Is cycle to work scheme still worth it?

The Northern Monkey

Work are thinking about it so have asked me if i'd be interested.. I've said no. Its only a small place (15 employees) and I'm pretty much the only serious cyclist.

The finance guy is coming back with figures such as 30-40% discounts which I don't believe for a second especially since the new VAT changes to the scheme that came in in 2012.

My argument is that I'd be better off finding bike myself instead of spending 1k on a CTW scheme, especially as you have to pay RRP.

1) I can negotiate a discount with the LBS anyways - if I didn't get al least 10% RRP in the 1st place i'd walk out.
2) 2010/2011 discounts can be huge if you shop around, making the RRP prices on new bikes just not worth it at all.
3) If I took out a 0% finance deal instead of CTW, I could pay off the loan early.
4) or I could spread the cost over a longer period, thus reducing the monthly payments (stil being able to pay it off early).
5) I don't have to worry about a final value fee.

Thing is, I don't actually want a bike But there are others in the office that I think are being mislead as I don't believe the savings are as good as what are advertised.

According to the BR article: http://www.bikeradar.com/road/gear/arti ... ikes-31162

"From 1 January, 'hiring' a £500 bike will cost £345.12 (£34.72 + 20% VAT a month – £41.66 – minus £12.90 in income tax and NI savings). After paying the £108 final value fee, they'll have spent a total of £453.12. This represents a saving of £46.88 – less than half the current discount."

Which is less than 10%!

Thoughts and advice please

cooldad

Depends on your tax rate.
Our company doesn't use an 'official' scheme, just gives us an interest free loan, taken off gross income, and we can buy anything - effectively a cash buyer from anywhere you want.
So save on the tax and interest. It's very worth it. No final payments or anything.
The accountants have checked it out and think it's legit so maybe worth suggesting it to your company.

diy

legit for them, but is it legit for you?

I did it last year (50% tax payer) still don't know what I will have to pay at the end (april) I reckon I saved 2-300 quid. over the normal shop around buy in Jan, screw a discount etc. etc.

cooldad

No idea really, but I've bought two bikes on it and never been asked for anything by HMRC. So have plenty of other people including the MD.
We're not VAT registered, so that doesn't come into it.

cooldad

TBH even if it was just an easy interest free loan I'd find it worthwhile. Saving half the price in tax is an added bonus.

bails87

Monkey: It may be 'only' a 10% discount, but that's still 10% and it's spread over a year. And you don't have to pay the final fee, you can pay one more monthly fee to keep hiring the bike for another 3 years. Then buy it at a massively reduced rate, or say you don't want it any more.

If I wanted a Giant/Trek/Specialized £1k road bike then my C2W scheme may not have worked out cheaper than going in and getting a discount for paying cash, but instead I got a Ribble, can't get them discounted, so I didn't lose out by going through the scheme. Then I got the benefits of no NI/tax (I didn't save VAT due to something about my employer :? ) and the payments spread over a year, so it worked out well.

If I was genuinely going to take up commuting by road bike then I'd use it, if I was just hoping to take advantage of the scheme to get a cheap MTB then I wouldn't bother.

mcnultycop

My firms scheme is crap as it is limited to bikes up to £600. I've upgraded a £500 bike so couldn't really get anything better. Just choose what you want and do the maths on that particular model.

The Northern Monkey

bails87 wrote:

Monkey: It may be 'only' a 10% discount, but that's still 10% and it's spread over a year.

But... if i can get a 10% discount myself, spread the cost over a longer period to reduce the payments and have the option to pay the balance early.....

I know I'm looking at this from my own view, being that I prefer a better spec and would be more likely to spend t full 1k, I'd rather spend 1k on an old stock reduced bike than 1k on a new bike... no question!

cooldad

It also depends on your tax rate though, can't be arsed to work it out exactly, but that example is a lot less than my rate. Cost to me would be around £20 odd a month, add a final payment and it's still around a 40 % saving.

One time when being a royally screwed top rate payer is worthwhile.

Satchm00

Worth noting a fair few bike shops now add 10% to the price when you do cyclescheme as they are passing on what they get charged...

benpinnick

Wait until april for when the ACT backed Workriders scheme launches. Same principle as other cycle to work except:

No 10% fee to the shop means that you can negotiate a discount at your leisure.
you can spread the payments up to 24 months (if your boss will let you)
You can pay it off at any time, although you lose the discount on the remainder of course.
Transfer at the end is around 5% of value (like the good ol' days).

Remember too that a 0% finance deal will cost the shop more than 10% commission, so you wont get a discount,or it wont be as good anyway.

