Self administered cycle to work scheme...

zzr-matt

Just after a bit of advice from anyone who has done this. We are only a small company (10 employees) and the owner is happy for me to set the scheme up as long as I do the donkey work which isn't too much of a problem it would appear.

I have taken a look at the forms on the wiggle site and should be able to come up with something similar easily enough.

My questions relate to the minimum period of the loan and its value. The bike one of the people was after is coming in at around the 2k mark. They are happy to pay the full amount to us in one month to aid our small company cash flow.

Looking at the information it would appear there is a limit of 1k due to us needing to have a credit licence agreement to go any higher for the loan.

So I suppose my question is, is it possible for them to sacrifice half the value of the bike from their salary before they get the bike then the other half the following month? They would then have a remaining 11 months of a year with payments of £0 before finally buying the bike from us at the end of this time. Would this be legal and legit or are we on dodgy ground letting them do this?

So something like:
Value of bike: £2000.00
Value of bike ex VAT @17.5 £1702.13

Pre tax salary sacrifice 31 Jan 2010 £851.07
Bike purchase 15 Feb 2010 £1702.13
Pre tax salary sacrifice 28 Feb 2010 £851.06

Any tips appreciated:)

Matt

Slow Downcp

Can't be done like that I'm afraid - the £1k limit is total price, unless you have a consumer credit licence. Also, as the company is hiring the bike to the employee, one payment isn't possible. It has to be equal instalments and then a fair market value payment at the end. Twelve months is the minimum most schemes run, but I use six months on our scheme (and a £3k limit as we hold a consumer credit licence)

manofsteel

There's nothing to stop the employee making up the difference themselves (Like you can on the Ribble website) i.e. pay off £1k over 12 months and buy the remainder of the bike themselves on a credit card etc. They'd only be getting the tax / NI / VAT savings on half of it - but it's a help (would probably end up with £2k worth of bike for approx. £1.5K)
Hope this helps

Slow Downcp

manofsteel wrote:

There's nothing to stop the employee making up the difference themselves (Like you can on the Ribble website) i.e. pay off £1k over 12 months and buy the remainder of the bike themselves on a credit card etc. They'd only be getting the tax / NI / VAT savings on half of it - but it's a help (would probably end up with £2k worth of bike for approx. £1.5K)
Hope this helps

Not strictly legal either, as the ownership of the bike remains with the company until the final payment (plus option to purchase) is paid. Many shops allow it though, the receipt has to be made our for £1,000 - if there is any sign of the employee topping up, the Revenue would disallow it (if they ever checked)

biondino

I got my Focus through Wiggle C2W and I was able to do £1k through the company, paying the outstanding £499 to Wiggle directly. No suggestions from either end that it wasn't legit.

ohlala!

the Revenue would disallow it (if they ever checked)

The revenue are tricky people they always come when you least expect it. It's best if you enquire to HMRC about this so that you're for sure it's legal.

simple_salmon

Just be warned that HMRC are changing the rules on these schemes (see thread in 'Campaigns'). The full advice is not out yet but the heads-up we've had is that the full market evaluation at the end MUST be done properly (i.e. no 5% nominal fee any more) and you must have a scheme that allows ANY employee access to a cycle should they want one - this can be via salary sacrifice or a pool bike scheme.

Like I say, we're still waiting for the full advice but I would say tread carefully; as of 18th December HMRC look like they may be taking more interest in these schemes.

Being cynical, from the advice we've had so far I'd say they're trying to kill them

Headhuunter

That's the understanding I had too. Topping up over £1k is, strictly speaking, illegal. It makes owndership very difficult to ascertain. In theory the B2W scheme is a bike lease scheme. Your employer owns the bike and leases it to you and then you buy it after 12-18 months for a fair ex lease, 2nd hand value. If you leave the company part way through the lease period, you can leave the bike with the company, as you would if you were renting it from them. However if you have paid an extra few hundred quid of your own money for the bike then how do you split the bike up? Company gets the frame and forks and you get the groupset??

Jamey

If it's a small company, can't you do a sort of informal in-house version where people do a salary sacrifice?

I remember my first job after uni was with a small company and my boss was able to buy me some PC parts I wanted through the company, then take it out of my pay pre-tax.

As long as the employer can justify it as a business expense then it at his/her discretion, isn't it?

simple_salmon

Would it be difficult to justify a cycle used for commuting as a business expense? Companies are not usually responsible for the journey to and from work when expenses can be claimed.

Do we have a tax expert on here who can offer advice?

il_principe

Why do they have to make theses things so damn difficult?

Jamey

Yeah, make with the free money already.

hubba hubba

Simple salmon, I'm starting my ACA in september, then I may do the CTA. Can I get back to you in about 5-6 years? Hope that's not too long

simple_salmon

hubba hubba - tbh you'll probably be ready before we are the way things are going at the moment

Headhuunter

Jamey wrote:

If it's a small company, can't you do a sort of informal in-house version where people do a salary sacrifice?

