Payments for cycle tax schemes - pay 125% value of bike?

davehilts

I am trying to get my company to start a tax benefits cycle scheme so I can get a brand new bike

However, going through the maths today it seems that you actually pay 125% value of bike - minus of course th tax benefits.

For the first 12 month loan period it seems you pay the full value of the bike - say £1000 - less VAT. So about £830 / 12. Of course these monthly payments then benefit from income tax saving too.

However, having paid the full value of bike (less tax) it seems that you then have to pay c25% value of the bike to take ownership of it.

So apart from the obvious tax benefits you in effect paying the full bike value plus then another 25% to own.

Still looks a pretty good deal but had assumed you pay the 75% of bike value (less tax) spread over first 12 months and then the remaining 25% to take ownership. Of course this would save even more!

Can someone please confirm how this operates.


Thanks

amaferanga

You don't have to pay 25% to take ownership of the bike. There's loads on the internet and even these forums about it if you search, but essentially as I understand it you only have to pay tax on the difference between what you do actually pay to take ownership of the bike and the 25% value.

mikey_748

Check out the cyclescheme website - there's an article on there describing how they get round the tax mans fair value clause after 12 mths - think you pay something like £70 on a £1k bike to extend the lease by 3 years and then it's yours.

Saving for 40% tax payers is about £440 after the £70 paymen

moonshine

Bottom line is if you are a lower (25%) tax payer and/ or work for an organisation that cannot reclaim VAT ( eg NHS, local or central Government or agency eg EA) the savings are minimal and you could probably negotiate as good a cash deal with your LBS, plus you would be outright owner from day 1.

I wouldn't touch it with a barge pole in hindsight .in my opinion the revert changes drove a stake through the heart of the scheme.

My 2p

navrig

For 40% tax payers it is worth it as long as you accept that you don't own the bike for 4 years. You make payments over the inital 12 months this works out at about 50% of the purchase price. You then pay an admin fee (we have been told about £50) which allows C2W to retain ownership for a further 3 years. At the end of the 3 years the bike becomes yours. The theory is that after 4 years the bike 2nd hand value is sufficiently low for the taxman not be interested in the benefit.

So you cannot sell it until it is 4 years old.

For lower band tax payers the benefits will be less so do your own sums.

Some companies pass on the VAT saving others don't. Again investigate and do your own sums.