Cycle to Work - upcoming changes to the benefit

Kanya

Ok, background on me: I work for a leading Employee Flexible Benefits company, who administer/implement online solutions for companies who wish to offer their employees a Flexible Benefit scheme (ie employee logs on a website, and can select a bike, increase pension contributions, take dental cover etc etc)

Figured I better put this up before I pass on the upcoming changes that have been announced today by the HMRC regarding the Cycle to Work benefit. They recently altered the bus pass benefit, removing any tax savings and it was only a matter of time before they looked at the C2W.

"HMRC are increasingly challenging eligibility rules and the way in which any transfer of ownership is handled. The attached documents give about as much clarity as we are likely to get, although a couple of grey areas remain.



Key things to note are:

HMRC will be tightening up its view on any new schemes or renewals that came into effect after 18 December 2009 (except where an employee has submitted an election prior to 18 December for a scheme that comes into effect on or before 6 April 2010).

A scheme that comes into effect after this date will NOT BE COMPLIANT if ANY employees are excluded. This means that employees under age 18 (who can't enter into a CCA, although could have an adult act as guarantor) or anyone limited by NMW can not be excluded. This means that if your client has people who would be caught by NMW they will NOT be able to operate a cycle to work scheme.

For transfer of ownership the guidance states that the FMV should be calculated for each bike at the end of the hire period, rather than using a blanket approach.

An alternative that several clients have gone for is to extend the loan period to 3 or 5 years. The salary sacrifice still occurs over 12 months but the employer effectively never transfers ownership and just writes off the asset at the end of the extended loan period.

http://www.dft.gov.uk/pgr/sustainable/c ... df/518054/

This is a link to the October 09 pdf document on the HMRC website at present, which details the changes. I know it says October 09...but these changes will be effective pretty much from April onwards.

If anyone has Q's etc, lemme know and I'll try answer them (as best i can lol!)

Kanya

Actually, I also meant to add that the main reason the government is pulling the bus travel scheme is because they can't track how people use their travel passes when not using them to get to work, nor can they track what percentage of use ie if an employee is supposed to use it at least 50% for travel to work.

The cycle schemes usually have a similar thing in place ie use your bike for at least 50% of use for travelling to work. There's no way of anyone tracking it, so the government are now thinking why should this be offered at tax/NI discounts etc.

Basically, they're now wanting to dry hump us.

Break out the lube chaps, Brown is coming in...

supersonic

Let's be honest, people have taken advantage of the scheme! I work from home mostly - I can't get one.

If he wants to be fair to all, and encourage cycling, then remove VAT on bikes. Be a hell of a lot easier to implememnt too.

Kanya

Pretty much - I took a £1,000 voucher last June (Boardman Pro) and I use it so randomly there's no way it equates to the minimum travel to work useage. But then..who's gonna know?

The VAT off bikes would have been the way forward as you say.

I'm not geting the "salary sacrifice over 12 months, then extend the loan for 3 to 5 years before transferral of ownership". Who in their right mind would hire it for 1 year, then not pay the final FMV of the bike, saying "no thanks, I'd prefer the company to own it for another 3 or 4 years so they can write off the cost to me"

You'd only save about £25ish...!

Cycling is Forever

supersonic wrote:

If he wants to be fair to all, and encourage cycling, then remove VAT on bikes. Be a hell of a lot easier to implememnt too.

If you mean Brown or really Darling as chancellor they can't remove VAT completely as the EU set a minimum of I think 5%

So thank EU for that one :x

Kanya

Put it this way...anyone who selected a bike last year got the better deal (in terms of T & C's)

Bikerbaboon

I realy do feel that loads of people are takeing the P1ss with the currtent C2W and it should be stopped. Its not people getting a bike to ride to work that need stopping its the guys going for the 3rd bike in 3 years and is not stuck on what new bike to get. Or the guys wanting a full sus MTB for the 1 mile trip to work once a week and then blats it round the local woods.
Its going to be tight times for the gov and spending so seeing all the abuse of this i cant see how it will continue unchecked.


