Cycle to Work- rich people's tax perk?

awavey

NitrousOxide wrote:

For basic rate tax payers, if for example they bought a £1k bike on a scheme, how much do they save since new HMRC rules regarding a fair charge for transfer of ownership kicked in?

Before this rule change, employers were typiclly buying ownership of the bike for ~£30, isn't it now ~20% of the trip for bikes over £500?

I think that these days, the scheme is not always the best way of buying a bike, using sales and cash back could be cheaper.

but if you dont have £1k burning a hole in your pocket, and lots of basic rate tax payers dont, just view it as a 0% interest free loan instead, my ownership payment was probably about 2/3rds of the monthly payments Id been paying all year, so it felt just like a 13th payment.

kingstongraham

guy.spartacus wrote:

KingstonGraham wrote:

Make complete bikes under £300 zero rated for VAT. Simpler again.

If you are looking at £1000 for a bike to ride to work, you don't need my help.

Surely that will just encourage manufacturers/retailers to bump their prices by 20%?

If an individual retailer chose to increase prices by 20%, they wouldn't sell as many as the ones that didn't.

Red.Devil.Ghost

I understand they can't let you do it if takes you below NMW, but it can save you money if it's cheaper than the bus etc. Also those who are still living it at home and have minimum living expenses could easily afford a sacrifice for a bike like that (which they may not otherwise be able to afford).

The main problem with it is that technically the company still owns the bike not the individual.

There is nothing to stop them getting a £1000 pay day loan to go and get a bike and land themselves in a lot more trouble financially than a salary below NMW.

They forgot to take the payments for the gf's bike so that's a pretty good tax saving.

surrey_commuter

Red.Devil.Ghost wrote:

I understand they can't let you do it if takes you below NMW, but it can save you money if it's cheaper than the bus etc. Also those who are still living it at home and have minimum living expenses could easily afford a sacrifice for a bike like that (which they may not otherwise be able to afford).

The main problem with it is that technically the company still owns the bike not the individual.

There is nothing to stop them getting a £1000 pay day loan to go and get a bike and land themselves in a lot more trouble financially than a salary below NMW.

They forgot to take the payments for the gf's bike so that's a pretty good tax saving.

This would be an interest free loan - no reason why individual companies could not offer it. Most companies will not do such things for a larger sum of money than they would owe the employee if they quit.

pblakeney

tkqpr wrote:

I wonder if someone can tell me how it works if you are self employed?

Although I mainly work from home I regulary use my bike for work purposes, banking/post/deliveries etc. However my accountant said (a few years back now) that I couldn't use it.

Has the rules changed?
Is there a limit?

Any help or experiences greater appreciated

Cheers in advance

Your accountant was wrong. The current rules have been in place for years.
Company buys bike*, claims back VAT, and uses it as a company expense against tax.
Company lends the bike to employees.
Company writes off the bike after 5 years.
https://www.gov.uk/hmrc-internal-manual ... l/eim21664

*Also safety equipment - Helmet, lights, reflective clothing etc, etc

kingstongraham

PBlakeney wrote:

tkqpr wrote:

I wonder if someone can tell me how it works if you are self employed?

Although I mainly work from home I regulary use my bike for work purposes, banking/post/deliveries etc. However my accountant said (a few years back now) that I couldn't use it.

Has the rules changed?
Is there a limit?

Any help or experiences greater appreciated

Cheers in advance

Your accountant was wrong. The current rules have been in place for years.
Company buys bike*, claims back VAT, and uses it as a company expense against tax.
Company lends the bike to employees.
Company writes off the bike after 5 years.
https://www.gov.uk/hmrc-internal-manual ... l/eim21664

*Also safety equipment - Helmet, lights, reflective clothing etc, etc

If you are on flat rate VAT scheme it probably doesn't give you much if any benefit.

pblakeney

KingstonGraham wrote:

PBlakeney wrote:

tkqpr wrote:

I wonder if someone can tell me how it works if you are self employed?

Although I mainly work from home I regulary use my bike for work purposes, banking/post/deliveries etc. However my accountant said (a few years back now) that I couldn't use it.

Has the rules changed?
Is there a limit?

