Cycle to Work - upcoming changes to the benefit

seward4or5

My employer already operates the pay over 12 months, hire over 3 years arrangement. The 3 years is coming up to expire in a couple of months - will be interesting to see what the policy is on the final market value payment.

bails87

Bikerbaboon
I see your point. But a new pond doesn't lead to a healthier population that costs the NHS less to look after. I don't know if C2W does either, but it's quite possible.

If the gov't contributes £200 towards a bike, and as a result the owner takes up cycling, loses weight, gets his wife and kids interested in cycling and leading a healthier lifestyle then thats £200 well spent in my eyes. If it doesn't have the added positive of reducing congestion and air pollution then that's a shame, admittedly.

knotty_boro

It's tax avoidance rather than "theft" or "fraud", and a relatively minor one at that compared to other methods of tax avoidance in operation.

You likened it to claiming benefits, when the two are completely unrelated and was my original point.

One is taking a tangible amount of money from a specific "fund", through the claiming of benefits, which would only be awarded after satisfying specific criteria anyway (means tested etc)

Whereas the second involves preventing money from actually reaching a specific fund (NI & PAYE) in the first place. Instead you'll most likely be providing it the HMRC elsewhere, probably through some other form of taxation (VAT on whatever you spend the money you've saved on, most probably).

You're also assuming that people who buy C2W bikes would go out and buy the same volume and value of bikes if the scheme were not in place, which is unlikely to say the least. Therefore the lesser amount the government would collect (say through VAT on a C2W bike) would still be more than they were going to get if they didn't have the scheme.

You could argue the C2W scheme has actually stimulated the bike industry, with the obvious knock on effects of reducing obesity and follow on impact to the NHS, providing jobs for bike shop staff etc.

Everything's not black and white you know!

blinddrew

There are two things that have always struck me as a bit odd about this scheme, firstly the mangled way that it has been done as a hire scheme rather than a hire-purchase scheme; meaning you never know the actual cost of your bike until the final purchase payment demand. Secondly, why the value was so high.
Addressing the points in reverse order, if you cut the scheme limit to £500 you can still get a very nice commuter bike (in whatever flavour you want), especially if you then allow the customer to top up to anything else. It will still have the attraction to those genuinely buying into the commuting for the first time (and most likely purchasing at the lower end of the market) without suffering the tax loss on a £1k bike that will never see the inside of the office cycle shed.
The first point is just a classic example of how the government and hmrc can't get their act together. Government want to do X, hmrc say you can't do that, government (normally in a hurry because they've already announced it) come up with some god-awful work around.

ExeterSimon

So to summarize:

People who don't have access to the scheme think it's a load of tosh.

People who do have access to the scheme think it's great.

As with everything else on this planet it's open to fraud. I'll put my hands up and admit that I have two bikes on the scheme (fortunately my wife works for the same employer ;-))

When the current scheme runs out for me in September I intend to combine both vouchers to go towards a new Whyte 19. Having an LBS that turns a blind eye towards things like this helps.

Daz555

plumpy wrote:

It would have been dead easy to tighten up the Scheme. For example, it could have applied only to bikes designed for road commuting.

Lots of people will have parts of their commute that are off road.

plumpy

"If you don't ride it to work 50% of the time then it's fraud"

"I'm not saying if you only use it 47.4% of the time it's fraud"

Which? Could you tell us the precise percentage at which you would regard recreational useage as fraud?

I get a bike on C2W and do 100 miles a week commuting. No leisure miles. 100% useage. Happy baboon.

Same bike, still 100 miles per week commuting. Get the fitness bug - I'm doing 200 leisure miles every weekend. 33% legitimate useage. The slammer?
[/quote]

knotty_boro

Hangings too good for you, in my opinion.

That extra NI could have bought a couple of films for Harriet Harman's husband !!!

Flynny2010

I got my bike though the C2W scheme as our company is a investor in people and run this and a couple of other goverment benefit schemes and if it wasn't for the scheme I probably wouldn't have got back into mountain biking.

I don't drive and to catch the bus is not a money saving excercise as it's a rip off! It's cheaper for me to pay the monthly deduction from my wage than to get the bus everyday for a month. So really it's a no brainer and has already paid dividends as I have lost weight in the first two week of doing it.

The majority of my commute is off road so it is unfair that they should limit to commuter road bikes.

All in all it's like many if the posts above, people that can use the scheme like it and the ones that can't don't.