Cooldad, sounds like you do still have Cycle to work, just ignoring the FMV payment, which companies can do if they want.

bamba

I brought my trance in may 2010 , for £1000.I paid 12 monthly payments of £50 and a final payment of £70,extending for 3 years.No more payments,bike is written off after the total hire period.Tbh I don't think any one is really bothered about what happens with it now as every one has had there money,Plus I'm able to start up a new scheme as well.
Extending the hire period is the key to still making the savings,if I wanted to transfer ownership after the 12 months it would have cost me £250.

stanny_uk

its gotta still be worth it... ive just got a £750 TREK which ended up being £584 gross out my salary so take the tax off that probably costing me £450 ish dunno bout final payment bit yet though..

Phil_D

cooldad wrote:

TBH even if it was just an easy interest free loan I'd find it worthwhile. Saving half the price in tax is an added bonus.

They loan you money to buy a bike, say £1000. You then take a £1000 reduction in your salary, and then repay the £1000 loan to them. Is that not just a £1000 pay cut?

diy

Roughly like this:

£1000 bike, + fee less vat so around £960

-£960 goes on your gross pay, so its less tax and insurance.
after 12 months you could get taxed on £250 (note not pay £250) or you MAY be able to extend the lease.

I bought a £1200 whyte for £700 - but I could have got it in the sale for about £1K.

Timing of your scheme is probably more important than the tax band you are on. April/may its hardly worth it. Jan/feb maybe.

If you earn around £100-110K then this could get you back some of your personal allowance.

cooldad wrote:

One time when being a royally screwed top rate payer is worthwhile.

How does your company pay you £150K+ without being VAT registered or did I miss something?

bompington

3 main drawbacks people see with C2W these days:

- the 10% commission thing: this seems to be a widespread misunderstanding. It only applies if your company goes through one of the commercial providers like cyclescheme.co.uk. If your employer is a small (implying flexible) business, there's no reason for them to do that : all they need to do is print out a contract and get you to sign it, then they (i.e. you, if they're flexible enough) can quite legitimately go to the LBS with cash in hand and negotiate whatever you can. - the VAT change thing: this really just levels the playing field - previously you got a lot better discount if you worked for a VAT registered company, but it was still well worth it for those of us that didn't: just slightly less of a rip-off for the taxpayer. ;-) - the final value thing: as mentioned frequently above, you can just defer the final payment to the point of negligibility - and there's no set fee for this, so if (as above) your employer is small and flexible, they could charge you £1 for your next 3 years' rental if they wanted, or possibly nothing at all. The bike technically remains the property of your employer for that time, but if that worried you then you probably wouldn't be at all interested anyway. It's worth noting that you're not restricted to 12 months either, you're allowed up to 18. Also - you can pay

the VAT on the nominal FV payment if your company are willing to waive it - i.e. £50 on a £1K bike.


As for Phil_D, you're, errr,wrong. What you are saying is that the final value payment is the full value of the bike, when even in the worst cases it's more like 25%

So you could buy a bike for £1K in the sales, pay that back less tax & NI i.e. £700 for a lower rate taxpayer, which means £38 per month if you pay over 18 months - you wouldn't even notice it! Followed by a variety of schemes to avoid or mitigate the FV payment.

A lot of this does depend on your employer playing ball, but it still looks worth it to me.

bompington

cooldad wrote:

...being a royally screwed top rate payer...

Deepest sympathies from all of us, I'm sure

benpinnick

Under The new workriders scheme it works a bit differently - worth it for you/your company to look at:

You pay £25 to get on the scheme.
Company leases bike for you from Workriders, you pay £1000 before tax/NIC for the bike. You can get any bike from over 1000 retailers. No 10% commission applies so no problems getting last years model/sale etc.
You save approximately between 20-50% depending on your tax band and salary (if you are saving 50% though you probably don't want or need cycle to work!).
At the end of the scheme you buy the bike for FMV - but they discount off cost of collection, service charge, minus wear and tear parts and the £25 deposit. which works out at £0 for a cheaper bike, up to about £25 extra for a 1000 one.

So, if you were paying on average 23% tax and NIC (which is current UK average). You could save £230 on the price of _any_ £1000 bike over the year, and actually own it at the end for effectively another £50 (£25 at the start, £25 at the end). Thats an interest free loan of £1000 with no credit checks etc, and a total saving of 18% on the price, whether its sale or not! Not to be sniffed at!

If you happen to work in a bike shop, you can make the same savings on your cost plus VAT purchases too! Even better.

njee20

Crikey my heart bleeds for all the poor buggers only saving 10% on their £150,000 salaries.

How does your company pay you £150K+ without being VAT registered or did I miss something?

+1?

Not really got anything else to add, if your company are looking to start doing something I'd look at administering your own scheme, saves all the potential ball ache and charges of the 'proper' schemes.

cooldad

diy wrote:

cooldad wrote:

One time when being a royally screwed top rate payer is worthwhile.

