C2W scheme?

bendertherobot

khwaja wrote:

Thanks for your replies everyone. I've just bought my first bike from my company at the end of the hire period. Looks like I could now get myself a second bike after all . I thought this was the case in theory but it helps to know that people have actually got a second bike in practice with no unwanted attention from HMRC! (not that you'd ever 'want' any attention from HMRC!)

It's nothing to do with HMRC at all. They cannot question why you'd need a second bike. You could well have given the first bike in at the end of term. You just need to be eligible and that's up to your employer to decide.

SLX01

Should the c2w deduction show up on your payslip as a deduction or do you just pay different tax? I've had mine 3 months now and there is no indication that the money is being deducted on my payslip?

bendertherobot

SLX01 wrote:

Should the c2w deduction show up on your payslip as a deduction or do you just pay different tax? I've had mine 3 months now and there is no indication that the money is being deducted on my payslip?

Then something's wrong. There should be a deduction. Mine said "name of scheme" on mine.

SLX01

bendertherobot wrote:

SLX01 wrote:

Should the c2w deduction show up on your payslip as a deduction or do you just pay different tax? I've had mine 3 months now and there is no indication that the money is being deducted on my payslip?

Then something's wrong. There should be a deduction. Mine said "name of scheme" on mine.

Interesting! When I bought the bike the printed receipt was in the wrong name/address due to a feck up by the sales assistant who then manually changed it on my copy and initialled it. The voucher was in my name do you think that they don't realise I bought a bike? What happens if they forget to deduct the money can they just start it half way through the 'hire period'?

bendertherobot

SLX01 wrote:

bendertherobot wrote:

SLX01 wrote:

Should the c2w deduction show up on your payslip as a deduction or do you just pay different tax? I've had mine 3 months now and there is no indication that the money is being deducted on my payslip?

Then something's wrong. There should be a deduction. Mine said "name of scheme" on mine.

Interesting! When I bought the bike the printed receipt was in the wrong name/address due to a feck up by the sales assistant who then manually changed it on my copy and initialled it. The voucher was in my name do you think that they don't realise I bought a bike? What happens if they forget to deduct the money can they just start it half way through the 'hire period'?

Well, technically your employer has just given you a "benefit in kind" which you would have to account to HMRC for. It would be better to sort it out!

SLX01

bendertherobot wrote:

Well, technically your employer has just given you a "benefit in kind" which you would have to account to HMRC for. It would be better to sort it out!

I think technically if my suspicions are correct the bike shop has given me a free bike, if the bike shop has not informed the company I bought a bike then they are not being charged for it therefore its not a 'benefit' thats taxable.
I will wait another month to see if it appears then make enquiries with payroll about the issue.

rich164h

It may well be that your company only updates the payroll with this a few times per year. for me, I can get and use and Evans voucher any time of the year I want, but the deductions only get implemented in April and October. At the moment for example, I got a new bike on this scheme about a month ago and I won't pay anything until the end of October.

pidism

pidism wrote:

I took out an agreement on this scheme last year. I think my contract expires September. This will be when I am due to pay my final installment/ Final purchase fee! The alleged 5% everyone talks about. :?

I took out the agreement for a total of £950 to buy my bike over 12 months with a total of £68.84 taken from my monthly gross wage.
12 x 68.84 = 826.08.

Dont know exactly what the final payment will be as my employers only started the scheme last year. I was one of the first to take part.

Either way I am happy with this. I do not have £1000 to go and spend on a bike, so easy tax free/ NI free payments from my wage are ok with me.

I will repost when I make my final settlement.

FURTHER TO ABOVE - I have been given the option by my employer of the final purchase fee. They want £54.64 to settle the scheme and allow me to OWN the bike. Happy with this am I so have agreed.
As previous posts have said, you save national insurance and tax contributions by payments out of your gross wage.
I am not a mathematician so can only speculate that I will have paid roughly £600 for a £950 machine.
Jump in with both feet and snap up a bargain.

I am very happy with the way my employer and the scheme have worked.

Martincan

Just a quicky for anyone in the know, do the monthly payments have to be same as that calculated on the cycle scheme website? Or can the individual pay what he/she would like a month, and make up the remainder at the end of the hire period?

alfablue

I don't think so, it is a "salary sacrifice" scheme, it is deducted from your pay before tax and NI. Whilst it might be technically possible for employers to vary the amounts I think they would be unlikely to be willing to do so due to the complications.

The net amount you pay will depend upon your tax and NI rate and whether your employer can reclaim the VAT and give you the benefit of this. The amount you pay per month will depend on those factors and the period over which the hire agreement runs.

Martincan

On, thanks, that's fair enough. I've managed to get my employer to sign up, and they're pretty keen, I've just got to decide on my bike (first road bike).

norfolkandgood

Can you buy a £1500 bike on the scheme if say your employer has capped the payment at £1000. For example could I pay £500 up front and then get the £1000 paid through the C2W scheme?

jlgt

I work for Bristol City Council, and I applied for a cyclescheme voucher from them a couple of days ago... Today I got back an email saying that in light of a recent ECJ ruling (see e.g. http://www.tax-news.com/news/Firms_Face_VAT_Bills_After_ECJ_Ruling____44632.html), they have suspended all Cycle to Work applications. They are waiting for advice from HMRC before deciding whether to start the scheme up again.

Basically, the ruling says that employers will be liable to pay VAT on voucher-based salary sacrifice schemes (and this could potentially be backdated). So obviously it will cost them more to run these schemes; they might pass the VAT cost onto the employee, or they might decide they're not viable and scrap them altogether.

I'm gutted because there was a lovely Bianchi I had my eye on which I'm now going to have to pay full whack on, or look for something else...