Bikerbaboon

knotty_boro wrote:

It's tax avoidance rather than "theft" or "fraud", and a relatively minor one at that compared to other methods of tax avoidance in operation.

You likened it to claiming benefits, when the two are completely unrelated and was my original point.

One is taking a tangible amount of money from a specific "fund", through the claiming of benefits, which would only be awarded after satisfying specific criteria anyway (means tested etc)

Whereas the second involves preventing money from actually reaching a specific fund (NI & PAYE) in the first place. Instead you'll most likely be providing it the HMRC elsewhere, probably through some other form of taxation (VAT on whatever you spend the money you've saved on, most probably).

I under stand the point that people no on CTW would not be paying out as much for a bike if they did not have acsess to the tax reduction. though to me its along the line of stealing from top shop and saying its ok as the money you should have payed to them will be spent in gap.

I realy cant see any differance to takeing out more money than you should, to paying in less than you should.


if im supposed to pay £1000 tax and i manage to skip out on £200 of it then the pot from my tax is £800 to pay for schools hospitals and other stuff.

now if i pay £1000 tax then claim £200 in job seekers ( i know hard to do but stick with me as im only using job seekers as a benifit another easy to abuse would be boiler scrappage and claiming you have an older boiler than you do have.) then the net pot is £200 down on where it should be. giveing £800 to pay for schools hospitals and other stuff.

I realy dont see the diferance all of it is takeing money that you should not be.

and again saying other people are doing the same or worse is not an excuse.


Also My company does have acsess to CTW i have chosen not to use it as i live 2 min down hte road and already have a cheap hack to get me there.

knotty_boro

You've missed the point completely, especially with your reference to "stealing from Top Shop and Gap". GAP and Top Shop do not share the same balance sheet for a start.

Bikerbaboon

knotty_boro wrote:

You've missed the point completely, especially with your reference to "stealing from Top Shop and Gap". GAP and Top Shop do not share the same balance sheet for a start.

you where saying that its ok to not pay tax on the bike as you would probabaly be spending the cash on other items that you would then have to pay tax on.

even though the tax missed is your income tax and vat... and then the additional amount you are spending you are only paying vat on.

and the counter point i was makeing its still wrong to take money that you are ont due even if you spend it later.

bails87

Bikerbaboon
So what would you propose? Scrap C2W completely?

Bikerbaboon

I cant find any stats on it but i would love to see some on how many bikes are used for commuting 12 months after the start date of the C2W are still used to commute on a regular basis.
i would go for scrap compleatly then spend the saved taxes on things to help people commute by bike.
better secure storage
better road planning to help people ride in citys.
stronger action against people that intimidate other road users.
youth training to get more people rideing to schools ( stop the mums clogging roads dropping off kids ) if people get used to it at schools its would lead to more continuing after.

if you realy are wanting to have a tax reduction system just take vat off goods for sports. this will have issues of what is a sporting good is and is not.

passout

Thanks for this post.

Right, I do cycle to work but was thinking of using the scheme for a second time to get a winter bike too. I could do it before April - probably this month. If I do it now, it will be the same as last years scheme right?

Please 'imagine' I'm thick when responding - cheers.

butcher of bakersfield

Bikerbaboon wrote:

i would go for scrap compleatly then spend the saved taxes on things to help people commute by bike.
better secure storage
better road planning to help people ride in citys.
stronger action against people that intimidate other road users.
youth training to get more people rideing to schools ( stop the mums clogging roads dropping off kids ) if people get used to it at schools its would lead to more continuing after.

All very good and valid points, but personally I think the government would make a pig's ear of it.

They would only take sensible action on it if there was more cyclists on the road to influence them and the C2W scheme is a step forward to that. Just my thoughts.

Kanya

passout wrote:

Thanks for this post.

Right, I do cycle to work but was thinking of using the scheme for a second time to get a winter bike too. I could do it before April - probably this month. If I do it now, it will be the same as last years scheme right?

Please 'imagine' I'm thick when responding - cheers.

Hiya - you will be subject to the new guidelines, pm me who you work for, i can check if my work admin your scheme.

Father Faff

Kanya wrote:

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, the rules haven't changed at all they are just tightening up on the administration.

