Can anybody explain cycle to work

KevChallis

After a little searching around the internet, I can't get my head around where the saving would be, say if I wanted to buy an £850 bike.

My wife and I own a hairdressing salon (I'm a sparky but do behind the scenes parts), as it's a ltd company, we are both classed as employees of the salon, so in theory, could I enrol the business with a cycle to work scheme and get a new bike?

What I don't understand is how payments are returned, of where the money comes from in the first place to purchase the bike, does it come from the employer? Or from some funding place somewhere?

Briggo

http://www.cyclescheme.co.uk/

cooldad

Employer buys the bike, rents it to you, employer claims the VAT, employee repays from gross salary so saves tax.
Unless you are VAT registered and pay enough PAYE to fall in at least the 40% bracket, it's hardly;y worth the bother with admin, final payments etc.

KevChallis

cooldad wrote:

Employer buys the bike, rents it to you, employer claims the VAT, employee repays from gross salary so saves tax.
Unless you are VAT registered and pay enough PAYE to fall in at least the 40% bracket, it's hardly;y worth the bother with admin, final payments etc.

Thanks, will just have to save or use the secret credit card that the wife knows nothing about then, that one where everything bought on it costs £20 HAHA

Thanks

Briggo

cooldad wrote:

it's hardly;y worth the bother with admin, final payments etc.

http://www.cyclescheme.co.uk/help/endo- ... cess-video

What final payment.

Yes I have done the C2W scheme, no I didnt pay a final payment and yes I saved over 30%.

Plus bear in mind its an interest free no questions asked loan.

cooldad

When? And there is. Scheme has changed. You can either buy it for the 'residual' value after a year, or finance it for a further period.

njee20

Cooldad's right, final payment can, depending how your company does things, wipe out any savings.

mini_death

Not all cycle to work providers offer the extension.
If you do decide to do it, from personal experience working with these companies, the best company to deal with is cyclescheme.co.uk They're sensible, clued up and work quickly. The whole process can be done online, plus most bike shops are affiliated with them. They also offer the extension.

mattham

Yep, Cooldad is correct, the scheme changed a couple of years back, its hardly worth it now it sems. It changed in 2011, you didn't have to pay VAT, but now you do.

Also, you have to pay 18% of the cost of the bike at the end of the first year if its less than £499, 25% if its £500 or over.

Unless you agree to finance it for a further period, you can reduce that payment but the bike is not yours, you cant sell it or anything so you're just paying for it for ages.

Only seems a benefit now if you cant stump up the cash or have any other means of financing it like a 0% credit card as your employer effectively lends you the money for free.

Briggo

I did it after the changes thanks, infact I did it in the first year if changes and still saved loads.

Even if you had to pay the 25% fair market value after a year, most employers do it through cyckescheme so unlikely, you still save something and as I said what people often miss is even if you don't actually save its an interest free loan that doesn't go on your credit rating.

Briggo

cooldad wrote:

When? And there is. Scheme has changed. You can either buy it for the 'residual' value after a year, or finance it for a further period.

You don't finance it you pay (I didn't actually get charged it) a 7% fee that's refundable to extend the hire and then after 36 months its yours.

Too many people who hear myths and slate a perfectly good scheme, suggest you watch the video it clearly explains.

cooldad

I have no problem with the scheme. An perhaps finance it is the wrong term - I didn't mean get credit, I meant finance, ie. pay.
And I do think it's worthwhile in most cases, but it's not as good as it used to be.
My initial explanation is still correct though.

My company has a simplified method - interest free loan over a year as a salary sacrifice. I've been told it doesn't comply with revenue, but our FD is happy, so so am I.

The Rookie

To be clear, there was no change, just a reminder of what the rules always were.

If you administer it yourselves you can make a big saving, there is no set amount for the monthly repayments, so you could set them at a lower rate than cyclescheme use and then include the final payment.

njee20

To be clear, there was no change, just a reminder of what the rules always were.

Yes and no, there was a guidance issued on the 'fair market value' which there wasn't before.

The Rookie

That is true, but only because what had been used before (give the bike away) was clearly not the 'fair market value' mentioned in the rules.

Personally I think the extended loan period 'bodge' is also tax evasion, I can't ring cyclesheme and get the same deal (one year old bike rental for a few years for 1/12 it's new price) so that makes it a taxable benefit in kind.

ElliesDad

You only pay the benefit in kind, ie tax, on the residual value of the bike. I've just finished a cycle 2 work scheme. My employers scheme was the Halfords one and it worked like this:

Cost of bike was £1000, Halfords also give you a voucher (or they used to) giving you 12.5% of accessories for free on top of this.

My monthly payment before tax was £83, actual cost per month to me was about £56 because you don't pay tax on the monthly payments.

At the end of the year I was given the choice to either give the bike back or pay the benefit in kind. As the bike was over £500 the residual value is set at 25% of the list price, therefore in my case it was £250, BUT you only pay the tax on this amount, therefore my final fee was only £50 and this is deducted from my salary over the next 12 months, so £4.17 a month.

Therefore the cost of the bike was (12 x £56) + (12 x £4.17) = £722.

So in my case I effectively got an interest free loan and a 28% discount.