CycleScheme...........?(confused)

bagz3

Hi, i'v been looking through the Cyclescheme website and am a bit confused as to wether i actually own the bike or not............

Quote the website..............

"What happens at the end of the hire period?

In order to preserve the tax benefits of the scheme, there can be no guarantee or obligation to transfer ownership to the employee immediately after the hire period has ended. However, employers generally choose to offer this option in addition to others, either directly or via Cyclescheme.

At the end of the hire period, Cyclescheme will contact employees to discuss the options available.

The most attractive option for employees will be to pay a small, refundable deposit (3% or 7% of the equipment value*) and continue to use the bicycle for an extended period of up to 36 months.

At the end of this period, if the employee does not wish to keep the bicycle, then Cyclescheme will refund the deposit in full. Alternatively, Cyclescheme may at its discretion, offer ownership of the bicycle to the employee at this point, and no further action or payment will be required if they wish to keep the bicycle."

Anyone used Cyclescheme and what has happened to you at the end?

alfablue

No you don't own the bike, and you cannot be promissed that you will get the bike. Never heard of a case when the employee was not offered the bike though.

If your employer offers it to you at the end of the hire period you will be liable for income tax on any benefit in kind. HMRC say a 1 year old bike of £1k should be worth £250, so if the employer gave you the bike free, you should pay tax on £250.

Some employers misconstrue this to mean they must charge you £250 to get the bike. This is not necessary.

Other employers can't get their small heads around this and give the bike free to Cyclescheme. They then offer you the bike for £250 or the £70 deposit to extend the hire period.

The latter happened to me. The £70 is in keeping with HMRC's valuation of a bike of that age.

bagz3

So the offer isn't as attractive as its made out then.............. :?

alfablue

bagz3 wrote:

So the offer isn't as attractive as its made out then.............. :?

hmmm, maybe not. It can be great if 1) the bike shop you use doesn't charge a premium for Cyclescheme purchases; 2) you pay higher rate tax; 3) you don't mind Cyclescheme "owning" it for the extended period.

I have had 2 bikes, and apart from my annoyance that my employer GAVE the second bike to Cyclescheme and not me, I guess I am 2 bikes up and made a decent saving, and didn't notice the payments.

diy

Your really have to be on 40% or top rate tax payer to make it worth the bother. But at the end of the day you have to remember, that you can normally haggle 10-15% off, most of these "list" price bikes will be 20-25% cheaper at the end of the year and if you are a 40% tax payer thats all your savings gobbled up.

Add that to the fact that you get almost zero haggling power through the scheme because the retailer has to pay fees to the cycle scheme.

Note I'm reasonably sure that the tax guidance note is wrong as you should apply VAT to the net sale not the gross sale, so the 250 is VAT deductable i.e. £1000 voucher is..
60 quid fee.
£940 (£784 net VAT) = Tax on 25% + VAT = £235 not £250

I got a note in writing from my employer that they intended to gift me the bike otherwise I would not have bothered.

bamba

Extend the hire hire scheme for the full duration, you'l pay a one off payment for this,( no more monthly payments) of a few % of the bike original purchase price, then at then end of the maximum hire period the bike is effective written off,no body owes anything.
If you do not chose to extend the hire period you will not benefit any tax or ni savings.
Durring this extended hire period c2w take control of things rather than your employer,so you are free to have another bike on the scheme in this time.
dont think any one is really bothered what happens to the bike durring the extened hire period as every one has had there money.

diy

except you cannot legally sell it.

bagz3

it states that the employer can transfer ownership directly over to you at the end OR.......

so why wouldnt they everytime............... all seems a bit strange how you can take ownership of the bike or continue to hire it??????

diy

Its for the reasons bamba stated. If you extend the hire you avoid the tax for the benefit.

Briggo

Hold on a minute, its not worth doing if you're not on 40% tax rate? Are you on crack? You still save a bit of money even if you took ownership after a year, or you just defer it for another 2 years and pay a fraction of the higher market value amount of the cost and save loads.

Plus even if you didnt actually save any money its a no questions asked 0% interest free loan.

Employers are never going to want to take ownership of the bike due to numerous reasons - extra admin, storage costs, collection costs, selling costs, it wouldn't be financially feasable to do that.

Who cares if its in the employers name, they dont want it.

Its a win win.

legin

roughly speaking you pay around 65% of the full price of the bike a good deal really

diy

The best saving are for those on almost exactly £115K as it would save another £500 in tax.

However if you would otherwise have waited for the sales or looked at a used bike, then its not so great.

My LBS had 40-60% off during their sales last year - admittedly it was high end stuff.

stellamandude

legin wrote:

roughly speaking you pay around 65% of the full price of the bike a good deal really

Who told you that ?

It's no where near that I'm afraid, on paper maybe, but in reality.......na
I'm currently using the www.cyclescheme.co.uk to purchase a £649 bike.

