an employer charges a nominal fee as a lot of company’s already do, if challenged by HMRC the onus would be on them to demonstrate that what was charged has led to a benefit in kind and to quantify that BIK. So a £1000 bike is sold for £1 + Vat at the end of a term, the actual value might be nearer £300 the BIK is £299, the amount payable would either be 20 or 40% of this. So for the lower rate tax payer a further £60 tax is due.

The scheme still represents excellent value for money and do you really think that HMRC want to get involved in chasing up the value of a second hand bike for at most a further £100, if there were real issues HMRC would just close the scheme.

Suggest that you take your misinterpretation and misinformation elsewhere.

hoolio

+1 Pat Murray

marcthehammer

My employer only asked for a £1, result.lol