Father Faff

The C2W scheme doesn't preclude you having more than 1 bike on it as long as you use those bikes "mainly" to cycle to work and indeed the regulations give an example of someone who rides from home to the station on one and has another bike at the other end of the railway line to cycle from the station to work. Although equally you could have a bike for Monday, a bike for Tuesday, etc. as long as they do more miles on the commute than on leisure.

Having said that the Government's stated aim was to encourage more cycling - however to offer it as a tax benefit and to fit in with the tax rules they had to say that you must use it "mainly" for work purposes to qualify for tax relief. Basically the government have tried to wangle their policy into existing rules but ultimately their main aim is to encourage cycling and I for one don't think they are that bothered about whether people strictly comply with the "mainly" rule or not. All I can say is last time I went to London I was amazed at the huge increase in cyclists - how much of a part the C2W scheme played in that is anyone's guess.

Personally I think all the various salary sacrifice schemes are somewhat contrived but they seem to have become a mainstream way of providing benefits to staff. Where I work we have quite a few staff who have used the scheme to buy bicycles when they might otherwise not have done as well as keener people like myself who have bought several bikes through the scheme. My own view is that it doesn't just benefit myself but also benefits my LBS, the bicycle industry, does mean I use my bike for commuting more than I might otherwise do (rather than the car) as I do feel I have some obligation to, etc And in fact I certainly use my road bike more for commuting than anything else. The MTB is a bit more debatable because it is so damn slow over 15 miles, half of which is road and half moor.

hucking_fell

So from now on if I were to put the £1000 voucher towards a £3000 bike (like I did a year or so ago) the market value of the bike after 1 year will most likely be over the voucher value and if my employer doesn't agree to the extended hire period then I'd be out of pocket when I buy the bike from them at the end of the scheme.

I know a few other fraudsters that have also used an LBS to claim that their new bikes 'only' cost them the maximum £1000 offered to them. This might happen less with the new rules.


edit - Having read the next 2 pages I think I should add that I use my 5 to commute when the weather's better, so mainly in the summer, when I take the off-road way home. This includes rooty singletrack and Forestry Commision tracks so a hybrid or road bike would not have been suitable for me.

Kanya

Father Faff wrote:

Kanya, the rules haven't changed at all they are just tightening up on the administration.

Mainly, yes.

The main point I was trying to let folks know about is the transferral of ownership. Instead of it being the norm that it's done after 12 months, er's can now officially opt to extend that from 3-5 years, and effectively write off the FMV. On the flip side of that, people have paid their salary sacrifice for 12 months, and then could wait an addition few years to take ownership.

I'd rather pay the 5% after 12 months on my bike.

bails87

I think the main problem is the lack of coordination between the gov't and HMRC. The gov't have tried to set up this system within the framework of existing rules, and it only really works if HMRC don't properly enforce it.

What happens if I live 2 miles from work, and ride in instead of driving 3 days a week. The majority of my commuting is done on the bike. So, that's 12 miles. So if I then go for a 15 mile ride at the weekend, I'm breaking the law. If I go for a 15 mile drive then I don't, equally, if I go for an 11 mile ride then I'm not. It seems a bit silly, especially as it's not like subsidised fuel, if I ride 1 mile or 100 miles at the weekend, it doesn't affect the amount taken out of my salary, the 'taxpayers' don't give me more money if I ride my bike more, so as long as it's beingused sensibly for commuting, does it matter if I'm racing on it every weekend?

It should be run so that a rough proportion of your commutes are done on the bike, and after that you can do what you want with it.

Or just drop the VAT for an instant 15% discount.

Belv

Cycling is Forever wrote:

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

There is no VAT on cycle helmets (or motorcycle helmets, or some categories of food)

bails87 wrote:

Or just drop the VAT for an instant 15% discount.

It's back up to 17.5% now

Father Faff

Yes, you are correct Hucking Fell - you shouldn't do that if your scheme has a limit of £1000, however there is in fact no limit provided the people running the scheme (your employer or outsourced provider) have the correct consumer licences. The reason it is normally a £1000 limit is because the consumer licence is free for values up to this.

It is up to the employer/outsourced provider to abide by the rules of the scheme, and yourself of course, and not the LBS that I am aware of.

The bike however will belong to the employer until the end of the loan period. In my company the loan period can be three years but you can pay it off quicker if you want. My view is that the residual value after 1 year is a lot more than 5% (just look on E Bay) so I think many providers and employers are breaking the law by selling bikes to staff at below market value after one year.

bails87

Belv
Do the maths.

