cycle scheme the big con?

snowster

Can someone explain how it works please brought a new bike last May 2013 from pauls cycles (first class service) now when I purchased may bike I was told that due to it being on sale I would loose 10% of the voucher cost which I expected thats the easy part, so the price of the bike was £1249 so I paid the extra £349 now the bit I don't get is 11 payments taken out of my wages of 83.83=£922.13 now I just received email for the final payment opion 2 one final payment of £250 so my question is what have I got out of it and is this the best option?

markhewitt1978

Don't forget the £922.13 was taken from your gross salary, so you'll have to take into account you didn't pay tax on that part of your income.

snowster

So at best you make a slight saving, I have three options has anyone choose option 1 and extended the hire agreement by 3 years for 70.00 and what happens after the three years are up?

The Rookie

Or national insurance....

Presumably you read how the scheme works and knew the final payment would have to be made.

snowster wrote:

brought a new bike last May 2013 from pauls cycles

First mistake, you didn't buy it from Pauls, the 'cycle scheme' (whichever scheme your company used or your company if self administering) did and then rented it to you for a year, that is what you signed up to, they are now offering you the chance to buy the bike you hired for the last year.

Read the small print, after the 3 years it is then your bike.

snowster

Yes I knew but never thought final payment would be so high so in your opinion option 1 Option 1 - Cyclescheme's Extended Use Agreement
Pay a small, one-off, refundable deposit of £70.00, maximising your savings. You will be able to continue to use the bicycle for an extended period of up to 36 months. There are no monthly rental payments during this period and you can participate in the scheme again if you wish.

At the end of this period, if you do not wish to keep the bicycle, then we will refund the deposit in full. Cyclescheme may at its discretion, offer ownership of the bicycle to you at this point and no further action or payment will be required if you wish to keep the bicycle

makes more sense than option 2?

t0pc4t

check with your work as well. Sometimes they let cyclescheme administrate the whole thing, the accountants in my place decided to depreciate my bike as with any other asset and it came out at about £70.

You don't save any money like a discount but as the rookie said the payments come out of your gross salary so the saving you're making is equivalent to what you would have paid in tax and NI on that.

I've always been pleased with it.

The Rookie

The fair market values at the end of the years hire are well known and publicised by HMRC as guidance, £70 is a LOT less than that.

snowster

So if i choose option 1 and extend my hire period by paying £70 and three more years what stops them from asking for the bike back after this?

Briggo

Nothing but its never happened, why would a company want a bike. It'll cost more to store. Be cheaper to give it you.

However my pet hate is Ill informed people taking out a bike on the scheme and ranting and raving without even trying to understand it and coming on a forum slating a very good scheme.

snowster

So after reading a lot maybe which I should of done before joining the scheme instead of relying on work mates basically i pay 25% now or a one off payment of 70.00 and three years on hire and after 3 years are up pay 7% and the bike is mine?

tootsie323

snowster wrote:

So after reading a lot maybe which I should have done before joining the scheme instead of relying on work mates basically i pay 25% now or a one off payment of 70.00 and three years on hire and after 3 years are up pay 7% and the bike is mine?

Pretty much. I recently purchased - sorry, hired! - my third bike through Cycle-Scheme. I'll pay pretty much the value of the bike (plus accessories I chose) over 12 months before I choose the best-value option of securing a three-year extension with the option of taking ownership at the end of it.
For me, it's an interest-free hire-purchase on which I am not paying tax. Big smiles.

snowster

So tootsie323 you chose to extend the hire period by another 3 years then pay the 7% at the end option 1

kammybear

I think the OP has fallen foul of the recent changes with the "final value".

As he's paid £250 for the final value, he's made very little saving apart from an effectively interest free loan?

In past years, most people were just charged £25 for their last value fee until HMRC got ratty.

The main issue is that they never tell you the final value when you take out the agreement? Not when I've done but it's always been £25 here and im on my 3rd?

Briggo

kammybear wrote:

I think the OP has fallen foul of the recent changes with the "final value".

As he's paid £250 for the final value, he's made very little saving apart from an effectively interest free loan?

In past years, most people were just charged £25 for their last value fee until HMRC got ratty.

The main issue is that they never tell you the final value when you take out the agreement? Not when I've done but it's always been £25 here and im on my 3rd?

He hasn't fallen foul of anything, he is deciding what to do.

Quite simply do not go for the purchase after 1yr, extend it and you'll pay the one off extension fee and the MV of some stupidly low amount which is then taxed though your PAYE via P11D.

snowster

So briggo you would extend another three years and pay the one off payment (extension fee) what does the MV stand for?

Chunkers1980

Market Value

kajjal

If you compare this to the Irish version of cycle scheme where you effectively get the bike for full price minus your tax rate with no final payment after 12 months. Which means reasonably high earners get a bike half price

The UK scheme is not so good unless you are a high rate tax payer and want a brand new bike. I found it better to get a bike on interest credit for a good reduced price as it meant if I changed jobs I wouldn't have to suddenly cough up for the remaining full amount.

cathalferris

Another advantage of the Irish way of doing it (how often do we get to say that? ) is that the bike is mine once I take possession of it - but I do owe the company I work for, for remainder of the term. I was lucky to get my Madone 4.5 second hand with a wheel upgrade, for under €1000 all-in.

kajjal

cathalferris wrote:

Another advantage of the Irish way of doing it (how often do we get to say that? ) is that the bike is mine once I take possession of it - but I do owe the company I work for, for remainder of the term. I was lucky to get my Madone 4.5 second hand with a wheel upgrade, for under €1000 all-in.

The reason I knew about was we were looking at moving over there at one point, some great places for road and mountain biking in Ireland

The UK scheme is very poor in comparison.

danvannoorden

I also looked into doing this and it seems like a waste of time and effort, theres no real incentive for the employer you might as well just get finance or buy it out right.

I oped for the latter.

shigllgetcha

The Irish system is so much easier, the company buys the bike for you, you own it and you pay it back as a gross deduction that you dont pay your taxes on through your payslip

The Rookie

kammybear wrote:

I think the OP has fallen foul of the recent changes with the "final value".

The 'recent changes' have been there since day one, and HMRC clarified the meaning of FMV (as if it really needed it!) well over a year ago, the OP has fallen foul of signing up to something he didn't understand.

Personally I think that ride to work now fails to achieve what's intended but it could be fixed very simply by the companies charging less for the monthly hire, after all if they were originally happy to 'sell' you the bike over 12 months, why not deduct the final payment from the rental payments and add it at the end, nothing sets how much they have to charge as the monthly fee, they could charge 1p if they wanted to (not that they would). The rules were written correctly, mis-applied by the companies concerned and then corrected in a very negative way, once one figures it out they will clean up until the rest follow.