Tax free bikes with the Cycle to Work scheme

Smudger99

Any wrote: »

The Cycle scheme we run means that the company buys the bike and then "hires" it to you for 12 mths while you are paying that salary sacrifice, but the company can reclaim VAT at 15% so you DON'T pay that either...
So it is not only that 20% income tax you are saving..

It is correct that the company owns the bike and hires it to you.
I work for the civil service and we participated in the scheme.
At the end of the year when all the payments were made the 'company' decided that we had 3 options.
1) give the bikes back to the company
2) take the bikes to the shop which supplied them to get them valued and then buy the bike from the company for this value
3) continue to rent the bike from the company for free, with the understanding that the company still owned them and could require us to take options 1 or 2 at any time.

I don't know if anybody else’s company would take this stance but that is how it was interpreted where I work. The administrator of the scheme is blaming HMRC, but I don't know.
Still be cautious

ds1980

basically yes but why would i want 100 bikes! Nominal fee at the end but basically your right it's up to the company.

RS1

Although this is a government approved scheme our company insurers inform us that during the initial lease period the company effectively owns the bike – therefore an accident could result in a claim against the employer.

Is anyone aware of this – I would be interested to find out how you get around this????
:rolleyes:

JoE

ds1980 wrote: »

As covered by a few on here just some pointers. Not all companies can and will claim the VAT back making this more expensive.

There are calculators to check compared with salary and things but these are only a guide.

We have a scheme and are VAT registered but we don't claim the VAT back so it works out more expensive to the purchaser. In essence you will have a lease contract with your employer who then has the right to sell you the bike at the end of the period. Make sure you get what the purchase price will be. We are selling them for £1.

Good but i would say savings are between 30-50% not 40% and there are pension issues as described above.

I bought my bike through this scheme and think it's fantastic, but there are some things to bear in mind about the lease agreement: your company cannot BY LAW tell you the sale price they will charge for the bike at the end of the scheme, as this would go against the grounds for tax relief (i.e. that it is hired to allow you to commute) and therefore constitute tax avoidance. They can give you an idea verbally/off the record, but this isn't at all binding. If your company scheme has been running for more than a year you can look at what others have been charged, but you won't know for certain.

Also, if you break or lose the bike during the year you have to keep paying for it, and could be asked to pay for a replacement to give back to your company at the end, so make sure you get it insured!

Re the pension, my company is running it so the pension contributions are taken out of your salary first, so remain at the same level. I don't know if the company has a choice, or if mine are just doing it wrong (wouldn't entirely surprise me!) but it's worth checking.

robd831

I agree with Smudgger99
Whilst not working for the civil service but probably the largest employer in London, after the year rental we were required to take the bike back to the shop it was bought from then pay the "market value" of the bike to keep it !!

Or rent it free for another two years then go back to the shop for the market value again.

We got told it's something to do with tax perks etc but this wasn't mentioned before we all jumped at the chance of cheaper bikes

Just make sure that the final payment is agreed before you enter into the rental contract otherwise it might not be the saving you thought.

Happy lycra days ahead :eek:

JoE

Although the scheme dictates the sale price at the end is called a "fair market value", It's not legally defined, so they don't HAVE to charge what it's technically worth, it's just that they can if they want to.

In fact, according to the scheme literature, the fair market price is usually about 5% of the original sale sale price with VAT.

But as I said, they aren't allowed to put it in writing... so you're stuck if the company doesn't play fair.

Cloudane

Sadly this only works if your employer can be bothered to fill in the forms. Mine can't, and the possibility of nicking the VAT didn't sway them either.

harkin_c

check out a similar thread:

http://forums.moneysavingexpert.com/showthread.html?t=966731

I did this scheme a year or so ago and fell into the trap and not staying with my company long enough to pay off the bike and ending up with a big bill

Billy-no-Money

I work for a company that doesn't allow the use of cycles or motorcycles for business but won't give me a clear reason - something vaguely health & safety but it comes over more as anti-cycling/motorcycling. They certainly don't offer cycle2work despite being one of the biggest IT firms in the world and not being short of a bob or two.

As with so many things HMRC-related, a simple idea has been turned into an over-complicated one with too many ways for small-minded lawyers and insurers to worm their way out of it. Funny how they all seem to manage to provide company cars for themselves though :rolleyes:

lisyloo

but won't give me a clear reason - something vaguely health & safety

It's very risk averse, but cycling/motorcycling is more dangerous than driving a car (mile for mile), so they could potentially be found liable if they "let" you do something dangerous in the course of your work.

You can blame the ambulance chasing blame oriented culture we have.
That's why we have packets of peanuts that say "MAY CONTAIN NUTS" and coffee that says "WARNING HOT DRINK".
Because if anything happens people look for someone to sue.