Cycle to work scheme - not

.blitz

A...friend is going to buy a bike on the Cycle To Work scheme with absolutely no intention of using it to cycle to work. I know the regs say at least 50% of the bike's use should be for commuting but has anybody been busted for getting a bike on the scheme and using it for purely recreational purposes?

milfredo

Seriously doubt it.

CraigXXL

We have some clients have the cycle to work scheme queried under PAYE inspections but nothing seem to come from this only a case of justifying the salary sacrifice.

alfablue

Its not going to happen unless you actually want it to! Employers have no reason nor duty to monitor usage. HMRC have better things to do with their time.

JonnyN

I use my bike 100% riding to work.............


I work from home.

:-D

pte1643

I was even up front with my employer about buying an MTB that wasn't going to be for commuting, and said that it would be used solely for Off Road.

They didn't bat an eyelid.

mea00csf

The CTW scheme is interesting as in legal terms, it's extremely dodgy from they buyers point of view, but in reality never heard anything ever come of it. The key things are:

1. It's a salary sacrifice, you're employer is in no way obligated to increase your salary at the end of the year
2. Your employer is not legally forced to sell you the bike at the end of the hire period, and if they give you any guarantee they are actually breaking the law because it then becomes hire purchase meaning they need to be insured to offer credit.
3. they can't legally give you a fixed agreement of how much they will charge at the end as this would then be seen as an agreement to buy (see above)
4. The 10% often quoted to buy at the end of the year comes from the "computers for home" scheme. Old tech used for a year this is appropriate. For a bike, not really and the company could get into trouble.

I heard of a case where someone basically had to buy off his own (small) company at market rate (much higher than 10%) because of something to do with the tax and assets, didn't really understand but anyway.

I would personally buy in the sales and avoid ctw if you can afford it. I would guess 99.999% of everything is fine, but considering the above, what happens should you're employer go bust, you're bike is then owned by the bank etc

pte1643 wrote:

I was even up front with my employer about buying an MTB that wasn't going to be for commuting, and said that it would be used solely for Off Road.

They didn't bat an eyelid.

pte1643

mea00csf wrote:

what happens should you're employer go bust, you're bike is then owned by the bank etc

Not much chance of my employer going bust.

Not entirely impossible, I'll grant, but extremely unlikely.

alfablue

mea00csf wrote:

The CTW scheme is interesting as in legal terms, it's extremely dodgy from they buyers point of view, but in reality never heard anything ever come of it. The key things are:

1. It's a salary sacrifice, you're employer is in no way obligated to increase your salary at the end of the year
2. Your employer is not legally forced to sell you the bike at the end of the hire period, and if they give you any guarantee they are actually breaking the law because it then becomes hire purchase meaning they need to be insured to offer credit.
3. they can't legally give you a fixed agreement of how much they will charge at the end as this would then be seen as an agreement to buy (see above)
4. The 10% often quoted to buy at the end of the year comes from the "computers for home" scheme. Old tech used for a year this is appropriate. For a bike, not really and the company could get into trouble.

I heard of a case where someone basically had to buy off his own (small) company at market rate (much higher than 10%) because of something to do with the tax and assets, didn't really understand but anyway.

I would personally buy in the sales and avoid ctw if you can afford it. I would guess 99.999% of everything is fine, but considering the above, what happens should you're employer go bust, you're bike is then owned by the bank etc

pte1643 wrote:

I was even up front with my employer about buying an MTB that wasn't going to be for commuting, and said that it would be used solely for Off Road.

They didn't bat an eyelid.

2,3 & 4 are not entirely accurate; the reason why it may not be an hp agreement is because such an agreement is not eligible for the tax and NI saving. Most commonly a figure of 5% has been used to equate with fair market value and this is based upon bikes.

mea00csf

still, they're not allowed to give you a guarantee to buy, or a guarantee of the price. I'm pretty sure you're not allowed to offer hire purchase unless you're licensed to give credit which most companies wouldn't be.

5%, really?! seems incredibly low to me. How on earth do they justify that valuation?

alfablue

Yes, you're right that they can't promise to sell or set a price as this would make it hire purchase. The dft has granted a group consumer credit licence for up to £1000 for all employers in the scheme, so it isn't an issue with the credit laws as such, just a hire purchase agreement doesn't attract the tax/ni break.

There has been a lot of debate about valuations, a well used and maybe ill maintained bike could be less than 5%; Evans offer this about valuations:

Bear in mind this from their retail PoV, not 'What you'd get on Ebay'

Category 1 - SHOWROOM CONDITION

ie just wheeled out of the showroom and never been used - this has already lost it's manufacturers warranties, as these only apply to the original owner plus it won't be of the spec that the buyer would have had the choice if still in the showroom. The document says "it has generally been the policy when pricing second hand bikes for sale to start at 50% of the original price for a showroom condition machine, descending from there to account for things like wear, demand and how long it has been since the bike was a current model."

