Buying via the 'Cycle to work' scheme - a good idea?

barrybridges

Hi - I hope someone might be able to offer their advice.

I'm interested in getting a new bike and have heard lots about the Cycle to Work scheme, but what I can't work out is whether it's actually a good deal or if the savings are any good.

I want to buy a bike decent enough to race on and I understand the upper limit is £1,500.

If I were to get a £1k bike, then what would I be 'saving' (I just dip into the top tax bracket, but not by much)?

The scheme suggests it's a hire agreement and that I'd pay a 'fair market price' to my employer at the end, but how is this calculated? How long is the term of the hire?

At the end, I'm offered it for a 'fair market price'. I had always assumed that this is where your employer asks you to buy it for a token £1 or something like that - but I don't understand why they would ask for anything given that by the end of the term you will have paid the full amount of the bike?

Is there any way I could actually end up paying MORE by using the cycle to work scheme?

barrybridges

Oh, and can I buy more than 1 bike through the scheme (e.g. 1 road + 1 mountain bike?)

Slow Downcp

Upper limit is £1,000 unless the employer has a consumner credit licence. If they do, then the upper limit is set by the employer, but the deduction cannot take you below minimum wage rate.

If you're only just higher rate tax, you'd save around 40% but it depends what final payment your employer asks for at the end of the hire.

Pross

If you are in top tax bracket and the company are passing on the full VAT saving you should get a £1k bike for about £500 - £600 I think. A fair market price is normally around £50 at the end of the salary sacrifice scheme but in theory your employer cannot guarantee to let you buy the bike at the end as this would make it a hire purchase agreement :?

One thing to consider is whether your company is using a formal scheme such as Cycle Scheme or Halfords as these may limit your choice of bike or, as they charge 10% from the bike shop, prevent you getting any sale price on the bike. However, on the whole it is likely that you will get a better deal on the scheme than buying direct anywhere unless you find a real bargain (or buy nearly new).

You can buy more than one bike but I'm not sure if you could have two at the same time. However, it may be possible to get a friendly bike shop to put down a road bike for £500 together with 'essential safety equipment' (i.e. a MTB) for the other £500

Pross

Should have added - I think you have to pay the market price if you leave your job before the salary sacrifice period ends so don't do it if you are thinking of changing jobs or there's a risk you are going to lose your job!

thebikechain

ignore this

TommyEss

You can buy more than one bike so long as the combined price is no higher than the limit.

The reason they have to charge a "fair market price" at the end of the scheme is to ensure it is not viewed as a benefit in kind by the tax man. If it is viewed as a benefit in kind (e.g. a ludicrous £1 purchase price at the end of the scheme) then you will be liable for all the tax you've saved, making it a long-winded 12 month interest free credit scheme.

barrybridges

But who defines 'fair market price' and is this ever looked into? For example, let's say the bike costs £1,000 at the start and by the end (12 months) it's worth £700. I don't want to pay my employer £600 over the course of 12 months and then a further £700 at the end, as that is more than the bike is worth!

Or is this one of those situations where the general practice is just to accept £50?

thebikechain

It will typically be a nominal amount but please bear in mind they do not actually have to let you buy the bike.

TommyEss

From Cyclescheme..

Each bike is assessed separately, but in our experience the market shows values to be around 5% of the original voucher value plus VAT. The fair market value cannot be stated before or during the scheme as this could be considered a benefit in kind as hire-purchase does not warrant any tax-relief.

That's the trick - you can't state the fair market value before or during the scheme.

Most people on here seem to be following the ~5% trend.

The fair market value is not the same as the maximum amount you could flog it for on Ebay, for example...[/quote]

Monkeypump

My company tends to impose a 13th payment to cover the final 'fair market value' amount. However, this has been known to be 'flexible' (i.e. not imposed at all) so your company may differ.

Usually it is a nominal amount, and although they're not obliged to sell you the bike at the end, a company would have to be pretty unscrupulous to impose a huge final payment or refuse to sell!

Also, the amount you can save will depend on whether your company gives you the VAT saving. Mine does, so an employee in the higher tax bracket here would save nearly 50% of the bike value.

With regard to leaving the company, you would be liable for the outstanding payments on the bike so it could significantly impact your final salary payment. Can't remember if you have to pay the full value of the bike or not though.

It IS a good way to get a new bike and save money, but like anything, read the T&Cs carefully before you commit.

Porta105

As Monkeypump says, the 'fair market value' payment it typically the same as a months payment so usually about £50

The Hedgehog

I recently finished buying a £1400 bike on this scheme. The saving on the deal (the limit was £1000) was approx £500. The payment at the end was £50 I recall. This is what my employers said was a fair market price (the County Council). So effectively I paid about £950 for a new bike costing £1400.
There is no catch - its a great deal if you are not limited & free to use any retailer.

uiw3026

I just finished paying for a bike through the cycle to work scheme and i would definitely recommend it. Basically i ended saving about 40% of the cost of the bike, and you can buy whatever gear and safety equipment you need - the limit was £1000.

The payments were then taken out over 12 months, and i paid the fair market price at the end which was only about 5% of the value of the bike.

I have no hesitation recommending it and in fact i am getting a 2nd bike from the scheme asap