How does your company pay you £150K+ without being VAT registered or did I miss something?

We are a brokerage earning commission. No VATable services.

njee20

Hang on? You earn that sort of money, and live in Bracknell!? :-)

GT_Dave

I dont have the option of the cycle to work scheme as the Army havent adopted it although they do want to encourage soldiers to cycle to work rather than driving.

One massive bonus that I can see with this scheme is that you dont have to persuade the wife to let you spend a grand on what she sees as a "push bike" which is an experience that i have just had to go through!!! :roll:

Cycle to work scheme all the way!!!!!

tarbot18

Im on my second and its thorugh local government . mine runs over 18 months of payments then you lease the bike for another 18 months for no fee and this means no final payment .

Ive worked it out to ill be paying back £650 for a grand worth so bit of a no brainer really and as it comes straight out my pay and only works out to £25 a month the mrs doesnt mind .
Ill be getting another in august when it starts again and as long as i stay with black bikes she doesnt notice............

benpinnick

GT_Dave wrote:

I dont have the option of the cycle to work scheme as the Army havent adopted it although they do want to encourage soldiers to cycle to work rather than driving.

One massive bonus that I can see with this scheme is that you dont have to persuade the wife to let you spend a grand on what she sees as a "push bike" which is an experience that i have just had to go through!!! :roll:

Cycle to work scheme all the way!!!!!

The Army wont do it as they already pay you to ride to work... Probably a better deal if you actually do it!

Briggo

Extend it past a year so you dont pay the ridiculous 25%, job done, just like it was before.

Shaggy_Dog

Frankly, even without any form of discount it is worth it as essentially you have a years' interest free credit. My bugbear is that you have a £1000 limit and where I work I have to go through halfords

pdw

bompington wrote:

3 main drawbacks people see with C2W these days:

- the 10% commission thing: this seems to be a widespread misunderstanding. It only applies if your company goes through one of the commercial providers like cyclescheme.co.uk. If your employer is a small (implying flexible) business, there's no reason for them to do that : all they need to do is print out a contract and get you to sign it, then they (i.e. you, if they're flexible enough) can quite legitimately go to the LBS with cash in hand and negotiate whatever you can. - the VAT change thing: this really just levels the playing field - previously you got a lot better discount if you worked for a VAT registered company, but it was still well worth it for those of us that didn't: just slightly less of a rip-off for the taxpayer. ;-) - the final value thing: as mentioned frequently above, you can just defer the final payment to the point of negligibility - and there's no set fee for this, so if (as above) your employer is small and flexible, they could charge you £1 for your next 3 years' rental if they wanted, or possibly nothing at all. The bike technically remains the property of your employer for that time, but if that worried you then you probably wouldn't be at all interested anyway. It's worth noting that you're not restricted to 12 months either, you're allowed up to 18. Also - you can pay

the VAT on the nominal FV payment if your company are willing to waive it - i.e. £50 on a £1K bike.

Good summary - although on the last point it's not VAT that you pay. If your company sells at less than FMV then it's a taxable benefit so it's income tax that you have to pay on the difference.

It's also worth noting that most companies actually make money on the scheme because they save the employer's NI contributions. There's nothing to stop them passing these savings on to you. In fact, if they really want to encourage cycling, then there's nothing that requires them to break even on the deal at all.

Our company has a self-run scheme which passes on the employer's NI savings, and sells the bike at the end of three years for a nominal amount as taxable benefit. Overall savings for basic rate payers are 35% and higher rate 43%. The only restriction on where you can buy from is that the retailer can produce a VAT invoice, and there's no 10% going to a 3rd party so you can take the best deal you can get.

At least 35% savings plus 12 month interest free credit? Sounds worth it to me.

pdw

if you are saving 50% though you probably don't want or need cycle to work!

I'm intruiged by this statement. What's the salary at which cycling to work stops be useful or desirable?

diy

Other end I would say, someone on the basic rate of tax with a scheme which operates around the tax year. But then the interest free option might be of interest. It does amuse me that some people think well off people can waste money. The desire to save money and get a good deal is hard wired and has nothing to do with income.

benpinnick

pdw wrote:

if you are saving 50% though you probably don't want or need cycle to work!

I'm intruiged by this statement. What's the salary at which cycling to work stops be useful or desirable?

Thinking more of the £1000 limit that most people face. Still would like a discount! Oh, and to get a 50% discount, your MONTHLY take home salary after tax would be around £37,500 or more. In case you're wondering. Like I said, probably don't need or want Cycle to work.

The Northern Monkey

So is the statement on the bikeradar article I posted earlier incorrect then?