Category 2 - EXCELLENT CONDITION

You have had the bike for the last year but only ridden it a couple of times.

The document says "15% of the original price is a likely outcome. Once could offer it up for more but reasonably expect to accept this kind of amount. If the bike is an absolute current model ie. same colour and specification as its unused shop floor equivalent, it could get a bit more, probably 17%"

Category 3 - GOOD CONDITION

A typical commuters bike that is one year old, been used regularly, has been excellently maintained and serviced and possibly parts exchanged, been cleaned and lubricated throughout useage.

The document says "commuter bikes are more likely to be left outside when they are not ridden, and users rarely have the same opportunities for after-ride care as the weekend mountain bike receives. A bike commuted on for a year in good condition can be expected to fetch around 10% of the original shop price. Using the same criteria described about, another 2% may be obtainable if the bike is still the current model"

Category 4 - FAIR CONDITION

Bikes that have received less attention than those described as good. These are unlikely to be clean, tyres may be worn and under-inflated, recalibration is required of the components, ends of the pedals are scuffed, but still recognisable as a recent acquisition after one year.

The document says "Historically, it has always been extremely difficult to sell such a bike..............we believe that it is near to impossible to put a price on these bikes, but recognise that sometimes it has to be done. 6% of the original would be likely to receive attention and possibly a sale"

Category 5 - POOR CONDITION

This is a bike that despite being only a year old, will demonstrate all the signs of being uncared for. The chain and moving parts will be coated in a thick, black muck that accumulates over a long period of time. Tyres will be worn and under-inflated, scrapes and scratches to the paintwork, rust in evidence.

The document says "this bike is effectively worth nothing at all, in that it will likely be impossible to find a buyer.........5% of the original price is a reasonable expectation with an additional 2% mentioned earlier if it is a contemporary model"

Joe_Pineapples

I just bought a downhill bike on my company's CTW scheme with absolutely no intention of pedaling it at all, let alone to work (which I live 40 miles from).

No one at work gives a monkeys about what I do with the bike. For the year that it'll take before its paid for, it becomes a tax deductible asset to the business (...I believe, but to be honest I'd switched off by this point in the explanation).

There is zero cost to my employer at the end of the scheme, and a certain amount of "look at us, we're a forward thinking company that cares about the environment AND our employees health" attached to being part of the scheme in the first place.

Me? I got a grand off the price, that's all I care about.

Zaskar20

mea00csf wrote:

5%, really?! seems incredibly low to me. How on earth do they justify that valuation?

I've just been offered to buy my CTW Specialized Pitch for it's 'fair market value' of £5!

Employers have never asked about usage and have never inspected the bike. As it is in excellent condition, for a one and a half year old mtb, I think i've been somewhat lucky.

BTW, the figure of £5 was quoted to finally purchase the bike at the very start of the agreement, although this was never written down anywhere, just given to me by word of mouth.

Joe_Pineapples

Zaskar20 wrote:

BTW, the figure of £5 was quoted to finally purchase the bike at the very start of the agreement, although this was never written down anywhere, just given to me by word of mouth.

Same here. I've had a nod & a wink and a pound coin has been mentioned.

*AL*

As long as there's little stress for the employer to deal with and their staff are happy, I can't really see a problem with C2W.

I can see a time when someone in higher places picks up on threads like this and it all comes to a sorry end though.

Sadly, some people fail to see when they're onto a good thing.

stumpyjon

And it's all these abuses to the scheme that is making it more and more likely it's going to get canned. The Inalnd Revenue is already picking up on the final value issue and is starting to crack down on it.

As for the I'm never going to ride it to work, well there is no requirement from anybody to log mileage but it's really not a good idea to tell your employer upfront that you have no intention of riding it to work, plausible deniability is the way go. Same goes for posting the same thing on here.

The rules of the scheme are clear (even if they are at present unenforced). But be aware we're talking about tax law here, it may take the Inalnad Revenue a while to catch up but if / when they do people will be made to suffer, you don't agrgue with the revenue and win, even when they're in the wrong.

Joe_Pineapples

Given the financial situation that they Govt. currently finds itself in, you can bet your ass that the CycleScheme will come to a rapid stop sometime within the next 12 months or so. My advice would be get in there while you can.

projectsome

My agreement says 5% of my journey, so in theory I could ride it to and from work for 5% of the year and never need to ride it to work again. Wonder what my HR Dept will say when I apply for my 3rd bike in Sept

rusty656

Just completed the transfer of my bike having paid for 12 months i have never once commuted in that 12 months and work knew that they are not bothered. i paid £49 a month for 12 months and then the final payment was £36 i think (5% of total purchase price) and i will getting another bike this year to !!!

If you cant afford to buy outright Cycle scheme is awesome get your bike and ride it !!!!!!!!!