Cycle to work scheme

If it does effect Cycle to Work schemes, get in now before Jan 2012 ? Or would something like this still effect you if you'd taken out a hire agreement before this date ?

I was just about to ask this....and my employers (University of London) don't knock the VAT off anyway as there's something to do with they don't have the right bit of paper for getting the VAT off purchasing bicycles blah blah blah.

Regardless of the changes, I'm seeing the Cycle to Work scheme as basically an interest free loan or have I got that wrong, as that's what it seemed to be with the first one I took out - had a certain amount deducted from my salary each month but also saved a bit as I was paying a little less tax. I'd be more than likely to be spending something in the region of £700 up to the maximum £1000 on a road bike. I couldn't end up paying more than the actual cost would I?

I've emailed Cyclescheme, I'll see what they say

Edit - Quick Response !

I would like to advise you that the HMRC have informed Cyclescheme that any hire agreements taken out after the 27th July 2011 will be affected by the VAT being applied to the salary sacrifice payments when it comes to the payments in January 2012
Therefore it would not matter if you put in a request before January 2012 as this would still be affected when the payments are deducted in January unfortunately

Does anyone know how the VAT payments would be dealt with, and how much they would be for a £1000 cycle scheme voucher ? You're already paying VAT on the value of the bike, you're also going to be charged VAT on the 'benefit' of the cyclescheme ?

Edit again ! - Cyclescheme detail it all here
http://www.cyclescheme.co.uk/employers/employer-updates/cyclescheme-hmrc-vat-update-faqs#faq1

Basically you'll pay an extra £8 a month over what you would of payed before on a £1000 voucher.

And I'm still making a saving other than buying it upfront, right? I'm a bit stupid with numbers but this would seem to suggest I'm right, right?

Basic Rate Taxpayer on a £1k certificate...

Post VAT ruling,
1st Jan 2012 **Inc VAT savings **pre 1st Jan 2012
Overall Saving £320.00 £433.36 **
Overall Saving** 32% 43%

And I'm still making a saving other than buying it upfront, right? I'm a bit stupid with numbers but this would seem to suggest I'm right, right?

Basic Rate Taxpayer on a £1k certificate...

**Post VAT ruling, **
1st Jan 2012 **Inc VAT savings **pre 1st Jan 2012
Overall Saving £320.00 £433.36
Overall Saving 32% 43%

Yes, you still make a saving compared to buying upfront. Cyclescheme have a calculator on their website to work out savings if i remember rightly

Cheers dude.

Right...sort out storage issues and road bike here I come!!

Brilliant I'm thinking of buying a new track frame on the C2W scheme - might have to go have a chat with the LBS.

Brilliant I'm thinking of buying a new track frame on the C2W scheme - might have to go have a chat with the LBS.

Folks, do check out the detailed HM Revenue and Customs guidance on the scheme.

http://www.hmrc.gov.uk/paye/exb/a-z/c/cyclists.htm

As in most things in tax, HMRC tend to let things go, get niggled when people use the loopholes, and then slam down the shutters when they feel it has gone too far.

Herewith a narrative explanation of the mechanics, with some example figures to help understand the scheme, and the practical issues which make it attractive to all employed cyclists.

Normally, as an employee, any assets made available to you by your employer, give rise to a taxable benefit in kind. Normally 20% of market value, special rules for cars, houses, and some other specific asset classes.

However, for cycles, and associated safety equipment, there is no benefit in kind.

Therefore, if your employer, out of the goodness of their heart, give you a bike, no nasty tax surprises through PAYE or at the end of the year, on a form P11D.

The twist is that your employer may not give you a bike for free, but rather offers to reduce your salary, in exchange for lending you a bike of equal value for the net salary forgone. You then see your salary go down not by the shop price of the bike, but a figure calculated after the tax relief received by your employer, and then less the income tax and NIC which you would normally pay on the salary forgone.

Under the old VAT rules, your employer would in most cases (not if a health trust, bank or insurance company) be able to get VAT relief on the cost to them of the bike, so a £1,000 bike would actuallly cost them an after VAT price of £833. If your employer is really, really nice, they will then discount the salary sacrifice further for the capital allowances tax relief they obtain for the "plant and equipment" they have bought for their business, say another 25% of the after VAT price, meaning that your gross pay cut could fall to a figure of say £625. Thus, after the tax and NIC deduction from your salary of say 35%, the effective cost to you is a year of being short £33.85 per month, and then the cost of buying the bike at the end of the hire term.

You then pottle around on the bike for a year or so and then your employer says "hey, want to buy a bike for a low price, as it is probably only worth scrap now" at which point you make a small contribution, and walk away with the bike, which is now your personal property.

HOWEVER, the VAT rule change means that your employer will effectively not be able to wash through the VAT saving to you. The most likely way of dealing with this, is for your salary sacrifice to be gross of VAT, rather than net, thus the reduced saving rate mentioned above.

Also, HMRC got the hump last year at Colnagos being sold for £150 at the end of the year, and there is now a formula for the minimum price at the end of term sale.

Always think through the implications of an end to employment, change in personal circumstances, offer of a better job elsewhere. What happens if the bike gets nicked, or you are involved in an accident with third party claims? Will the cycle to work scheme prove a real headache, in considering such matters.

