Cycle to Work scheme questions

DonDaddyD

So, this cycle to work scheme, I have a few questions:

Of those that have used the scheme recently, how much have you been charged at the end of the salary sacrifice agreement?* I am to understand that the figure changes but I'm not sure how the calculation is determined, in fact how is the end fee calculated?

Has your employer ever asked you for the bike/equipment back at the end of the salary sacrice agreement?

Has there been any disagreements with bike shops or your employer about adding your own money onto the maximum amount offered for a single purchase? So lets say you want a Specialized Allez Elite/SWORKS which goes for £1300 - £1500 you apply for the maximum £1000 and want to make up the difference has there been any problems/have you met any resistance?

*My terminology may be off.

bails87

The shop may let you top up (the one I used did, added £100 or so to upgrade to 105), but I wouldn't tell the scheme provider/employer about adding your own cash as it's not allowed in the scheme.

rolf_f

If you are doing it in a way that makes it worth while, at the end of the year the ownership is transferred from your employer to the cycle scheme operator. You then rent the bike from them for £0 per month for another two years or so and then pay a transfer fee which is about the same amount as your monthly payments were.

So calculate your monthly payment and multiply it by 13 to work out the approximate cost to you of the bike. Never heard of any employer or cycle scheme taking on a C2W bike but that's because to take them from you, the scheme charges the same amount as the handover fee - effectively it costs you as much to hand the bike back as to keep it.

Some shops will allow top ups, some not. I think in recent times there has been a crack down on it. There's no potential for disagreements - the voucher will be for £1000 and any top up is between you and the shop. If they say no your choice is to accept it or go elsewhere.

cyclingprop

Lots of shops will let you top up, though the docs provide will indicate the price was "`1000" for the purposes of the scheme. They may not confirm this in writing.

Exit charges, table listed here: http://www.cyclescheme.co.uk/employers/ ... mrc-update

However, many employers (mine included) may state a set fee for transfer (e.g. £100), in which case the difference between what you pay and the HMRC value in the table for your bike becomes taxable, so is favourable for the employee.

Ultimately you need to checkwith your employer what their scheme terms are because there are many differences in the application.

the_hundredth_idiot

Someone I know (not me, honest) got a really good discount on a bike through Cycle 2 Work - price was £1,300 and he got it for £1,000. His receipt listed the bike at £1,000 and some cheap pedals he bought at the same time for £300 ...

spen666

There is no £1000 limit in the bike to work scheme

The £1000 comes from the Consumer Credit Act as to offer credit of over this sum you need a consumer credit licence. If you work for a company with such a licence- eg Barclaycard, then they COULD if they want offer you a bike purchase way above that figure.


That said, most schemes are in practice (even at such companies) limited to £1000.

If you are allowed to put your own money to the purchase, then strictly speaking it is no longer qualifying for the cycle to work scheme and the relevant tax advantageous treatment.

So far HMRC do not appearto have clamped down on this, but you could easily find they do.

Remember this is not a bike purchase scheme, but a form of credit agreement- in effect it is an HP agreement

rolf_f

spen666 wrote:

There is no £1000 limit in the bike to work scheme

The £1000 comes from the Consumer Credit Act as to offer credit of over this sum you need a consumer credit licence. If you work for a company with such a licence- eg Barclaycard, then they COULD if they want offer you a bike purchase way above that figure.


That said, most schemes are in practice (even at such companies) limited to £1000.

In other words, there is a £1000 limit

You might mildly pedantically point out that there is no legal limit to the scheme but for most people that isn't the issue. I recall very few people in all of the C2W threads we get on here that aren't limited to £1000. I was though I did manage in 2 out of three cases to buy a bike over the limit. Obviously, the more you pay over the £1k limit, the smaller the proportionate saving as you are paying full whack for the difference.

spen666

Rolf F wrote:

spen666 wrote:

There is no £1000 limit in the bike to work scheme

The £1000 comes from the Consumer Credit Act as to offer credit of over this sum you need a consumer credit licence. If you work for a company with such a licence- eg Barclaycard, then they COULD if they want offer you a bike purchase way above that figure.


That said, most schemes are in practice (even at such companies) limited to £1000.

In other words, there is a £1000 limit

You might mildly pedantically point out that there is no legal limit to the scheme but for most people that isn't the issue. I recall very few people in all of the C2W threads we get on here that aren't limited to £1000. I was though I did manage in 2 out of three cases to buy a bike over the limit. Obviously, the more you pay over the £1k limit, the smaller the proportionate saving as you are paying full whack for the difference.

I'm sorry my post appears to have not been clear to you. If you misquote parts of sentences then you can get a very different meaning to what I had typed.

There is no £1000 limiit in the bike to work scheme.

The limit comes from practice and decisions by employers not from the bike to work scheme.


If you pay even £0.01 of your own money to the cost, then the bike is not obtained within the bike to work scheme and is not eligible for any tax advantageous treatment - ie the whole cost should come from taxed income not untaxed income.

sketchley

The scheme is not limited to £1000.

However you are commiting to a rental agreement that would ordinarly require your employer to have a consumer credit license. However there is an exemption in the comsumer credit act that allow for this, and other salary sacrifice schemes, to be provided without a consumer credit license providing the maximum liability under the scheme is less than £1000. If your employer is in financial services and already has a license then the limit is the one on the license.

