CycleScheme - Is it worth it?

rickyrider

I spent some time looking into this for the company I work for and decided it was far more hassle than it was worth. Buying a bike in end of season sale for 30% discount is much easier and quicker and possibly cheaper.

pdw

Daddy0 wrote:

Just wanted to say many thanks for all your inputs! I have suggested to the directors that they just buy me the bike and I hire it for £1 a month then pay the FMV tax at the end... Will see if they go for it. If not I'll have to basically pay back the companies costs which will still be a lot less than the normal schemes. Shame I couldn't get this sorted out sooner though - I missed out on a Felt F5 for under £1000 at Wiggle

Yeah - if they go for that you're on to a winner.

Just a thought - if rather than £1/month you get rid of the hire payments altogether and the company just lets you use their bike, then I reckon there's no hire agreement, which means no need for a credit licence which means no £1k limit

pdw

rickyrider wrote:

I spent some time looking into this for the company I work for and decided it was far more hassle than it was worth. Buying a bike in end of season sale for 30% discount is much easier and quicker and possibly cheaper.

What about if you could do both? Buy a bike in the end of the season sale and stick it through the cycle to work scheme. If you don't use one of the commercial schemes, then there's no restrictions on what and where you buy.

daddy0

pdw wrote:

Just a thought - if rather than £1/month you get rid of the hire payments altogether and the company just lets you use their bike, then I reckon there's no hire agreement, which means no need for a credit licence which means no £1k limit

Hmmmmmmmmmmmm! I wonder if I can work my charms sufficiently.... Anyone else been lucky enough to do it this way?

FJJ

Daddy0 wrote:

Hmmmmmmmmmmmm! I wonder if I can work my charms sufficiently.... Anyone else been lucky enough to do it this way?

Thats basically what I did at Halfords - reserved on-line to get £70 off via their spend & save offer then 10% discount with a British Cycling voucher. They also give a 10% bonus on top of the LoC price for accessories etc.

fungus_the_muffin_man

One other downside is if you leave your place of work before your contract is up.
I got a new job and left after 6 months of the contract. It was a £1000 bike so my last wage was minus the deduction left for the bike. Roughly £500. A really sting in the pocket!

ricky1980

Someone has corrected stated the end of the lease in term of cycle scheme.

Depending on your initial contract, it would have been either 12monsths or 18months contract
At the end you have 2 options 1) buy it for 25% of the original bike worth 2) extend lease for a chosen number of years and at the end pay min 7% of final value depend on years from new...its a sliding scale the info is available on HMRC website

Bare in mind at the end of the initial lease you would have paid the bike in full gross. So paying 25% effectively deminishes the tax savings you get from using the scheme. So you simple enjoy the benefit of interest free payments.

But if you choose to extend the lease for a further 3 years then at the end you only pay 7% and during the 3 year period you are no longer required to make monthly payment.

In short its worth doing it either you want it outright in 18month or keep it going for 5years and pay a tiny sum to have the bike. The option of getting the bike ownership is no question as they will sell it back o u no worries

FJJ

ricky1980 wrote:

Someone has corrected stated the end of the lease in term of cycle scheme.

Depending on your initial contract, it would have been either 12monsths or 18months contract
At the end you have 2 options 1) buy it for 25% of the original bike worth 2) extend lease for a chosen number of years and at the end pay min 7% of final value depend on years from new...its a sliding scale the info is available on HMRC website

Bare in mind at the end of the initial lease you would have paid the bike in full gross. So paying 25% effectively deminishes the tax savings you get from using the scheme. So you simple enjoy the benefit of interest free payments.

But if you choose to extend the lease for a further 3 years then at the end you only pay 7% and during the 3 year period you are no longer required to make monthly payment.

In short its worth doing it either you want it outright in 18month or keep it going for 5years and pay a tiny sum to have the bike. The option of getting the bike ownership is no question as they will sell it back o u no worries

It is a bit of a joke that CycleScheme actually charge the user the FMV - most companies / schemes just 'gift' the bike and add the FMV to the employees P11D as a benefit in kind so they just pay income tax at their marginal rate on it e.g. around £53 for a £1000 bike to a lower rate tax payer.

sketchley

Couple of points.

There nothing stopping your, if your company plays ball that, getting the company to buy the bike in the end of season sales with x% discount and renting tax free back to you under the cycle to work scheme. The bike shop have no need to even now it a C2W purchase. So you can get benefit of both.

