Question about Ride to Work scheme

peug26

I work for the local authority and get a small car allowance for using my car (basically pays for depreciation, etc). If I applied for Ride to Work will this affect the car allowance? I've had mixed opinions so far and one of the sales staff at Evans told me that it should not affect it?

The Rookie

From an HMRC viewpoint no. A car allowance is treated by them as salary and subject to tax and NI.

Whether your (local gov) employer has an issue I can't say, but no reason UNLESS you have specific caveats on your car allowance (availability for transport for example) that conflict with you riding to work.

I get a car allowance and could get an R2W bike if I want (I don't, not worth it to me).

peug26

The Rookie wrote:

From an HMRC viewpoint no. A car allowance is treated by them as salary and subject to tax and NI.

Whether your (local gov) employer has an issue I can't say, but no reason UNLESS you have specific caveats on your car allowance (availability for transport for example) that conflict with you riding to work.

I get a car allowance and could get an R2W bike if I want (I don't, not worth it to me).

I'll have to find out whom I need to speak to in the council to find out more about this. Out of curiosity why is R2W not worth to you? I thought it allows someone to buy a bike and get 32% (or 42% in my case) off? Have I misunderstood it?

The Rookie

You have misunderstood it!
R2W is a tax efficient hire scheme, its not strictly a purchase, so at the end of the year you have to jump through some hoops to actually buy the bike (to get around tax liabilities) and that costs money (some of the saving), how much depends on the scheme.
In addition as in most cases the shop only gets 90% of the voucher value (depending on the scheme - it is the schemes margin) many won't let you have sales bikes and some of the best value online stores add 10% to the price to maintain margin. I could (and did) get the bike I wanted cheaper paying cash.

mattyfez

The Rookie wrote:

You have misunderstood it!
R2W is a tax efficient hire scheme, its not strictly a purchase, so at the end of the year you have to jump through some hoops to actually buy the bike (to get around tax liabilities) and that costs money (some of the saving), how much depends on the scheme.
In addition as in most cases the shop only gets 90% of the voucher value (depending on the scheme - it is the schemes margin) many won't let you have sales bikes and some of the best value online stores add 10% to the price to maintain margin. I could (and did) get the bike I wanted cheaper paying cash.

Technically that's correct but in reality it doesn't matter.

I bought £300 of components on c2w and it just gets paid off over 12 months and that's that. It's basically an interest free loan with a tiny benefit as tax offset.
At the end of the period the payments automatically stopped and that was the end of it.

Maybe it depends on the particular scheme, I think mine was 'cycle scheme'.

The Rookie

Components don't have a final value, bikes do, they can't gift the bike at the end of the scheme, there are different ways round it but they all (or almost all) involve an extra fee.

In addition yours may have been before HMRC clamped down.

jamiedal

The Rookie wrote:

You have misunderstood it!
R2W is a tax efficient hire scheme, its not strictly a purchase, so at the end of the year you have to jump through some hoops to actually buy the bike (to get around tax liabilities) and that costs money (some of the saving), how much depends on the scheme.
In addition as in most cases the shop only gets 90% of the voucher value (depending on the scheme - it is the schemes margin) many won't let you have sales bikes and some of the best value online stores add 10% to the price to maintain margin. I could (and did) get the bike I wanted cheaper paying cash.

I’ve never found this with the salary sacrifice scheme, you do get sent a email asking you to pay a fee when it ends but most just ignore and they don’t chase you, out of probably 80 people at my work I only know of 1 who paid the final fee, I’m on my 4th bike 4 years running with cycle to work and have never paid anything at the end so a £1000 voucher costs £580 so it’s a no brainier to keep getting them and upgrading the bikes you have or getting new ones for the kids and mrs

JBA

Jamiedal wrote:

... it’s a no brainier to keep getting them and upgrading the bikes you have or getting new ones for the kids and mrs

Hmm? Illegal and a great way to get the scheme stopped. HMRC have already started clamping down on the scheme due to misuse and this is why.
C2W is a great way to get a decent bike and equipment tax free but don't take the pi$$ or you spoil it for everyone.

peug26

I spoke to one of the R2W helpline advisors and was informed that the car allowance should not be affected by the scheme. However when i asked questions regarding the options to own the bike after a year I quickly realise that the scheme is very much the equivalent of PCP for cars. I was told that if i want to own the bike at the end of the year I woul dhave to pay a lumpsum for this. When I looked into the figures I discovered that it pretty much gives me barely 10%discount. For me that is useless and i would save more if i bought the bike on a good sale.

However from what I can see the same rules do not apply when you use the money to buy parts instead. Which could come in handy if i wanted to upgrade my bike in the future. Can I clarify, R2W and C2W are the same thing arent they?

The Rookie

They are yes, the official government tax break is called ride to work, but then they use cycle to work in the guidance.