Any help or experiences greater appreciated

Cheers in advance

Your accountant was wrong. The current rules have been in place for years.
Company buys bike*, claims back VAT, and uses it as a company expense against tax.
Company lends the bike to employees.
Company writes off the bike after 5 years.
https://www.gov.uk/hmrc-internal-manual ... l/eim21664

*Also safety equipment - Helmet, lights, reflective clothing etc, etc

If you are on flat rate VAT scheme it probably doesn't give you much if any benefit.

If the total bill is over £2k you can claim back the VAT. So if you are looking at £1.5k you may as well upgrade effectively for free.
You still save corporation tax on any cost, plus the user is getting the bike free of any tax implications, ie full wages.

kingstongraham

PBlakeney wrote:

KingstonGraham wrote:

PBlakeney wrote:

tkqpr wrote:

I wonder if someone can tell me how it works if you are self employed?

Although I mainly work from home I regulary use my bike for work purposes, banking/post/deliveries etc. However my accountant said (a few years back now) that I couldn't use it.

Has the rules changed?
Is there a limit?

Any help or experiences greater appreciated

Cheers in advance

Your accountant was wrong. The current rules have been in place for years.
Company buys bike*, claims back VAT, and uses it as a company expense against tax.
Company lends the bike to employees.
Company writes off the bike after 5 years.
https://www.gov.uk/hmrc-internal-manual ... l/eim21664

*Also safety equipment - Helmet, lights, reflective clothing etc, etc

If you are on flat rate VAT scheme it probably doesn't give you much if any benefit.

If the total bill is over £2k you can claim back the VAT. So if you are looking at £1.5k you may as well upgrade effectively for free.
You still save corporation tax on any cost, plus the user is getting the bike free of any tax implications, ie full wages.

Does the company owning the bike mean you can't claim the mileage on expenses?

To be honest, if you are only using it to go to the bank and the post box, it's difficult to see that a £2k bike would be primarily for cycling to work. Are these even qualifying journeys?

father_jack

"t's difficult to see that a £2k bike would be primarily for cycling to work"

had someone buying a MTB on c2w only using it on the weekend riding off road.

should be a criminal offence and done for tax fraud.

pblakeney

KingstonGraham wrote:

Does the company owning the bike mean you can't claim the mileage on expenses?

To be honest, if you are only using it to go to the bank and the post box, it's difficult to see that a £2k bike would be primarily for cycling to work. Are these even qualifying journeys?

I doubt you could claim the mileage but wear and tear maintenance etc on the company bike will be done through the company.
If you can use a £2k bike for going to the post office, why wouldn't you?
From the HMRC website - "Employees are not expected to keep detailed records of time spent cycling or miles travelled for the purpose of this ‘main use’ test."

I know all of the above to be the case as I did it. I did commute by bike though.
You even used to be able to claim for a breakfast, but that got scrappped.

pblakeney

Father Jack wrote:

"t's difficult to see that a £2k bike would be primarily for cycling to work"

had someone buying a MTB on c2w only using it on the weekend riding off road.

should be a criminal offence and done for tax fraud.

Yeah, well, I am only following the eample set by our illustrious leaders.
When they stop ripping the proverbial out of expenses, so will I.

mrfpb

I wonder if someone can tell me how it works if you are self employed?

If you are a sole trader then you can't use C2W, you just claim 20p a mile for expenses. If you own a company the other replies will apply.

The Rookie

Father Jack wrote:

should be a criminal offence and done for tax fraud.

It is and they can be......(well tax evasion).

bigmat

The Rookie wrote:

Father Jack wrote:

should be a criminal offence and done for tax fraud.

It is and they can be......(well tax evasion).

What about if you use Cycle to Work to buy a track bike that by definition isn't (and never could be) road legal? Would it be OK if you put the balance of your £1,000 towards a pair of carbon deep sections for crits / TTs?!

The Rookie

The money should only be allowed to be put towards a complete bike or accessories relevant to C2W use.

A track bike indeed could never be used so would be tax evasion (assuming a cheap front brake couldn't be added for the purposes of doing some journeys to work!), you could get an LBS to get a cheap aweful BSO and add the carbon rims to it and 'sell' it as a complete bike to you, one journey to work and it complies as being the majority of the use of that bike, then fit the wheels on another bike, I know someone who did this with a groupset, immoral perhaps but not unlawful in my opinion.