Paying tax on the FMV is ok via PD11D providing your company doesn't have a P11D exemption. In which case the instant they do this for one person the whole company has to have P11D which is extra admin. At least that's the feedback I got from our aacounts department.

Iamnot Wiggins

I've just discovered that my company offers the cycle scheme.

Would I be allowed to use it for a frame purchase only? So let's say, for example, I wanted a Boardman Air frame which is over £1,000. Could I claim the voucher and top it up with some of my own money to buy the frame? Or have I got this all wrong?

craker

Nope - whole bike only. Someone earlier in the thread commented on the possibility of a build consisting a a top notch frame and cheapest other bits, IMO that just leaves you a load of bottom of the range leftovers, surely worth more than any savings you'd get off the scheme.

However your LBS might bend the rules a little, you may get lucky. I had a shop offer me a set of new wheels; they would put on the form an equivalent value bike. Don't know where this leaves you legally should the bike shop then deliver you a bike you didn't want!

twowheels

Ive just signed up last week and got my bike this Saturday from Halfords. The company I work for told us at the end of the 12 months payment we just give them £20 as a token gesture and the bike is ours and no other FMV.

pdw

Sounds like your company hasn't kept up with HMRC guidance. Transferring the bike to you for that amount would be considered a taxable benefit (assuming the bike cost more that £111). It's also worth noting that the company can't at this point make a promise to you to transfer the bike in the future, which means that it can't be held to its offer to transfer for £20.

Iamnot Wiggins

craker wrote:

Nope - whole bike only. Someone earlier in the thread commented on the possibility of a build consisting a a top notch frame and cheapest other bits, IMO that just leaves you a load of bottom of the range leftovers, surely worth more than any savings you'd get off the scheme.

However your LBS might bend the rules a little, you may get lucky. I had a shop offer me a set of new wheels; they would put on the form an equivalent value bike. Don't know where this leaves you legally should the bike shop then deliver you a bike you didn't want!

Hmmm. I really wanted a Boardman SLR9.8 f&f which my LBS can't get. Might have to go back to the drawing board or look at other alternatives.

BUR70N

I got a bike through the scheme last year before the benefits where not as great, as I believe some of the rules changed end of last year.

I pay 'X' amount before tax, but also I pay little less tax an NI as I am getting taxed on a slightly less amount (well thats how it was put to me) and have saved money long term, no mention of the 7% or 25% of value at the end. My payments look to be a % of the value of the bike with the tax saving, so paying back the value of the bike minus my tax savings for a year period.

My company were able to use any shop I like, transfer of funds same day after paperwork was completed. HR for once dealt with it correctly and it was the shop that took longer to realise they had the funds!

Plus the fact I have 0% APR on a brand new bike where I don't have the funds to go and purchase one is a really bonus.

You can use one scheme as year to the max value of £1000 but you can have 2 running at the same time with a max value of the £1000 for both. So say you purchase one bike for £500 and then a few months later you wish to purchase another you can do so upto the value of £500.

RufusA

Sketchley wrote:

Paying tax on the FMV is ok via PD11D providing your company doesn't have a P11D exemption. In which case the instant they do this for one person the whole company has to have P11D which is extra admin. At least that's the feedback I got from our aacounts department.

I suspect your Accounts Department is misinformed, or deliberately misleading you!

Assuming the dept is referring to a dispensation, then this will only cover certain types of items where tax relief is available i.e. reimbursed business expenses such as travel / subsistence. If ANY employee has a *taxable* benefit i.e. company car, private medical insurance etc. then the company will still have to produce a P11D for them regardless of whether they have a dispensation or not!

It is extra admin, but no more than any other taxable benefit.

Rufus.

Flubsterunited

I tried to persuade my company to set up its own internal scheme but they didn't want to, shame really as loads have people have gone for bikes under the schemes and most the lbs would have done a better deal if sorted directly. The real bugbear is that I work for a finance company and as they have a ccl there doesn't need to be a limit!

NWLondoner

It used to be worth it but now too much hassle and end of term fees.

My company only uses one retailer and only runs it at certain time though out the year. If i applied on day 1 of the scheme opening it would be at least 2 months before i would get my hands on a bike

nacnudsmada

is there a way to get a bike if the company does not want to sign up through the scheme? other then out right purchase?
my company is to small you see!

pdw

Not sure what you mean by "sign up through the scheme". The "scheme" is a tax break that allows a company to "make bikes available" to employees (i.e. loan or rent) without it being considered a taxable benefit. You don't need to sign up to anything, just to comply with the rules surrounding the tax break.