I'm 4 weekly paid
£41.60 deducted from my wages each pay day
13 pay days a year

13 x £41.60 = £540.80

After 13 payments there is a "one off payment" to extend the hire period for a further 2 years.
This is 7% of the bike retail price for all bikes over £500 and 3% for sub £500 bikes.

7% of £649 = £45.43

£540.80 + £45.43 = £586.23

Which means I've saved £62.77 off the list price, which is no where near the 65% your claiming.

As said above, it's a interest free loan, which is a win win in any ones books.
I also save on Tax and N.I since the deductions come out of my gross pay.

bagz3

stellamandude wrote:

legin wrote:

roughly speaking you pay around 65% of the full price of the bike a good deal really

Who told you that ?

It's no where near that I'm afraid, on paper maybe, but in reality.......na
I'm currently using the www.cyclescheme.co.uk to purchase a £649 bike.

I'm 4 weekly paid
£41.60 deducted from my wages each pay day
13 pay days a year

13 x £41.60 = £540.80

After 13 payments there is a "one off payment" to extend the hire period for a further 2 years.
This is 7% of the bike retail price for all bikes over £500 and 3% for sub £500 bikes.

7% of £649 = £45.43

£540.80 + £45.43 = £586.23

Which means I've saved £62.77 off the list price, which is no where near the 65% your claiming.

As said above, it's a interest free loan, which is a win win in any ones books.
I also save on Tax and N.I since the deductions come out of my gross pay.

Are you're wages actually down £41.60 from your regular wage, because i think this is deducted before tax and therefore you're not tax as much as you usually are?? (have i explained that right?)

bagz3

stellamandude wrote:

legin wrote:

roughly speaking you pay around 65% of the full price of the bike a good deal really

Who told you that ?

It's no where near that I'm afraid, on paper maybe, but in reality.......na
I'm currently using the www.cyclescheme.co.uk to purchase a £649 bike.

I'm 4 weekly paid
£41.60 deducted from my wages each pay day
13 pay days a year

13 x £41.60 = £540.80

After 13 payments there is a "one off payment" to extend the hire period for a further 2 years.
This is 7% of the bike retail price for all bikes over £500 and 3% for sub £500 bikes.

7% of £649 = £45.43

£540.80 + £45.43 = £586.23

Which means I've saved £62.77 off the list price, which is no where near the 65% your claiming.

As said above, it's a interest free loan, which is a win win in any ones books.
I also save on Tax and N.I since the deductions come out of my gross pay.

Are your wages actually down £41.60 from your regular wage, because i think this is deducted before tax and therefore you're not tax as much as you usually are?? (have i explained that right?)

Briggo

stellamandude wrote:

I also save on Tax and N.I since the deductions come out of my gross pay.

Exactly, your GROSS wage, meaning you dont pay NI and Tax on it so you save 30-ish % there if your a basic tax payer.

So you're saving more than your aclaimed 62 quid.

Daz555

bagz3 wrote:

it states that the employer can transfer ownership directly over to you at the end OR.......

so why wouldnt they everytime............... all seems a bit strange how you can take ownership of the bike or continue to hire it??????

You continue to "hire" it in name only. You do not continue paying for it month in month out.

I bought my FSRxc (£999 at the time) in 2009 on C2W.

I had £49 deducted each month for 12 months and then paid a further month to extend to the max period and get the full benefit.

Total cost to me was under 640 notes plus my company effectively passes the VAT back to the employee by allowing you to spend 15% of the retail price on bike equipment.

So my total spend was £640 and I had over £1150 worth of goods. Not a bad deal in anyone's book.

Daz555

stellamandude wrote:

I also save on Tax and N.I since the deductions come out of my gross pay.

This is the key to the savings.

Without that benefit you'd need to earn about £65 a month to afford a £41 a month payment.

CheeseEatingSurrenderMonk

Me and my boss were both going to do the scheme but with how useless and un-informative the website is we decided to do things another way. I'm not sure of the in's and out's but basically he spoke to our accountant and there is a way of doing things without going through the scheme. I got a Cube MTB, shoes and bottle cage and it came to about £750. I'm paying £75 a month for 6 months then the bikes mine and thats a 60% saving. I have the money taken out before I get taxed not after so this saves me a couple of quid as well. If you have a decent boss then this is worth considering.

Daz555

CheeseEatingSurrenderMonk wrote:

. I have the money taken out before I get taxed not after so this saves me a couple of quid as well. If you have a decent boss then this is worth considering.

Saves you way more than a couple of quid. Even a 20% taxpayer is looking at £180 over the year as a result of having £75 taken at gross.

Daz555

Note to the magazine bods.

Perhaps a article published on Bike Radar or one of the magazines is overdue? It is clear there is so much confusion on how C2W and Cyclescheme works.