Dropping vat from the price of a bike would be great but i cant see them doing it.

supersonic

I just don't think the goverment realised how big the uptake was going to be - and how many MTBers would use it for shiny new bikes!

But of course, given the chance, I'd have done the same! Who wouldn't?!

How about a bicycle scrappage scheme?!

P-Jay

Bikerbaboon wrote:

I realy do feel that loads of people are takeing the P1ss with the currtent C2W and it should be stopped. Its not people getting a bike to ride to work that need stopping its the guys going for the 3rd bike in 3 years and is not stuck on what new bike to get. Or the guys wanting a full sus MTB for the 1 mile trip to work once a week and then blats it round the local woods.
Its going to be tight times for the gov and spending so seeing all the abuse of this i cant see how it will continue unchecked.


Dropping vat from the price of a bike would be great but i cant see them doing it.

What's the issue? Live and let live I say.

Even if they don't use it to get to work, any time someone it cycling they're not driving.

When I had a C2W bike I would have loved to ride to work, but it's not exaclty possible if you need to wear a suit to work and go out 3-4 times a day for meetings.

I think all sports equipment (that's euipment, not flashy trainers) should be Tax free. Obesity is quickly becoming the biggest health threat in the UK, A think a £1 lost in tax to on a bike sale is worth £2 in savings to the NHS*



*unless, like me, you need 3 weeks in hospital, 2 ops, 12 weeks physio and 86 (at the last count) x-rays, 4 CT scans and about a dozen surgeon clinics after a crash - but I'm a clumsy retard.

bails87

86 xrays? :shock:
Do you glow now?!

Kanya

Exactly what you guys said. The level of "abuse" is high, I've seen guys take 2nd and 3rd bikes and I myself will probably do just that come June 2010 - I'd defo sign up (if the T & C's are somewhat similar that is...) and go get a new bike, probably a hybrid for the commute and keep my Pro for XC exclusively.

It should be one bike, per employee every few years (or a one off) rather than each and every year. In 3 years, i could have some nice bikes at a healthy saving each year/each bike....and keep on adding to it at a minimal cost really.

I think this benefit (and my workplace who are monitoring it) will go soon in all honesty. yes the gov wanted to look green enticing folk onto bikes...but as you say they had no idea of the uptake and popularity.

The major factor is that they just have no way of knowing or tracking its main useage, or mileage etc in relation to being used for travelling to work.

dodgy

Kanya wrote:

Put it this way...anyone who selected a bike last year got the better deal (in terms of T & C's)

Hi Kanya,
I selected my benefits in late November 2009 (so opted for cyclescheme voucher), though I don't have the bike yet. Am I effectively on last year's scheme?

Kanya

Yes, I think you will be.

"HMRC will be tightening up its view on any new schemes or renewals that came into effect after 18 December 2009 (except where an employee has submitted an election prior to 18 December for a scheme that comes into effect on or before 6 April 2010). "

Your scheme sounds like it runs November to October 2010. You made your selection end November. Plus your scheme's benefit year is as above - Nov 09 to Oct 2010 (rough guess from your info)

These changes will pretty much take effect from schemes that renew from April onwards or for new schemes being set up.

alfablue

Kanya wrote:

I think this benefit (and my workplace who are monitoring it) will go soon in all honesty. yes the gov wanted to look green enticing folk onto bikes...but as you say they had no idea of the uptake and popularity.

The major factor is that they just have no way of knowing or tracking its main useage, or mileage etc in relation to being used for travelling to work.

I think the massive uptake is great, the more bikes there are on the road, and the more enthusiasm there is for cycling the better. It matters not one jot whether this is for commuting or leisure, its ALL a good thing if one looks at the bigger picture. I have enough hatred on the roads from drivers without cyclists themselves having a downer on this!

stumpyjon

Poo

We're supposed to be just getting into the scheme. I can understand the recommendation to extend the 'loan' period, mnost bikes after 5 years have next to no residual value but in reality a £ 1000 hardtail probably has a genuine market value of a couple of hundred quid at least so from that point of view alone most people have been abusing the system.