If something costs £100 inc VAT. Then the VAT isnt £17.50.

£85 + 17.5% of £85 = £100

17.5% of £85 = £15

So on something costing £100 including VAT, the VAT is actually 15% of the total price, the 17.5% is added on to the pre-VAT price, it's not taken off the final price.

bails87

Father Faff wrote:

Yes, you are correct Hucking Fell - you shouldn't do that if your scheme has a limit of £1000, however there is in fact no limit provided the people running the scheme (your employer or outsourced provider) have the correct consumer licences. The reason it is normally a £1000 limit is because the consumer licence is free for values up to this.

It is up to the employer/outsourced provider to abide by the rules of the scheme, and yourself of course, and not the LBS that I am aware of.

The bike however will belong to the employer until the end of the loan period. In my company the loan period can be three years but you can pay it off quicker if you want. My view is that the residual value after 1 year is a lot more than 5% (just look on E Bay) so I think many providers and employers are breaking the law by selling bikes to staff at below market value after one year.

Father Faff
True, which is why the rules need to change, the reason you don't own it at the end without the final, not pre-agreed payment, is because it would be a hire-purchase agreement if you did, and that wouldn't be tax exempt. So the gov't are relying on employers breaking the rules to make the system work.

If I buy a £1000 bike on the scheme, look after it and it's worth £500 after a year, after already losing £600 through salary sacrifice, then overall I'd be paying £1100 for a £1000 bike. If I knew this was likely to happen at the start of the scheme, then I wouldn't bother, I'd save the £100 and just buy the bike myself. As far as I can tell, the final payment isn't to compensate anyone who's out of pocket, it's purely to comply with tax rules.

Father Faff

Mr Bails

1) Firstly VAT included in £100 is 7/47 = £14.89
2) Secondly I don't think the Government is trying to encourage employers to break the rules, it is more the providers who are ignoring the true market value to encourage more take up. As I say at our work we depreciate by 66% per year so if we were to sell a bike that originally cost £1000 + VAT after 1 year it would be £1000 - 66.666% = £333.33 + VAT that we would offer it for sale. After 3 years it would be sold for £37 + VAT.

Bikerbaboon

bails87 wrote:

I think the main problem is the lack of coordination between the gov't and HMRC. The gov't have tried to set up this system within the framework of existing rules, and it only really works if HMRC don't properly enforce it.

What happens if I live 2 miles from work, and ride in instead of driving 3 days a week. The majority of my commuting is done on the bike. So, that's 12 miles. So if I then go for a 15 mile ride at the weekend, I'm breaking the law. If I go for a 15 mile drive then I don't, equally, if I go for an 11 mile ride then I'm not. It seems a bit silly, especially as it's not like subsidised fuel, if I ride 1 mile or 100 miles at the weekend, it doesn't affect the amount taken out of my salary, the 'taxpayers' don't give me more money if I ride my bike more, so as long as it's beingused sensibly for commuting, does it matter if I'm racing on it every weekend?

It should be run so that a rough proportion of your commutes are done on the bike, and after that you can do what you want with it.

Or just drop the VAT for an instant 15% discount.

I dont have any isses over stuff like that my main peeve is with people abusing the system like hucking fell spoke about using the £1000 voucher to buy a £3000 full sus MTB that is not ment to be a commuting bike.

Father Faff

Well I don't know where you live Mr Baboon but I have a Meta 5 to take me over the moor to work on occasions that I don't use the road bike. I certainly wouldn't like to do 2ft drop offs on a commuting bike!

bails87

Bikerbaboon
But if he commutes on it, what does it matter? The cost to the taxpayer is the same as if he's bought a £1000 hybrid or road bike. I agree, if you use the scheme, you really should commute on the bike that you buy some of the time. Even if it's a FR/DH beast

Father Faff
£15.....£14.89....I was rounding up

And my point is, that if the bike is well maintained, you may well end up paying more for the bike than if you didn't use the scheme. The only reason you need that final payment is because of HMRC rules. The whole point of the change/better enforcement is that you CAN'T just say 66% per year. You have to have it independently valued. Which means the scenario I described above could happen.

If, rather than hoping people worked around them, the gov't/HMRC changed the rules for the C2W scheme and said that there's no final payment. Or maybe one more of the same value of the monthly deductions, then you wouldn't run the risk of the C2W just turning into an expensive loan, considering a lot of places offer interest free credit.