Question on C2W scheme

cougie

Anyone here work for a big company that runs the C2W scheme ?

My multinational is reluctant to put it into place - and we've finally been able to pin them down to what their problems are with the scheme.

The major stumbling block for them seems to be - if an employee leaves during the agreement - what happens to the bike.

The guidelines tell us that "if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay i.e. without any tax exemptions.

If applicable, the employee may then be offered ownership of the equipment in the normal way (please refer to 'What happens at the end of the hire period?' above)."

Is that everyones experience of it in practice ?

Thanks

thistle_

That's how I understand it although I'm not sure how it's enforced. The bike is the company's property until you make the last payment.

I was made redundant near the end of my hire period (all monthly payments paid but not the final payment) and asked what happened but nobody knew. They and HMRC have my address if they want the payment for a 4 year old bike....

timothyw

I suppose this could just be their way of letting you know you're all getting the sack in 3 months...

The contracts are usually fairly clear about this (outstanding balance must be paid from net pay) so I can't really see what their concern is, unless they have a lot of employees on sub £1k net (which is a pretty lousy wage nowadays!)

You could try and persuade them to set up their own agreement, so avoiding the involvement of any outside organisations if that makes them feel better - this has benefits for you too as you can avoid cycle to work fees (like planet-x's 10% fee) and other caveats (eg no sale bikes).

sketchley

The contract normally has a 'disposal fee' should the employee leave employment or even the scheme and not want the bike anymore. The payment is equivalent to the remainder of the rental but isn't tax free, I.e. it comes out of your salary after tax and Ni deductions, and is subject to vat. There is no requirement or intact any obligation for the disposal fee to include the transfer of ownership of the bike. This is big disadvantage of the scheme that is often missed, if you leave employment or at the end of the rental contract the company can keep you bike and you lose out completely. It almost serves as a lock in, probably more an issue in small rather than big companies but still an issue. As I've said before our contracts are five years with years 2 to 5 rental being £0 per month. This works well as the Company have to rent me the bike while I stay in employment but they can still take it off me if a left.

In practice what happens instead of the disposal fee is the employee and employer reach an agreement were by the employee pays the remaining amounts, after tax and Ni, and the employer transfers ownership of the bike. However is this amount is less than the FMV of the bike as per the hmrc table then further tax would due on the difference.

A major difference here is redundancy, which by its very nature could include the bike as part of the redundancy payment which would then be tax free. If I was in that position that's how I would negotiate it.

Rule of thumb here is to no enter into agreement if you are going to leave within a year.

bails1310

Same type of company [£100m t/o global distribution] and scheme is only open to employees who can repay the bikes value [max £1k] with one months salary net of any other deductions that might be relevant.

There was some resistance due to admin but its not much, scheme pretty does it all for you.

sketchley

bails1310 wrote:

Same type of company [£100m t/o global distribution] and scheme is only open to employees who can repay the bikes value [max £1k] with one months salary net of any other deductions that might be relevant.

There was some resistance due to admin but its not much, scheme pretty does it all for you.

Scheme has to be open to all employees, it's one of the rules.

bails1310

It is open to all employees.

If they are accepted then that is different.

markhewitt1978

If there are any employees who would not be accepted it's not open to all?

backo

I left my last employer with a year left of a three year C2W scheme. My final salary had the remainder i.e. a years worth of C2W deductions NET of tax and NI.

whitecot

I work for a large multinational. They have no interest in dealing with the bikes and so they outsource everything to Cyclescheme (it was Halfords originally).

The company effectively purchase a cyclescheme voucher for you which you then use to purchase a bike. Nobody is interested in what you buy or whether you can find a shop that will let you "top-up" the voucher and so no messing around with quotes.

You pay the cost of the voucher back over 12 months out of gross pay (salary deduction). There is no NI credit. If you leave you pay any outstanding payments out of net pay. At the end of the period (or when you leave) you have the option of purchasing the bike outright based on the "fair" value of the bike as defined by HMRC. After one year the "fair" value is quiet high so nobody takes this option! The alternative is to pay a deposit equal to the "fair" value of the bike after 4 years which according to HMRC is about £50. You then get to use the bike free of charge. I think at this point ownership of the bike is technically passed to Cyclescheme (i am not sure if anyone has told them any details about the bike). Now your only contact is with Cyclescheme and you can change your job as much as you like. At the end of the extra 3 years Cyclescheme pass ownership to you based on the "fair" price which is the deposit you have paid and so there is no further exchange of money. In theory you can't sell the bike in the 3 years but in practice nobody is really interested and Cyclescheme don't check the status of the bike.

From the company perspective they have provided you with a voucher which you have to pay back. You have no option and it's not really any different to a train season ticket loan. There is no risk of them not getting their loan back and they have no interest in whatever happens to the bike and so they are not going to get stuck with it as an asset. The only cost to the company is the interest on the amount to buy the voucher. I suspect they pass the deposit at the end of the hire period to pay for Cyclescheme's administration charge.

Cyclescheme will now try to encourage you to do the whole thing all over again and will point out that you can use the voucher just to buy safety equipment and that you do not need to buy a bike. Thank you HMRC.