Thing it the whole scheme just shows how vacuos and ill informaed the government is. The scheme has been flawed from the start. They were never going to get loads of people cycling to work (maybe that was the point, big green / health annoucement that in practice they didn't expect to be taken up). Loads of people have been unfairly excluded, people whose firms wouldn't participate, self employed people etc. not very democratic. They dumped the whole scheme onto employers to administer and take the risk on.

Thing is they should be encouraging people to take up leisure cycling, some of those people would then have eventually gone on to commute, in the mean time there would be some health benefits and the more people cycling would up the profile of cyclists with drivers. Trouble is the government ministers don't understand what they are trying to do and are only interrested in big PR initiatives, not genuine long term culture changing policies.

Kanya

Ahh, I wasnt on a downer, just conveying the chat re the C2W that floats around the office re this benefit.

I think its a great benefit, I have a spangly great bike, for mucho cheapness and will definately take the C2W option for another bike come June if the terms are still as good!

alfablue

Sorry Kanya, I see you are just reflecting views you have heard.

P-Jay

bails87 wrote:

86 xrays? :shock:
Do you glow now?!

Not quite, but I wouldn't fancy my chances of knocking up the mrs any time soon, which is just fine by me.

I only know because I had to go to hospital again yestersay to buy copies to show my private consultant, says 86 images on the disc!

I'm only 14 away from growing super powers I'm sure!

supersonic

That is a fair bit of radiation!

I once (actually twice lol) had to have a radiotracer injected for a scan - 3.5 years worth of background equivalent adminsitered in 5 mins! I was issued with a warning card, had to flush the bog twice and wasn't allowed to sit within 2m of anyone haha!

butcher of bakersfield

supersonic wrote:

How about a bicycle scrappage scheme?!

The scrappage scheme was a joke. They just put the price of cars up 2k before knocking 2k off for the customer. It was the business that profited - which is what it was primarily designed for, but only done so by misleading the customer.

Second hand dealers began doing it without being subsidised by the government.

Not to mention perfectly good cars getting scrapped.

VAT is an interesting one.

supersonic

Not everyone did - many got a good deal with it.

butcher of bakersfield

I'm sure a lot fo people did get a good deal. I just think it'd be abused asmuch by the industry as the c2w scheme is by the customer.

And I can't bare to see perfectly good stuff get scrapped.

Petty Vagrant

I've used a bike for years to commute as I hate sitting behind the wheel of a car going nowhere fast in the rush hour. My bike was getting a bit old and knackered from lack of proper care and too much salt and sh1t clogging it up, the forks totally shagged out and needed replacing.

I joined the C2W scheme last summer, bought a Giant XTC2 because it looked like a nice bike! I really didn't have a clue what I was looking at or for. Told the bloke in the shop that I never go off road - how wrong was I! Since then I've caught the bug big time and ride all the local trails 3 times a week regardless of the weather. My garage resembles a bike workshop now, I've spent a fortune on bike bits and learnt a huge amount about bike maintenance.

I've repaired (including replacing the forks myself) and serviced my old bike, at first to give it to the missus but now I use it again for the commute as my Giant has tyres best suited for the mud now. True, I don't now use the scheme as it was intended but I don't really feel as if I'm being too much of a cheat either - when the weather improves I'm sure my commute will again include a lap or two of the local woods on the way to work! My point is that without the scheme I probably wouldn't have spent the amount of money on a new bike that I did (and the hundreds since then!) and wouldn't have got hooked on MTBing. My fitness levels have improved massively (apart from the injuries from falling off :shock: ), which has got to be a good thing.

I describe the scheme as my own little tax dodge, being PAYE I never get the chance to avoid tax like a lot of others so I don't lose any sleep over it! I hope they don't scrap the scheme as I've almost convinced my wife that I need (notice 'need' and not 'want') another new and much more expensive bike as soon as I can, especially as it's a bargain!