The problem is I feel that many employers do not correctly explain exactly how much the employee will pay, when they will pay it, and what happens at the end.

stellamandude

Daz555 wrote:

stellamandude wrote:

I also save on Tax and N.I since the deductions come out of my gross pay.

This is the key to the savings.

Without that benefit you'd need to earn about £65 a month to afford a £41 a month payment.

Yes, I understand there are savings to be had here, and this makes it sound all the more "rosey", but in the REAL world, as in "cold hard cash", I've bought the bike for £62.77 less than the retail price :P
I'm not gunna get in to a argument about the savings on N.I and Tax off setting the price of the bike, I just gave a simply explanation on how my scheme works.
I can't even say if I notice the £41 a month missing from my net pay, as my wage varies from month to month with a "bonus system"

stellamandude

Daz555 wrote:

The problem is I feel that many employers do not correctly explain exactly how much the employee will pay, when they will pay it, and what happens at the end.

Spot on !!
I ended up phoning the cyclescheme and asking them exactly that

diy

It was roughly 50% discount for me

£1,149 Whyte 901
1000 bike voucher net (VAT, Tax, an NI) = 400 quid then 120 quid tax at the end of the year + the cash top up so £669.

real world saving is about 200-250 quid, given that the bike will probably go for 800-900 in the end of season sale.

KitsuneAndy

Daz555 wrote:

Note to the magazine bods.

Perhaps a article published on Bike Radar or one of the magazines is overdue? It is clear there is so much confusion on how C2W and Cyclescheme works.

The problem is I feel that many employers do not correctly explain exactly how much the employee will pay, when they will pay it, and what happens at the end.

Doesn't always work, my employer has this scheme and several non-bike related ones. All the literature is really good, clear, shows how much you pay Gross and Net and what happens at the end.

People *still* don't get it.

darpots

Since they changed the bike valuation rules about 9 months ago its not as attractive as it was, but still cheaper and better than paying for a bike any other way.

How much you pay at the end will depend if you are taking the extended hire or not. Every year extended hire technically reduces your final payment. Or like me you could have a word with your very kind boss and arrange to get a bonus equal to the final payment

Daz555

stellamandude wrote:

Yes, I understand there are savings to be had here, and this makes it sound all the more "rosey", but in the REAL world, as in "cold hard cash", I've bought the bike for £62.77 less than the retail price :P

The REAL world is TAX and this is where the savings come from. They cannot be ignored - this is why the scheme works for so many people.

I paid £640 notes for a grand of bike. ALL of it due to TAX and NI.

stellamandude

Daz555 wrote:

stellamandude wrote:

Yes, I understand there are savings to be had here, and this makes it sound all the more "rosey", but in the REAL world, as in "cold hard cash", I've bought the bike for £62.77 less than the retail price :P

The REAL world is TAX and this is where the savings come from. They cannot be ignored - this is why the scheme works for so many people.

I paid £640 notes for a grand of bike. ALL of it due to TAX and NI.

As i said before.............a SIMPLE explanation of how the scheme works for me..........

£41.60 deducted from my wages each pay day
13 pay days a year

13 x £41.60 = £540.80

After 13 payments there is a "one off payment" to extend the hire period for a further 2 years.
This is 7% of the bike retail price for all bikes over £500 and 3% for sub £500 bikes.

7% of £649 = £45.43

£540.80 + £45.43 = £586.23

Which means I've saved £62.77 off the list price, which is no where near the 65% your claiming.


That £586.23 is deducted from my wages................that's how much the bike cost me :P

Daz555

stellamandude wrote:

Daz555 wrote:

stellamandude wrote:

Yes, I understand there are savings to be had here, and this makes it sound all the more "rosey", but in the REAL world, as in "cold hard cash", I've bought the bike for £62.77 less than the retail price :P

The REAL world is TAX and this is where the savings come from. They cannot be ignored - this is why the scheme works for so many people.

I paid £640 notes for a grand of bike. ALL of it due to TAX and NI.

As i said before.............a SIMPLE explanation of how the scheme works for me..........

£41.60 deducted from my wages each pay day
13 pay days a year

13 x £41.60 = £540.80

After 13 payments there is a "one off payment" to extend the hire period for a further 2 years.
This is 7% of the bike retail price for all bikes over £500 and 3% for sub £500 bikes.

7% of £649 = £45.43

£540.80 + £45.43 = £586.23

Which means I've saved £62.77 off the list price, which is no where near the 65% your claiming.


That £586.23 is deducted from my wages................that's how much the bike cost me :P

I saved about 40% as per my post earlier. How little you have saved in comparison seems odd. Even if most of your tax was at 20% it is still very low.

Bar Shaker

In an article about the economy in last weekend's Sunday Times, Business section, the cycle to work scheme was listed as one that HMRC is just about to close.

diy

stellamandude wrote:

That £586.23 is deducted from my wages................that's how much the bike cost me :P

Deducted from your GROSS income, no?