N0bodyOfTheGoat

Hasn't at least one of these bike salary sacrifice schemes changed the rules, so you can now simply use the voucher to buy bike components, rather than a complete bike?

The Rookie

A scheme can't change the tax rules, only the government can!
https://www.gov.uk/government/uploads/s ... idance.pdf
Section2 cycles or safety equipment (though someone I wouldn't put under safety).

rolf_f

Father Jack wrote:

"t's difficult to see that a £2k bike would be primarily for cycling to work"

Why not. People spend 40k on cars which are mostly used for commuting. I have no idea why but they do. How many people pay less than £2k for their cars? In absolute terms, a £2k bike is a ridiculously cheap tool for getting to work.

My £1.2k Ribble has mostly been used for cycling to work so where is your boundary between what is easy to see as a commuter and what isn't?

kingstongraham

Rolf F wrote:

Father Jack wrote:

"t's difficult to see that a £2k bike would be primarily for cycling to work"

Why not. People spend 40k on cars which are mostly used for commuting. I have no idea why but they do. How many people pay less than £2k for their cars? In absolute terms, a £2k bike is a ridiculously cheap tool for getting to work.

My £1.2k Ribble has mostly been used for cycling to work so where is your boundary between what is easy to see as a commuter and what isn't?

It was a partial quote from me.

What I said was that given the question was about working from home and using the bike to go to the post box and the bank, it's difficult to see that a £2k bike would be primarily for work. In that situation, if you do use it primarily for work, surely you're an idiot.

I ride my nice bike to work when it isn't wet, obviously no problem with that.

father_jack

The scheme should be those in poverty, just getting a job, just coming off income support/jsa, and help those start work. Or if they already have a bike that is unsafe, get one that is new and safe.

I work in a bike shop a young lady come in who has a BSO (£99 full suspension POS) with a busted rear wheel, basically she couldn't even afford that, or just get a new £99 bike to get to work. Gov should do something to help...not giving tax free bikes to >40% tax payers to get a £5000 FS to ride in the peak district whilst they're on holiday.

cookeeemonster

Cant be bothered reading through all the posts here but has anyone mentioned the big help given to bike shops/manufacturers/bike industry as a whole thanks to this scheme??

Giving cheap bikes to jobless and low paid would be a great thing but thats a separate issue, a lot of shops would lose out if the £1000 bike sales suddenly dropped.

Probably.

pblakeney

Father Jack wrote:

The scheme should be those in poverty, just getting a job, just coming off income support/jsa, and help those start work. Or if they already have a bike that is unsafe, get one that is new and safe.

No.
It is to get people commuting by bike and out of their cars.

tootsie323

Father Jack wrote:

"t's difficult to see that a £2k bike would be primarily for cycling to work"
had someone buying a MTB on c2w only using it on the weekend riding off road.
should be a criminal offence and done for tax fraud.

Have my cake and eat it! My commute happens to be cross-country so I did buy a hardtail MTB on the scheme and, yes, do commute with it (unfortunately our company has since left the scheme; I was hoping I may be able to get a cyclocross bike through the same means...).

bendertherobot

Father Jack wrote:

The scheme should be those in poverty, just getting a job, just coming off income support/jsa, and help those start work. Or if they already have a bike that is unsafe, get one that is new and safe.

I work in a bike shop a young lady come in who has a BSO (£99 full suspension POS) with a busted rear wheel, basically she couldn't even afford that, or just get a new £99 bike to get to work. Gov should do something to help...not giving tax free bikes to >40% tax payers to get a £5000 FS to ride in the peak district whilst they're on holiday.

How is she getting to work?

bigmat

bendertherobot wrote:

Father Jack wrote:

The scheme should be those in poverty, just getting a job, just coming off income support/jsa, and help those start work. Or if they already have a bike that is unsafe, get one that is new and safe.