Bikerbaboon

so if i have a part time job its ok to get job seekers as well as im only working part of the time?

no... so why is it ok to get a bike thats not going to be used for commuting at all on the C2W?

knotty_boro

Err, because the two are completely unrelated?

plumpy

So, an infinitesimally small proportion of MY taxes has gone towards giving Petty Vagrant (and others) a discount on a bike which he still had to pay a lot for himself and which he uses largely for healthy and green outdoor exercise rather than entirely for commuting?

Money which could have gone instead towards MP's duck houses, MEP's travel and lunch expenses, or illegal wars?

Good.

neil²

Cycle to Work in my organisation is seriously dodgy.

We have to use the 'voucher' at just one bike 'shop'. This 'shop' is wholly owned by my organisation and only sell at list price. So, not only do the organisation save on the NI and employer's contribution, they also profit on the mark up on the bikes. I have got two bikes through the scheme but don't think that I have saved any money as it is possible to get a much better deal with interest free credit and much more choice outside the organisation.

Bikerbaboon

knotty_boro wrote:

Err, because the two are completely unrelated?

how both fraud. The £200+ that you can be saveing on a bike is cash not going in to the tax fund. That cash saveing that you are given is for people that cycle to work... if you buy a bike on C2W and dont ride it to work 50% of the time then its fraud.


as to how taxes are spent its a differing matter sure some taxes have been wasted just remember that if you have a crash its tax that pays for the ambulance and the hospitals..... you cant walk out of your front door and not see something your taxes are paying for. Every penny that people swindle is a penny less that taxes can pay for.

mcj78

Bikerbaboon wrote:

knotty_boro wrote:

Err, because the two are completely unrelated?

how both fraud. The £200+ that you can be saveing on a bike is cash not going in to the tax fund. That cash saveing that you are given is for people that cycle to work... if you buy a bike on C2W and dont ride it to work 50% of the time then its fraud.


We get roundly shafted from various angles re. taxation in this country so if anyone wants to spend thier £1000 voucher on a new mtb frame while they have a perfectly serviceable road bike they use for commuting, i'm fine with that. I'm sure most people will be fine with that & once my road bike's paid off (yep, ctw) i'll continue to use it for commuting & (dependant on next years t&c) i'll be spending the voucher on other cycling bits & bobs.

On the new T&C - if I spent the voucher on a new groupset & cycling clothing would it be independently valued after a year of use?

plumpy

It would have been dead easy to tighten up the Scheme. For example, it could have applied only to bikes designed for road commuting, if necessary with a list of approved models. Presumably the Government was happy to accept that "increased recreational bicycle useage" (one of its stated policies, though not specifically in relation to the Scheme) was as likely a consequence of the Scheme as "replacement of motor vehicle journeys by bike journeys".

Saying that taking liberties with the 50% commuting requirement is "tax fraud" is a bit of stretch in my opinion, but even if it is, there are millions and millions of other tax abuses all around which I'd like to see stamped out before I fret about that one.

We all know (even if the Government didn't) that people don't choose to commute other than by bike because of the cost of bikes. Mainly it's traffic; weather; hills; faff with clothes; and "helmet hair" (not joking).

Bikerbaboon

plumpy wrote:

Saying that taking liberties with the 50% commuting requirement is "tax fraud" is a bit of stretch in my opinion, but even if it is, there are millions and millions of other tax abuses all around which I'd like to see stamped out before I fret about that one.

.

Im not saying ooooh no you have only used a bike 47.4% for communting you fraud.
What im saying is the people that buy bike with no intention to commute on them are commiting tax fraud.


as for saying ahhh well loads of other people are using tax loop holes or commiting fraud so why complain about this one. Where do you draw the line? how much can i steal from the tax payer b4 you this actions is needed? is it £200 off a bike or £20,000 for a new pond?

Just because other people are doing it does not make it right.