C2W query - employers obligations re. bike storage etc.

mcj78

Hi all,

Does anyone know off-hand if there are set obligations for employers to provide secure bike storage etc. if they take part in the scheme? Also - does the employer benefit (& to what extent if so) from running the scheme through VAT or tax exemptions?

Cheers!
J

The Rookie

No requirements on them, no.

The employer would benefit from the salary sacrifice as they don't have to pay the Employers NI contribution (12.5%) on the amount of the deduction.

not sure about VAT.

Go to one of teh providers wesbites (like cyclescheme) it lists all the benefits for all, some are now updated using the new HMRC guidelines on FMV.

Simon

alfablue

There are no obligations (though the last government posed the "Cycle to work guarantee" which is a voluntary agreement).

Employers save 12% on NI contributions, and they can write off the capital used to purchase the bikes so save corporation tax (28%?) so they can save £400 per £1k bike, I think.

They may also reclaim the VAT and not pass it on to the employee (which is naughty) so another £175.

mcj78

Bah - was hoping there would be some requirement to provide secure bike storage, all we've got just now is what looks like some rusty scaffolding in the busiest possible place! Oh well, cheers anyway guys!
J

alfablue

mcj78 wrote:

Bah - was hoping there would be some requirement to provide secure bike storage, all we've got just now is what looks like some rusty scaffolding in the busiest possible place! Oh well, cheers anyway guys!
J

Hey, come on! Don't just accept the status quo, get active!!!!!!!

Start a BUG (Bycycle User Group) at your workplace, and get the employer to sign up to the Cycle to Work Guarantee http://www.cycletoworkguarantee.org.uk/ . Tell them how good it will be for their environmental credentials and for employee satisfaction.

mcj78

Heh, we've already got a BUG - administered by the "travel & transport co-ordinator", on the outside it seems quite pro-active with regular emails re. group / charity rides & suchlike but I haven't noticed much in the way of increased cycling provisions, bar an email telling us that there was a tool kit & puncture repair kit located at the main gate.
I've been told there are plans for new & improved bike storage facilities - but Iwon't be holding out much hope to be honest! Due to recent departures, our shared office is much quieter & I keep my bike in there anyway, chained to a (fixed) table, as i've had a bike nicked from there already. The cycle to work guarantee looks decent though, i'll pass the details onto the "travel & transport co-ordinator"

Cheers!
J

RufusA

=

alfablue wrote:

...and they can write off the capital used to purchase the bikes so save corporation tax (28%?)

Sadly not quite!

Companies can only offset a small percentage of cost as capital allowances against profit, not the full cost (usually unless it's a special case that allows 100% first year allowances). Also because of the salary sacrifice their profit will rise.

For example for a £1k bike:

Profit + £850 salary sacrifice - £170 capital allowance = £680 * 28% extra corp tax.

On disposal the following year things sort themselves out assuming the accountant is on the ball!

Rufus.

alfablue

RufusA wrote:

=

alfablue wrote:

...and they can write off the capital used to purchase the bikes so save corporation tax (28%?)

Sadly not quite!

Companies can only offset a small percentage of cost as capital allowances against profit, not the full cost (usually unless it's a special case that allows 100% first year allowances). Also because of the salary sacrifice their profit will rise.

For example for a £1k bike:

Profit + £850 salary sacrifice - £170 capital allowance = £680 * 28% extra corp tax.

On disposal the following year things sort themselves out assuming the accountant is on the ball!

Rufus.

5.3 Deductibility for the employer
Employers who purchase cycles and cyclists' safety equipment for loan to their employees will be able to treat the cost as capital expenditure and claim capital allowances in the normal manner.
For many businesses expenditure on cycles and cyclists’ safety equipment will qualify for the Annual Investment Allowance (AIA). The AIA allows businesses to write off 100 per cent of qualifying capital expenditure up to £50,000 each year against the businesses’ taxable profits.
Where the AIA is not available or the total capital expenditure on plant and machinery exceeds the annual limit, expenditure on cycles and cyclists’ safety equipment can be added to the main capital allowances pool and qualify for writing down allowances at 20 per cent per annum.
For example:
• Cost of cycle in year 1 = £500
• Amount on which capital allowance due in year 1 is £500 x 20% = £100
• Amount on which capital allowance due in year 2 is £400 x 20% = £80.00
• And so on.
For expenditure incurred in the year 2009-2010 all businesses can claim the temporary 40% first year allowances on their spending on most plant and machinery, which can include cycles and cyclists' safety equipment, for any expenditure not covered by the annual investment allowance.
From the employers point of view as long as it is a business asset the employer can continue to claim capital allowances regardless of how long it is used in the cycle scheme.

RufusA

alfablue wrote:

5.3 Deductibility for the employer
....
For example:
• Cost of cycle in year 1 = £500
• Amount on which capital allowance due in year 1 is £500 x 20% = £100

Er what I said isn't it?!

The Dft conveniently fail to mention the implications of the salary sacrifice on corporation tax.

The 40% FYA have been abolished so are no longer available for 2010/11, and 100% AIA has probably already been allocated to other things for companies with 28% corp tax rates.

Rufus.