Cycle2Work Employee/Employer

bigharj

Hi.

Are there any company directors that can give me some help regarding Cycle2Work? My salary is 'maintained' well under the higher tax threshold.

Tell me if I am wrong on this £1000 example

Plan A - Cycle2Work scheme I would recieve £200 in income tax benefit and £120odd national insurance benefit, all of which I would never see as my accountant does the bills and the business pays my tax liabilities at the end of the year. Savings of 32% however the business has to pay 100% of the cost now.

Plan B - Buy the bike in cash and haggle the price down, aim for 10%-15% in discounts & claim the VAT too. I am not sure whether I am allowed to do this, my accountant does'nt seem to be too bothered as he sees it as legitimate business purchase as cycles in business are widely accepted these days. Potentially savings of 30% and the business gets the benefit by the next VAT quarter.

Just don't know where to go with this, my gut instinct tells me to buy in cash and avoid the paperwork.

Thanks

Harj

Wirral_paul

Under example A, you pay the company back from income over a fixed hire period of typically 12 or 18 months, and after that there is still a residual value to the bike. I'm just at the 18 month period on my bike, and as it was £2,000 there's a 21% "Fair Market Value" still on the bike. This could wipe out a fair chunk of the savings!!

http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

However, the scheme i'm on extends the hire period and I am paying a deposit of 7% of the value (£140). No more payments are then made to "hire" the bike. The hire period is extended until 3yrs 7months (which allows rounding up to 4 years) at which point there's a 7% Fair Market Value as shown in the table in the link. The deposit is then used to pay this fair market value and i'm the full legal owner (in September 2014!).

Taking this 7% final payment into account, the savings are closer to 25% overall to me - not 32%. Still a good discount and an interest free loan however so it was worth it.

For you though - i'd suggest you should be considering buying the bike for cash through your company. Have you spoken to your Accountant about writing it off against the company profits as a legitimate business expense?

I should add i'm not an Accountant though (but do a lot of tax calculations in the Financial Adviser's practice i work at)

nickellis

Option two definitely.

Cash up front so can haggle as you suggested
Claim the VAT back
Loads of businesses use bikes for all kinds of stuff. All you'd have to do us claim you use it to visit a client around the corner, company CO2 footprint and all that. I'm not sure if you'd even be asked to justify it by HMRC.

If it was a stupid priced bike (£10k carbon fibre with all the trick bits) then you might get asked to justify the expense.