Cycle to work scheme disposal costs changed by HMRC

isy1011

my DH was told that the auditors have made these changes that no one wants the bike back at the end. The cycle shop my DH got his bike from dont deal in second hand bikes.

alexlyne

I also heard that it is possible to pay the tax on the 21% or 25% of the bikes cost. So in theory, if a bike cost 1K, and at the end of the 12 or 18mths, you have to pay 25% of the value to keep it, it would be £250. But, if your employer (or c2w scheme) was generous, they could let you have it for £50, and pay tax on the remaining £200 (at 20% it's £40) - this avoids it being a benefit in kind.
I'm not a tax expert, and always reckon that these schemes are just confusing enough to make people think that they're getting a better deal than they will actually get.

Muncher

I'm Baffled by the comments here.

I set up and now run a cycle to work scheme for my company, and it works really well.
I can only assume that many of the negative postings are either from people who are in a rubbish scheme, or don't fully understand how the scheme works.

In our scheme, an employee finds the bike he wants from any supplier, up to £999. He fills in the paperwork, I pick up the phone or go onto the internet and buy it. Job done - cuts out any third party scheme administrators.

The employee has a hire agreement of 12 months.

Over that 12 months, he pays the cost of the bike, less VAT, less Tax and less national insurance. This works out that he has saved between 43% and 60%, depending on exactly which tax and national insurance bracket he is in.

The company saves the employers national insurance contributions (12.8% I think), and is able to write off the depreciation in the value of the bike against tax, as it is a capital asset.

Everyone's a Winner!!

The bit which everyone seems to be moaning about is the hike in residual value. No 10 touched on the fact that you can carry on using the bike after the hire period has finished. The government guidelines on the scheme clearly state that the bike can be loaned to the employee after the scheme has finished, with no tax charge arising, provided it is still used mainly for commuting.

So unless someone wants to take ownership of their bike to sell it, or because they're leaving the company, there is no benfit in paying the money to transfer ownership.

I guess after a number of years, it could be transferred to the employee's ownership at a very nominal sum - but what's the point.

By the way, if you're a serious cyclist, £700 is certainly not a lot for a bike, and you're saving serious money on it through a cycle scheme

Yorkie1

The paperwork for my Cycle to Work scheme states that at the end of the 18 month period, I must either pay the residual amount or return the bike. No option for extending the period of loan.

The hike in residual value means I will effectively pay almost all of the market value. Yes, I've also effectively had an interest-free loan but I wouldn't have gone for as expensive a bike if I'd known that the residual value would be raised so significantly at the end.

yorkie2

This seems very unfair, this is an anti-cycling policy by the new Government, who appear to be discouraging the use of this scheme.

If you don't agree to pay the fee at the end, what happens? Can they force you to return it? Can they send bailiffs round if you don't? What if the bike is lost/stolen? (I know the rules state that if the bike is lost/stolen within the hire period you have to repay the cost of the bike, but it doesn't say what happens after this period)

"Many employers opt for Cyclescheme to take ownership of the bikes at the end of the hire term, in which case any offer sale to the employee will come directly from Cyclescheme. "

Is there a way to find out which option your employer goes for? If they opt for Cyclescheme to take ownership, do they chase you to return it? If they don't, does that mean the onus is on the employer to chase it?

I'd never consider doing this scheme if I was going to have to pay 20%+ at the end in addition to the monthly payments!

SailorSam

They were discussing this last weekend on Radio 4 Moneybox, someone who had bought his bike through the scheme for £1k and believed he would now lose out, pointed out that if he had bought the same bike but not used the scheme, he would have been able to shop around and get it for about £800.
Is that right ? That you can only take advantage of the scheme if you pay full retail price at the beginning. The guy was saying that anything that he saved by using the scheme was off-set by the fact he could have made a saving at the start if he hadn't used it.

Muncher

Yes, I heard the moneybox bit on Radio 4. It struck me as being laughably off the mark, considering the normal standard of the program.

All these complaints (where to buy, whether you can loan the bike at the end etc etc) purely depend on how the scheme is set up by the employer and the third party.

The reason I decided not to use a third party scheme provider, but do the minimal amount of work myself, was so that I can decide on the rules. A third party scheme provider has to get its money from somewhere, so I guess they have agreements with the cycle suppliers. By the very nature of this, you're not necessarily getting the best deal around, as they have to get their cut.

The DFT have a very good guidance booklet:

dft.gov.uk/pgr/sustainable/cycling/cycletoworkguidance/pdf/518054/


This explains all the rules in very straighforward terms, and the only thing you have to be careful of is that the residual value has changed.

I should stress that these are the government rules, and the scheme of which your employer is a member, will have its own interpretation and variations on this.

So to say that the government scheme is not worthwile because of the residual value changes is, to my mind, absolute rubbish. It may be that the scheme that you are in, no longer looks good value, but that isn't the fault of a minor tweak by the government in their tax allowances.

By the way, I'm not a member of the Conservative party, but I looove the cycle to work scheme - it's brilliant if you use all the rules to your advantage, and you can save a bucket load of money!!! :o:o:rotfl:

molerat

SailorSam wrote: »

They were discussing this last weekend on Radio 4 Moneybox, someone who had bought his bike through the scheme for £1k and believed he would now lose out, pointed out that if he had bought the same bike but not used the scheme, he would have been able to shop around and get it for about £800.
Is that right ? That you can only take advantage of the scheme if you pay full retail price at the beginning. The guy was saying that anything that he saved by using the scheme was off-set by the fact he could have made a saving at the start if he hadn't used it.

He is probably paying a ticket price of £1K but will pay back that amount less tax and NI so probably only £590 - £690

thescouselander

anewman wrote: »

£700 is cheap for a bike. Yes you can get a bike in Tesco special offers for £60, but it will be steel frame, heavy, and so unpleasant to ride it's more of an occasional toy than a way of cycling a few miles to work and back home.

I disagree, £700 is not cheap.

I bought a Carrera Virtuoso from Halfords to get to work and I managed to it half price so it was just over £200. Ok, its only a Halfords bike but it got very good reviews with some people even using this sort of bike for triathlons - in my own experience it has been excellent. A £700 would be nice but it would certainly be more than what is required for most purposes.

ZootHornRollo

thescouselander wrote: »

I disagree, £700 is not cheap.

I bought a Carrera Virtuoso from Halfords to get to work and I managed to it half price so it was just over £200. Ok, its only a Halfords bike but it got very good reviews with some people even using this sort of bike for triathlons - in my own experience it has been excellent. A £700 would be nice but it would certainly be more than what is required for most purposes.

i agree, it's a bit like saying that a ford focus @ £15k is a cheap car when you consider a Porche 911 costs £75k. £700 is not top of the range but it also certainly not a cheap bike.

Perhaps a bad choice of phrase.