If anyone is thinking about doing the scheme, I recommend trying to apply for a voucher as quickly as possible, as other employers might not have reacted as fast to this ruling, and you might be luckier than me...

Pat Murray

[quote="jlgt
Basically, the ruling says that employers will be liable to pay VAT on voucher-based salary sacrifice schemes (and this could potentially be backdated)....[/quote]

You want to direct your employers to the ruling - not their interpretation of it. Salary based voucher schemes are childcare schemes. Any employer can offer C2W directly without handing out a voucher from cycle scheme or the like.

magoo289

You can spend more than the £1k, but you will have to pay the amount above this directly to the bike shop and it not attract any of the savings gained under your employers salary sacrifice scheme.

alfablue

magoo289 wrote:

You can spend more than the £1k, but you will have to pay the amount above this directly to the bike shop and it not attract any of the savings gained under your employers salary sacrifice scheme.

You may be able to spend more than the voucher amount, but many employers (and schemes) are prohibiting this because it introduces an ambiguity over ownership (i.e. the employer owns the bike, but if you paid some of the cost then it gets complicated). Bike shops may take your cash so you can spend more because they may not care about your employer's rules. But on the face of it, you can't spend over the voucher amount (but I did).

Anonymous

It's going to be a shame when all the 2011 bikes are released as price increases will mean a lot of the favourites will tip just over the £1000 mark. E.g. Boardman and possibly Cannondale with the CAAD10...

Weejie54

You may be able to spend more than the voucher amount, but many employers (and schemes) are prohibiting this because it introduces an ambiguity over ownership (i.e. the employer owns the bike, but if you paid some of the cost then it gets complicated). Bike shops may take your cash so you can spend more because they may not care about your employer's rules. But on the face of it, you can't spend over the voucher amount (but I did).

It could get quite interesting if it ever came to a dispute over ownership of a 'topped up C2W'. I hope it would never get to such a dispute, however.

jlgt

Pat Murray wrote:

You want to direct your employers to the ruling - not their interpretation of it. Salary based voucher schemes are childcare schemes. Any employer can offer C2W directly without handing out a voucher from cycle scheme or the like.

I'm not sure about this - as far as I can work out, the voucher is not the important thing: the ruling seems to relate to any scheme where salary is sacrificed in order to gain a benefit (in this case, tax-free bikes). See for example http://www.smith.williamson.co.uk/news/3453-salary-sacrifice-retails-voucher-are-now-subject-to-vat:

"The ramifications of this case for other items for which salary can be sacrificed, for example, cars and the 'Cycle to Work' scheme will no doubt have to be reviewed by HMRC and appropriate guidance issued. Businesses should urgently consider the impact of this case on any current or future remuneration planning and seek further advice accordingly"

If there was another way of getting a bike through C2W without sacrificing any salary then that would be different, but does that exist? I just think that lots of other employers might be suspending C2W applications to wait for guidance from HMRC about this.

bendertherobot

There's a difference IMO. Most salary sacrifice schemes were "tolerated" by HMRC.

The C2W one was specifically created by HM Government.

It should be safe. If it isn't then Cyclescheme, the UK's fastest growing company? must be crapping themselves.

jlgt

bendertherobot wrote:

There's a difference IMO. Most salary sacrifice schemes were "tolerated" by HMRC.

The C2W one was specifically created by HM Government.

That's true, but I'm not sure if that will make a difference (though I hope so) - this is a European ruling, and I don't know how much scope there is for HMRC to disagree with it...

SLX01

Its only the use of 'schemes' that give employees perks that avoid paying VAT that is in question so even if thats passed on you still get the cost of the bike deducted from your taxable income and a bike on a years credit interest free.

Martincan

Just to clear this in my head, once one has paid the monthly hire period for the full 12 months, you can pay your employer a fair market price/a nominated amount chosen by the employer, and the bike is phyiscally yours?

rjh299

Martincan wrote:

Just to clear this in my head, once one has paid the monthly hire period for the full 12 months, you can pay your employer a fair market price/a nominated amount chosen by the employer, and the bike is phyiscally yours?

Yes but it is at the employers discretion if they want to sell you the bike or not. Never heard of anyone not being offered it after paying the 12 months though.

Martincan

Ok, thanks. I thought that was the case, just wanted to double check.

rodgers73

Article in the Telegraph today saying that HMRC are changing their guidance on what should be paid for the bike at the end of the year when buying it off the employer.

New guidelines will say at least 25% of the bike's cost should be paid if it is only a year old and cost more than £500 to purchase. Solution offered was to extend the hire persiod beyond 1 year thus allowing a lower price to be agreed. This will apply to all bikes currently being "hired" under the scheme - ie immediate effect!

Sorry no link to the story - I got it from the print version!

amaferanga

Old news that. There are other threads discussing this.

My employer is about to clarify how they're going to deal with it - if they want 25% at the end of the year I'll be passing as will most people I'd imagine. I think the other way round it is to pas the bike on for say 5% and the employee then pays tax on the difference between the 5% and 25%. That'd probably end up costing only a little more than 10% FMV.

rolf_f

SLX01 wrote:

bendertherobot wrote:

Well, technically your employer has just given you a "benefit in kind" which you would have to account to HMRC for. It would be better to sort it out!

I think technically if my suspicions are correct the bike shop has given me a free bike, if the bike shop has not informed the company I bought a bike then they are not being charged for it therefore its not a 'benefit' thats taxable.
I will wait another month to see if it appears then make enquiries with payroll about the issue.

I doubt the shop has given you a free bike - the payments should come out of your pay packet as soon as you get the voucher even if you don't hand the voucher over to the shop. Effectively, when you apply for the voucher, you are agreeing to pay part of your salary to the cycle scheme. If there is a mistake, it is likely to be between your employer and the c2w company.