Cyclescheme is a commercial company that will help an employer take advantage of the tax break, in return for taking percentage from the retailer.

nacnudsmada

When I had a chat with the guys at the scheme they explain that the employer has to put the money up front for the bike 1st? Then that's when the tax break comes in to pay the boss back (my understanding)
So what if the company does not sign up for it? I might have to give them a tingle Monday!

meanredspider

Thanks to the tax man, our company (a large UK employer) has given up on the cycle scheme.

My experience of it is that it's best to think of it as a cheap loan for a full-priced bike.

My advice to anyone is, if you have the cash to buy a bike, do that and shop for the best deal you can get - you will save far more than any cycle scheme by having cash & flexibility.

nacnudsmada

Oh dear, i am starting to share you sentiments as it seem to be falling on the "to hard" pile

herb71

It's worth it if you need to hide the purchase of another bike from the wife.

nacnudsmada

Herb71 wrote:

It's worth it if you need to hide the purchase of another bike from the wife.

Ahh yes did not think about that. I guess you cannot hide a bike in a wardrobe and say, "What this old thing I've had it for ages"!

pdw

My advice to anyone is, if you have the cash to buy a bike, do that and shop for the best deal you can get - you will save far more than any cycle scheme by having cash & flexibility.

That may be the case if you use Cyclescheme (the commercial company), but it's certainly not true in general.

There is nothing in the tax break that requires you to buy a full price bike. Employees using my company's in-house scheme are free to shop for the best deal that they can get, and then save between 35% and 42% on that price, whilst also spreading the payments over 12 months.

My advice to anyone is check the details of your company's scheme. It may offer a very good deal, or it may be rubbish.

pdw

nacnudsmada wrote:

When I had a chat with the guys at the scheme they explain that the employer has to put the money up front for the bike 1st? Then that's when the tax break comes in to pay the boss back (my understanding)
So what if the company does not sign up for it?

Who do you mean by "the guys at the scheme" ? I assume you mean people at Cyclescheme? Once again, Cyclescheme are a commercial company, you do not have to sign up with them to make use of the tax break, and you can get a better deal if you don't.

The normal way that a scheme works is:

1. Company buys a bike.
2. Company rents the bike to the employee for 12 months. The payments for this part can be made from your pre-tax earnings. That is the tax break.
3. Company offers to sell the bike to the employee. There is no tax break for sale of a bike, so this must be done at a "fair market value", or it will incur tax.

The fact that the tax break exists for (2) but not (3) means that the company will typically recoup most of the cost of the bike through (2) and minimise the payment for (3). HMRC have specified minimums for what it considers "fair market value" for a bike of a given age and value.

ricky1980

Just do it...Nike Tick

it is worth doing

ricky1980

FJJ wrote:

It is a bit of a joke that CycleScheme actually charge the user the FMV - most companies / schemes just 'gift' the bike and add the FMV to the employees P11D as a benefit in kind so they just pay income tax at their marginal rate on it e.g. around £53 for a £1000 bike to a lower rate tax payer.

it used to be the case, until the government closed that tax loophole. it's the same for every scheme now regardless if it isn't then they are not complying with the recommended procedure. this means the user will be liable for income tax for this benefit, which is why you have to pay for the bike at the end of the 1 year or 18month lease if you want it under your ownership.

It is annoying that you have to be charged a fee for your own bike which you have paid in full. But £70 is a lot less than £250 based on £1000. Although the FMV is probably not gross but after tax deduction so its even worse really

pdw

ricky1980 wrote:

FJJ wrote:

It is a bit of a joke that CycleScheme actually charge the user the FMV - most companies / schemes just 'gift' the bike and add the FMV to the employees P11D as a benefit in kind so they just pay income tax at their marginal rate on it e.g. around £53 for a £1000 bike to a lower rate tax payer.

it used to be the case, until the government closed that tax loophole.

No, it's still perfectly legitimate to gift the bike, and treat it as a benefit in kind.

What schemes used to do was just charge a nominal fee for the transfer, and not treat it as a benefit. There never was a tax break allowing companies to sell bikes to their employees at below market value, and this is what got clarified.

It is annoying that you have to be charged a fee for your own bike which you have paid in full.

There's no reason why the rental payments that you make should add up to the full cost of the bike. If your scheme charges you the full cost of the bike in rental fees, and then a further fee for transfer, then it's not a very good scheme.