Finally, make sure your purchase will stand up to scrutiny if HMRC come a'calling. A bike for your kids, a carbon frame that has never seen the office, and some exotic wheels with nothing else attached, are going to get you into trouble if a General Motors loving tax inspector is sent on your employers next PAYE compliance check.

I Brought a bike on the cycle to work sceme and got stung by the VAT, my work has know canceled the sceme. This year i brought a bike which was last years model at 30% off and had the option of to pay over 2 years. Worked out much cheaper and without the stess of the inland revenue changing the rules again to suit them selves. Plus the spec on the bikes from last year are better as the companies are increasing the prices and reducing the specs.

I'm just in the process of buying a bike through the cycle scheme. I read that the suggested thing to do is not to buy the bike from your employer at the end of the hire period, but just continue using it. Technically they still own it, but it's not like they are going to ask for it back (at least my employer wouldn't anyway). Has anyone on here tried it that way?

From bikeradar
Historically, few employers have bothered with the final sale transaction because it was a hassle, so many employees didn’t have to make a final payment. Despite recent changes in the scheme, providers OnYourBike say: “OnYourBike have always recommended continued use for no further payments at the end of the initial hire period. This remains unchanged and will continue to be our recommendation.”

I'm doing the 'Extended Use Agreement' with Cyclescheme at the moment - paid a one off fee (equivalent to the old end of hire purchase price). Be interesting to see how it works out

I'm doing the 'Extended Use Agreement' with Cyclescheme at the moment - paid a one off fee (equivalent to the old end of hire purchase price). Be interesting to see how it works out

ahh, so you still paid a one off fee at the end of the hire period?

The way I'm doing it is that I've paid a "continuation deposit" to keep the agreement going for another 4 years (no more monthly payments). At the end of that time, I'll have to buy it at its current value...theory is that a 5 year old bike will be worth bugger all....maybe even less than the £70 deposit, so could get some of it back!

Does anyone have an example please of an extended hire agreement so i can persuade my company to implement this scheme ?

i just extended it paying £70 for 3 years . . i think i have it somewhere . .

I've just been informed that my company won't be offering any extended period, i was interested in joining the scheme until i got this email:

*I have had a look at the calculations for you . Your monthly Gross payment will be £60.70 based on a bike of a value of £650.00.

Your net payment ie the amount it will physically cost you per month is £41.28 , £495.36 annually .

The payment you would need to make at the end of the twelve month contract would be £162.50 (25%) therefore the total cost through the scheme = £657.86. unfortunately we cannot divert from this unless you wanted to return the bike, HMRC have clamped down on the rules!!

*Errr, so it's actually going to cost me £8 more than buying on 12 months interest free credit.... awesome scheme...

That's fucking bullshit. There's nothing in the rules that says what the monthly rental costs have to be. They should reduce the monthly payment so that they cover 75% of the cost, then the final payment should make it up to 100%.

I thought accountants were supposed to be clever.

That's fucking bullshit. There's nothing in the rules that says what the monthly rental costs have to be. They should reduce the monthly payment so that they cover 75% of the cost, then the final payment should make it up to 100%.

I thought accountants were supposed to be clever.

They are keeping all the "winnings" in terms of the capital allowances, and the salary sacrifice rebate.

They might be cleaver, but greedy is the word that comes more naturally to mind.

I still think mine works out cheaper than buying the bike out right. Based on the calculator without my employee code this is what I got;

Which means I can get the planet x carbon for under £600 all in (including final payment) all it means is I'll have to buy my road shoes and pedals myself.

EDIT ** Also the 10% charge from planet x. Doh. Do they charge 10% of the voucher or 10% of the C2W?

plus your final payment. which 'should' be 25%, no?

I just need to spell it out:

I want to set up the scheme at work. We are a small office and I don't want to use any third party that would charge us and/or limit my choice and in fact complicate things. As far as I can tell, I agree the salary sacrifice with my boss (in writing, of course) and the accountants will take care of the rest (?) sorting out my tax and the company's

Having read official guidance and un-official advise from several sources, I can't find anything preventing me from buying a bike by components, ordering from several sources etc and paying using the company credit card. Am I right? Or are we going to get into trouble with the taxmam?

The taxman doesn't care how you buy your bike. The scheme was originally designed to be set up just as you are proposing. The third parties have just leapt in because they can make money from companies and individuals who don't want to spend the time researching and just want a simple solution. By working directly with your employer you can maximise your benefit.

Mirius,

thanks, that's what I thought! Over to current projects it is!

I've just applied again for it. If It's anything like my last bike I pay a continuation fee at the end of the first 12 months. Which will work out at 7% of the purchase value.

So my total for the bike is £679.32 (12 months @ 56.61) + the continuation fee @ 69.93 Total cost of the £1,000 bike to me is £749.25 which is still quite a significant saving (around 25%)

The scheme is still very much worth doing imo.

My employer covers the cost as an expense up to the value of £1000 and treats it as a taxable benefit.

Result.

Rather annoyed about my scheme. I can save 23%, on a £750 voucher, from Halfords - who I'm not overly impressed at.