Cycel to Work Scheme - no loan - tiny company!

vroomvroom

Hi All

Apologises for the numpty question (I have used the search function but still can not find the exact answer I need)

I work for a tiny company, in fact I am the only PAYE employee, I want to buy a bike on the C2W scheme but the company will not support a loan and therefore I am willing to take the full hit for the bike on my next salary.
Because there will be “no loan” do I still get the salary sacrifice at gross (therefore save Tax and NI)

Can the company still claim VAT back in which case they only have to charge me the Net price (£851 on a £1000 bike) or do they still have to charge me the full amount. (inc VAT)

Either way looks like the bike will cost me between £502 and £590 (40% tax payer) is this correct ! I want full ownership of the bike !
Kind regards

richred_uk

As I understand it (trying to set up the CtW scheme at work), you can't pay for the bike in a single hit. The shortest rental period I've seen mentioned is 6 months.

My suggestion would be that you make the company a 6-Month interest free loan of £851 (if you can take the cashflow hit), the company buys the bike, claims back the VAT, rents it to you for 6 months at whatever 851/6 is. At month 6, the company repays the loan to you in full (paying it off in stages might look just too dodgy).

At some unspecified point in the future, the company may decide it wants to sell you the 2nd hand equipment for 5% of retail. The company pays VAT on the amount you pay to take ownership.

thel33ter

vroomvroom wrote:

Hi All

Apologises for the numpty question (I have used the search function but still can not find the exact answer I need)

I work for a tiny company, in fact I am the only PAYE employee, I want to buy a bike on the C2W scheme but the company will not support a loan and therefore I am willing to take the full hit for the bike on my next salary.
Because there will be “no loan” do I still get the salary sacrifice at gross (therefore save Tax and NI)

Can the company still claim VAT back in which case they only have to charge me the Net price (£851 on a £1000 bike) or do they still have to charge me the full amount. (inc VAT)

Either way looks like the bike will cost me between £502 and £590 (40% tax payer) is this correct ! I want full ownership of the bike !
Kind regards

Thats how I got my Kona, It was £860 or so at the shop, The company didn't do cyclescheme so I got an intrest free loan from the company, I payed payed the before VAT price (I think) and it was payed with salary sacrifice before tax, so it cost something like £40 a month for 12 months.

Total: a £1300 bike for £480 or so =

That didn't make much sense but yea, if you can get a loan like I did then you get the same benefits of CtW but you own the bike.

vroomvroom

cheers for the answers !

I can not do aloan even if it is 6 months.

Sure I cann't pay it off in one go ?

richred_uk

There's no 'official' guidance saying that you can't 'rent' the bike for 1 month under the scheme and then buy it, but I strongly suspect that if HMRC inspected your company, they wouldn't look too kindly on it - either saying that the rental cost was too high for 1 month's use of a bike, or that your 5% payment after 1 month wasn't a fair market price for something so new and then hit you with a B-I-K charge for the difference between the 5% and what THEY consider a fair value for a 1 month old bike (all this after you've paid the company the rental).

The other option for you is to persuade your cpompany to get the bike on a finance scheme - they are allowed to up your rental price to cover any interest they pay under it, so it's net zero cost to them (actually it's better than zero as they save on your emplyer's NIC's and get the 5% payment at the end of the scheme).

Would it be possible to sell them this scheme as part of your next pay review? Seems odd to me that an employee thought of highly enough to be a 40% tax payer wouldn't be valued enough to spend £851 on locking into the company for 12 months when you get that money back, but there you go.


EDIT - here's DfT/ HMRC's guidance http://www.cycletoworkguarantee.org.uk/ ... on-WEB.pdf

Rich

shouldbeinbed

could you sub-let the bike from elsewhere - if you've got a good relationship with your qualifying LBS, I know its not the intended use, but is there anything to stop one of them getting the bike on C2W and you reimbursing their payment on a monthy basis.

The stipulation is to be riding the bike for 50% of commutes. I'm sure if HMRC did come knocking, the LBS could simply say that the 'owner' has rather generously lent it out to you as a customer for a test ride day as you're thinking of getting one and wanted to be sure it was right before buying

the chance of it being checked up on though is IME less than nil.

hstiles

You need to really push the fact that the paperwork is incredibly easy to set up and the employer saves 12.5% NIC tax on the amount of salary sacrificed.

I'm trying to persuade my employer to sign up too