I work in a bike shop a young lady come in who has a BSO (£99 full suspension POS) with a busted rear wheel, basically she couldn't even afford that, or just get a new £99 bike to get to work. Gov should do something to help...not giving tax free bikes to >40% tax payers to get a £5000 FS to ride in the peak district whilst they're on holiday.

How is she getting to work?

Walking barefoot, presumably.

I picked up a perfectly serviceable bike for £25 off eBay a couple of years back. You can get a half decent bike fit for the commute for less than a night out if you know what you're looking for.

tgotb

Father Jack wrote:

The scheme should be those in poverty, just getting a job, just coming off income support/jsa, and help those start work. Or if they already have a bike that is unsafe, get one that is new and safe.

I work in a bike shop a young lady come in who has a BSO (£99 full suspension POS) with a busted rear wheel, basically she couldn't even afford that, or just get a new £99 bike to get to work. Gov should do something to help...not giving tax free bikes to >40% tax payers to get a £5000 FS to ride in the peak district whilst they're on holiday.

The aim of the scheme was to get more people cycling to work, and in particular to get people out of cars and onto bikes, thereby reducing the load on our (costly to maintain) transport infrastructure. If your aim is to reduce the number of people driving to work, you need to incentivise people who are affluent enough to own cars.

Why do some people think that every single government policy should be aimed at wealth redistribution?

I bought a perfectly serviceable second-hand bike for 20 quid last year; if it was the only bike I had, I'd be perfectly happy to commute 30 miles a day on it. If people are struggling to make ends meet, they shouldn't be wasting their money on brand new bikes, subsidised or otherwise...

Nellyspania

CookeeeMonster wrote:

Cant be bothered reading through all the posts here but has anyone mentioned the big help given to bike shops/manufacturers/bike industry as a whole thanks to this scheme??

Well it could be for smaller shops on the schemes.

When smaller retailers offer interest free credit, often what happens is the credit is provided by a third party lender, who finances the sale and takes the risk of non-payment by the purchaser in return for a cut of the sale price.

If they sell the same bike on a BTW scheme voucher the shop will take a ~10% loss on the RRP (Scheme provider's cut) but effectively get a cash sale.

rolf_f

Father Jack wrote:

I work in a bike shop a young lady come in who has a BSO (£99 full suspension POS) with a busted rear wheel, basically she couldn't even afford that, or just get a new £99 bike to get to work. Gov should do something to help...

What? You mean like ensuring that those on low income don't have to pay income tax? Not a bad idea - might be worth suggesting that to the Government.

kingstongraham

TGOTB wrote:

Father Jack wrote:

The scheme should be those in poverty, just getting a job, just coming off income support/jsa, and help those start work. Or if they already have a bike that is unsafe, get one that is new and safe.

I work in a bike shop a young lady come in who has a BSO (£99 full suspension POS) with a busted rear wheel, basically she couldn't even afford that, or just get a new £99 bike to get to work. Gov should do something to help...not giving tax free bikes to >40% tax payers to get a £5000 FS to ride in the peak district whilst they're on holiday.

The aim of the scheme was to get more people cycling to work, and in particular to get people out of cars and onto bikes, thereby reducing the load on our (costly to maintain) transport infrastructure. If your aim is to reduce the number of people driving to work, you need to incentivise people who are affluent enough to own cars.

Why do some people think that every single government policy should be aimed at wealth redistribution?

I bought a perfectly serviceable second-hand bike for 20 quid last year; if it was the only bike I had, I'd be perfectly happy to commute 30 miles a day on it. If people are struggling to make ends meet, they shouldn't be wasting their money on brand new bikes, subsidised or otherwise...

Three points:

1) Not every policy should be redistributive, but it should attempt to provide value for money. I'm yet to be convinced that spending tax revenues on helping 40% tax payers to buy expensive bikes is the most effective use of this. In this earnings bracket, it is not the availability of a bicycle that is preventing someone commuting by bike.

2) The stated aim is not only to reduce car use, it is to reduce air pollution and promote healthier journeys to work. Riding a bike is healthier than taking a bus.

3) You don't have to be particularly affluent to drive a car.

pblakeney

1. Most of the money is retrieved through VAT and increased sales/employment.
It got me to commute, and buy a bike I wouldn't have otherwise.
2. True.
3. True.