Cyclescheme..

The Northern Monkey

Is it still viable/advantageous to us?

I've never really understood it all... tried... but got confused.

Now i'm definitely going to be riding to work (via the train) as of payday next week, and I know that my company can offer the cycle to work scheme.

Looking at a bike costing £650... how will that be reflected in my pay?

I've looked at the website and put in all my details.. pay etc etc but i'm really confused, which is the bit that tells me how much it'll cost a month?!

Cheers all for around the 10th time on this topic

benpinnick

Yes its worth doing, in summary assuming your company (employer) is VAT registered , depending on your scheme set up:

On at least 75% of the value of the bike:

You'll save 20% VAT
You save the equivalent of your tax (Average is around 23%)
Its interest free credit.

On the downside if your company uses a 'scheme' they charge 10% or more commission to the shop, which kills any discount opportunity.

The Northern Monkey

I think the main thing for me is the monthly salary sacrifice as I have to offset it against how much i'll save by using the bike/train instead of the car.

If the difference is slim I may as well use the car :?

Using the train (without paying for another bike), I save around £50 - £60 a month over the car (not taking into account consumables like servicing, tyres, maintenance etc etc).

With petrol increasing though, using the car is getting more expensive.

ali$tair

It depends how your company work out the final payment, if it's done on the the 2nd hand price after a year it really takes out any saving and the only real advantage is you are paying for the bike monthlly.

If they do it over 3 years it leaves you with a mch better saving.

aidso

There is an article on the front few pages of Cycle (ing?) Active magazine this month discussing it. I am nearly at the end of my 18 month contract and to be honest I will be glad to see the back of it. It depends on your own circumstances but it has changed dramatically in the last 6 months.

Each month you'll probably be paying about £30 from your top line - but remember that is before Tax, NI and Pension contributions etc, so you'll be paying much less than £30. At the end of the contract you have the option of buying the bike for a small fee or handing it back...or choosing another bike and keep the payments going.....

That was until HMRC starting messing with it!!! The fair final payment was 5%, meaning for me my final payment on a £1000 bike was ~£70. But since about August they changed their evaluation and I will now be expected to pay 21% to own the bike in March. That's about £210 ffs! They expect you to hold on to the bike for 4 years which in my mind is ludicrous. If you are seriously using your bike as a commuter everyday I can't see it being worth what they will want for it after 4 years. Based on that I wouldn't enter the scheme again and would prefer to take a Finance deal from the bike shop.

Seems they weren't happy at the loss of petrol sales and since they can't tax you for using oxygen then they;ll just tax the bike .

aidso

This is from October's issue:

http://www.cyclingactive.com/news/tried ... ork-scheme

sidneysides

aidso wrote:

There is an article on the front few pages of Cycle (ing?) Active magazine this month discussing it. I am nearly at the end of my 18 month contract and to be honest I will be glad to see the back of it. It depends on your own circumstances but it has changed dramatically in the last 6 months.

Each month you'll probably be paying about £30 from your top line - but remember that is before Tax, NI and Pension contributions etc, so you'll be paying much less than £30. At the end of the contract you have the option of buying the bike for a small fee or handing it back...or choosing another bike and keep the payments going.....

That was until HMRC starting messing with it!!! The fair final payment was 5%, meaning for me my final payment on a £1000 bike was ~£70. But since about August they changed their evaluation and I will now be expected to pay 21% to own the bike in March. That's about £210 ffs! They expect you to hold on to the bike for 4 years which in my mind is ludicrous. If you are seriously using your bike as a commuter everyday I can't see it being worth what they will want for it after 4 years. Based on that I wouldn't enter the scheme again and would prefer to take a Finance deal from the bike shop.

Seems they weren't happy at the loss of petrol sales and since they can't tax you for using oxygen then they;ll just tax the bike .

This is not correct. You do not have to pay the 25% FMV. You can extend the hire agreement and just pay 7%, (£70) but theoretically, you don't own the bike until the end of the hire agreement. Cyclescheme extend it to 31 months, but there's no way they can check whether you still have the bike.

aidso

sidneysides wrote:

This is not correct. You do not have to pay the 25% FMV. You can extend the hire agreement and just pay 7%, (£70) but theoretically, you don't own the bike until the end of the hire agreement. Cyclescheme extend it to 31 months, but there's no way they can check whether you still have the bike.

Did you even read my post, as long as it was? If you extend your contract beyond the 12/18 months of course you don't have to pay the FMV, until the new end date. My second point being that if you are seriously using a bike to commute every day it will not be worth what HMRC expects you to pay for it after the 5 years....and will the bike even last that long?

http://www.guardian.co.uk/money/2010/au ... scheme-tax

and the official website where I got my 25% estimation from: http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

kaytronika

FMV after new end date should take in to account the age of the bike after new date, thus final payment will be considerably less than 25% (or 21% on 18 month agreement).

After four years the fair market value on a £1000 bike is 7% or £70... It says so in those guidelines.

I know the cycle scheme I'm looking at using says that as long as you keep using the bike for work purposes as per the original agreement, you can carry on the agreement until the bikes worth is negligible.

If I can make a bike last me 16 years, 5 years shouldn't be too much hassle.

sidneysides

And in reality, how are they going to check you still have it? No chance really.

BobbyTrigger

ours has gone the journey, as aidso says, tax man has changed the rules meaning its just not worth it now.

i wouldn't touch it with yours now quite honestly.

my work are organizing they're own scheme now instead with a load of local LBS's, salary sacrifice. so in theory should still save approx 25%.

sidneysides

It's still worth it. Read my post!

cee

my company did it themselves....no scheme. just used the tax law.

basically bought my bike direct from supplier by purchase order.

Price to me (supplier did me a favour since I broke my out of warranty frame also by same supplier) was £850....