I remember my first job after uni was with a small company and my boss was able to buy me some PC parts I wanted through the company, then take it out of my pay pre-tax.

As long as the employer can justify it as a business expense then it at his/her discretion, isn't it?

You can easily run the scheme in house, you don't have to go through a 3rd party like Cycle Scheme or one of the retailers' own, dedicated schemes (Halfords, Wiggle etc). Many employers go through a third party simply because they think the scheme is going to involve a lot of hassle which they can outsource at no cost. To be honest they're probably right, no employer wants its employees doing anything other than priniting money for the company or contributing to the bottom line in some way. To have members of staff fannying around administering a C2W scheme which is not revenue producing is in their eyes, counter productive.

There used to be the same pre tax, salary sacrifice scheme available to buy computers in the early to mid 90s I think and there still is a similar salary sacrifice system in place to pay for child care....

Slow Downcp

simple_salmon wrote:

hubba hubba - tbh you'll probably be ready before we are the way things are going at the moment

Did you look into my suggestion about not paying an end of term fee, and suffer the benefit in kind?

Slow Downcp

simple_salmon wrote:

Would it be difficult to justify a cycle used for commuting as a business expense? Companies are not usually responsible for the journey to and from work when expenses can be claimed.

Do we have a tax expert on here who can offer advice?

You could only claim it as a business expense if you used the bike to cycle to customers/meetings etc.

Unless you are a home worker, who rides occassionally to the office, in which case you may have a claim .

simple_salmon

Slow Downcp wrote:

simple_salmon wrote:

hubba hubba - tbh you'll probably be ready before we are the way things are going at the moment

Did you look into my suggestion about not paying an end of term fee, and suffer the benefit in kind?

I did, and we're considering it as an option. It 's going to depend on the advice that our scheme provider give us regarding the final evaluation but it could well be the option we take.

Obviously this means losing out on the final payments and with around 70 bikes currently on the scheme that is a lot of money but that may be a hit we have to take. The alternative - the bikes costing as much, or more, than buying them outright in the first place is too painful to contemplate...

TBH yours was the most helpful response on the thread so cheers for that.

Slow Downcp

They could still charge 5%, and any difference go as BIK if they're worried about losing the final payment.

simple_salmon

Slow Downcp wrote:

They could still charge 5%, and any difference go as BIK if they're worried about losing the final payment.

Of course!! - I'll pass that on too.

Many thanks.

Edit - I guess that this would increase the costs to the staff member though as they would pay the 5% PLUS the BIK payment (is that how it works?).

I'm hoping that the final decision will be as painless as possible for the staff rather than us since they signed up in good faith.

ohlala!

Would it be difficult to justify a cycle used for commuting as a business expense? Companies are not usually responsible for the journey to and from work when expenses can be claimed.

A business expense is an expense incurred wholy and exclusively for the trade. For example if you are a courier company a bicycle would be essential as it is a tool that your company uses to perform the job.

Tiswas

...

Slow Downcp

Tiswas wrote:

As far as the consumer credit license goes, if one is not held by the company making the loan, the loan become unregulated, and therefore unenforceable.

It would also mean that the local trading standards might investigate. Should someone inform them that the company is making unregulated loans.

Only if the loan id for >£1k

Tiswas

...

owenlars

Our company scheme allows you to top up over £1000

Slow Downcp

owenlars wrote:

Our company scheme allows you to top up over £1000

That would fall foul, as described by Tiswas.

alfablue

Slow Downcp wrote:

owenlars wrote:

Our company scheme allows you to top up over £1000

That would fall foul, as described by Tiswas.

I don't think it would fall foul, though there would be an ambiguous situation with ownership. If the company paid more than 1K then they would need the credit licence, but I can't see how an employee contribution would equate with credit.

Slow Downcp

alfablue wrote:

Slow Downcp wrote:

owenlars wrote:

Our company scheme allows you to top up over £1000

That would fall foul, as described by Tiswas.

I don't think it would fall foul, though there would be an ambiguous situation with ownership. If the company paid more than 1K then they would need the credit licence, but I can't see how an employee contribution would equate with credit.

Sorry - misread the post :oops:

As you say though, it does cause problems re ownership and HMRC would no doubt see this as reason to tax the spend.

owenlars

Ownership fixed by you having to pay them the money back in the event of loss or leaving the company. Plus the notional value is declared in the documentation at 5% Our lot are pretty good at tax and are squeaky clean for a variety of reasons.

Slow Downcp

owenlars wrote:

Ownership fixed by you having to pay them the money back in the event of loss or leaving the company. Plus the notional value is declared in the documentation at 5% Our lot are pretty good at tax and are squeaky clean for a variety of reasons.

You can't fix the notional value in the documentation - there's plenty of recent threads showing this, along with HMRC looking for fair market value.
If 5% is agreed in advance (and documented) then it's no longer a hire agreement, but a hire purchase, which does not qualify for tax relief.
Your lot aren't that good at tax, or squeaky clean, it would seem.