The £1000 liability is what it would cost you to replace the bike if it was stolen or written off (which is your responsbility to do under the rental agreement) or you left early. For all practical purposes that is the value of the bike on day one. So if for example you top up the bike with £300 the value of the bike is still £1300 therefore cunsumer credit law still applies.

Re ownership and transfer after initial rental. First and foremost this isn't a hire purchase agreement and it cannot be for tax reasons. The moment your employer gives you any right to purchase at the end of the scheme, or if you leave company, then the rental becomes as hire purchase and is therefore taxable. You have to trust that your employer will transfer the bike to you after the rental they cannot and should not put it in writting that they will. If you upset your employer or decide to leave they can effectively keep your bike and there is nothing you can do about it. Also there is nothing to say they have to rent it to you at 1/12th of the purchase price each month, they can rent it to you for whatever they choose. The scheme simply allows for the rental to be tax free, however replacement cost might still effect consumer credit act and the £1000 limit.

If they do transfer the bike to you at the end of rental, they can do so for whatever fee they choose. You would have to pay tax on the difference between what you pay and the fair market value (FMV) as worked out in the table from HMRC. If you pay the full FMV to your employer then no tax is due, if they transfer for free then you must pay tax on the FMV. The latter is prefered option. If bike is £1000 then FMV after 12 months is £250 so you pay £250 as a transfer fee then there is no tax, but the other option is to pay tax on £250 which is either £50 @ 20% or £100 @ 40% both a better deal. You just need to get a P11D form from your employer and declare it on your tax return.

There is a better option which helps with both the points above and works providing you don't plan to leave in hurry. Get your employer to write the rental as 1 years rental with monthly payment of 1/12th of the purchase price followed by 4 years of rental at £0 per month. This means that first you don't need to transfer the bike after 12months and your employer is committed to continuing the rental for a further 4 years (so you 'keep' the bike) and the FMV after 5 years is zero so no tax. This is only an issue if you leave at which point transfer the bike and pay the tax or hand it back. Of course you never own the bike (in the first 5 years) so can't sell it and the majority of journeys on this bike still have to be for commuting or tax man might come knocking.

spen666

Sketchley wrote:

The scheme is not limited to £1000.

However you are commiting to a rental agreement that would ordinarly require your employer to have a consumer credit license. However there is an exemption in the comsumer credit act that allow for this, and other salary sacrifice schemes, to be provided without a consumer credit license providing the maximum liability under the scheme is less than £1000. If your employer is in financial services and already has a license then the limit is the one on the license.

The £1000 liability is what it would cost you to replace the bike if it was stolen or written off (which is your responsbility to do under the rental agreement) or you left early. For all practical purposes that is the value of the bike on day one. So if for example you top up the bike with £300 the value of the bike is still £1300 therefore cunsumer credit law still applies.

Re ownership and transfer after initial rental. First and foremost this isn't a hire purchase agreement and it cannot be for tax reasons. The moment your employer gives you any right to purchase at the end of the scheme, or if you leave company, then the rental becomes as hire purchase and is therefore taxable. You have to trust that your employer will transfer the bike to you after the rental they cannot and should not put it in writting that they will. If you upset your employer or decide to leave they can effectively keep your bike and there is nothing you can do about it. Also there is nothing to say they have to rent it to you at 1/12th of the purchase price each month, they can rent it to you for whatever they choose. The scheme simply allows for the rental to be tax free, however replacement cost might still effect consumer credit act and the £1000 limit.

If they do transfer the bike to you at the end of rental, they can do so for whatever fee they choose. You would have to pay tax on the difference between what you pay and the fair market value (FMV) as worked out in the table from HMRC. If you pay the full FMV to your employer then no tax is due, if they transfer for free then you must pay tax on the FMV. The latter is prefered option. If bike is £1000 then FMV after 12 months is £250 so you pay £250 as a transfer fee then there is no tax, but the other option is to pay tax on £250 which is either £50 @ 20% or £100 @ 40% both a better deal. You just need to get a P11D form from your employer and declare it on your tax return.

There is a better option which helps with both the points above and works providing you don't plan to leave in hurry. Get your employer to write the rental as 1 years rental with monthly payment of 1/12th of the purchase price followed by 4 years of rental at £0 per month. This means that first you don't need to transfer the bike after 12months and your employer is committed to continuing the rental for a further 4 years (so you 'keep' the bike) and the FMV after 5 years is zero so no tax. This is only an issue if you leave at which point transfer the bike and pay the tax or hand it back. Of course you never own the bike (in the first 5 years) so can't sell it and the majority of journeys on this bike still have to be for commuting or tax man might come knocking.

Of course as you state it is not an HP agreement - my mistake.

however, if you top up the voucher, with money out of your own pocket eg to buy a £1300 bike, then this is not within the rules of the scheme and strictly speaking makes it no longer eligible for the tax savings.

At present the tax man has not acted on this, but it would not surprise me to find he does- just like he did with the final values.

This could easily catch a lot of people out, especially if the paperwork shows the bike as costing more than £1000





Anothe scenario to think about.
You buy a bike for £1500 paying £500 yourself, but the paperweork to keep taxman off your back says £1000.

If bike was stolen/ written off in an accident then insurer will have a damn good argument for arguing it is a £1000 not a £1500 bike as that is what your paperwork says

There are risks whatever way you act.