Deducted from my salary every month is £60, but before tax.

Net difference from my bank account is about £45...

so basically....monthly net payments total about £540, plus the final payment i guess about £212.50 = total cost to me of £752.50...

so although i won't get the massive saving touted last year...I will still save about £100 on the price negotiated with the supplier, and also got it all interest free etc......

Now this works out even better in my case, because I got a decent discount from the supplier, which is not something that many suppliers will do in a cyclescheme.

The fact that no-one even had to mention cycle scheme, as my company just bought the bike helped.

Actually, I reckon this is where the tax rules are better for the consumer...

with no 3rd party company to take 10% etc, and the fact that the company can just buy the bike on a credit card....means that discount may still be negotiated with any bike shop or supplier you like.

As soon as the words cyclescheme are mentioned...that conversation will effectively end.

cycleschemie

@benpinnick

"Its interest free credit."

No, it isn't.

sidneysides

But at the end of the day, I can freely use a £1000 bike and pay £575 for the priviledge. Sounds good to me.
Do I care if I own it? Not really, it's not as if I have to ask permission every time I want to ride it!
Admittedly, as a higher rate taxpayer, I save more, but as I said

Total cost of bike and accessories: £1,000.00
Net cost of bike and accessories, including finance and admin costs (if applicable): £833.33
Income tax saving over hire period: £333.33
NI saving over hire period: £8.33
Final cost of bike & accessories: £491.67
Total saving:** £508.33
Gross salary sacrifice, based on 12 month hire period (this should be the figure displayed on your hire agreement): £69.44
Net salary sacrifice, based on 12 month hire period: £40.97
Percentage saving over RRP: 50.8%


All I then pay is 7% to extend the agreement whilst still using the bike and pay no more!

= £570

benpinnick

cycleschemie wrote:

@benpinnick

"Its interest free credit."

No, it isn't.

I think everyone knows what I mean.

cycleschemie

The Northern Monkey said:

"I've never really understood it all... tried... but got confused."

So- no.

benpinnick

cycleschemie wrote:

The Northern Monkey said:

"I've never really understood it all... tried... but got confused."

So- no.

Lol.

benpinnick

Cee, assuming your monthly payments cover the cost of the bike, ask your employer to pop the bike on your p11d at the end of the 12 months rather than taking the 25%... Although of course they might like the 25%

cee

benpinnick wrote:

Cee, assuming your monthly payments cover the cost of the bike, ask your employer to pop the bike on your p11d at the end of the 12 months rather than taking the 25%... Although of course they might like the 25%

until i get official word of what the final payment will be....i will be keeping my mouth closed.



but yes, i had thought of taking the benefit in kind....

m1tch666

I have been sitting patiently awaiting what my work will tell me in relation to the 'changes' that have been made. We all know that it has been the companies not adhering to the correct procedure and deducting a true market value from the total you should pay then dividing the remainder as your 'hire' price.....

I was expecting the same 'extend the hire' agreement to be made but was surprised to find out they've done something different....ish.

Using the method (nominal payment, not fmv) they reckoned they would have charged about £50 for a bike worth £1000. Now they state it has to be £250 (fmv) so what they propose is the following.

The fmv (£250) will be declared to HMRC as a reportable earning (benefit in kind) with the employee paying tax on that value.

HMRC will adjust my tax free pay by the residual value for the tax year 2012/13.

My company will pay any National Insurance costs.

This means that the cost to me will actually be (if 20% tax payer) £250 x 20% = £50.....this being the nominal value they had intended to charge originally........

It seems a much easier way than signing up to an extended agreement and since doing this they have now decided to go ahead with the scheme for another year.....

aidso

Mitch so you only have to pay £50 at the end of the 12/18 mths and not £250? That's a good result

m1tch666

aidso wrote:

Mitch so you only have to pay £50 at the end of the 12/18 mths and not £250? That's a good result

It was the nominal fee that they set up their (incorrectly) monthly hire fees based upon.....I don't have to actually pay anything, it's still deducted at source over the next year....

bamba

Just had my letter regarding the fmv, being as i has £1000, it states i have to pay 25%,
nice of them to back date it to any bike ending after sept 2010,how do they get away with doing that ? i paid £16fmv on my £550 bike i had last year.
Thats like ordering some thing in a resturant of the menu and then being told it dearer as your eating it.
Has any one one expiranced paying the new fmv yet ?
Im guessing the £250 i have to pay is pre tax as with the rest of the payments otherwise im not saving the full tax amount and is it taken in one lump some , which is bit of a bummer if it is as that was was the point of me having it ( low monthly payments)

RevellRider

Bamba, when does your current scheme end?

bamba

end of June i think , this year

RevellRider

Well then you best bet if your not with cyclescheme, is to either try and get your employer to judge the bike at a lower FMV than HMRC has set. Or 'prove' that it isn't worth the FMV.

If your employer goes for the first option, you'll pay tax and NI on the difference in the value

bamba

doesnt look good then. Its a trance X4. Even worse the same bike is available at Paul's cycles for £816. in the past mind, my company has not bothered to collect any final payments. Dont no any one who did. But now the prices are in the hundreds i cant see it being the case now

RevellRider

I'm going to assume you ride the bike off road then. Have you been through a chain and cassette yet? Wore your tyres out? What about shock servicing, does the bike have a Fox shock and fork? You must have a set of worn pads around.

bamba

yes, obviously i ride a off road mountainous route to work an back, gone through a few pads. Not changed an thing else yet. What do you sujest ? I get a valuation to say all the items you mention need attention to de value the bike ?

RevellRider

Exactly, if everything is shot on the bike and it needs 'servicing' it's of no benefit to the company to have it's asset (the bike) valued so highly