Tax exemption via cycle2work scheme

GeorginaAlexi

Has anyone been involved with this (https://www.cycle2work.info)? OH has been offered the opportunity to sign up.

In theory his employer will loan up to £1000 for bike and accessories and OH will then pay this back by salary sacrifice (before tax and NI). Once loan is paid back his employer will offer to sell him the bike at the cost of tax on the market value eg; bike cost £650; will be worth 25% of its original value (£162.50) therefore the cost of the bike will be £32.50.

Is this too good to be true? Will he be losing out or gaining? I cant seem to get my head round it.

Many thanks

Mikeyorks

GeorginaAlexi wrote: »

Once loan is paid back his employer will offer to sell him the bike at the cost of tax on the market value eg; bike cost £650; will be worth 25% of its original value (£162.50) therefore the cost of the bike will be £32.50.

If the employer offers to sell the bike at the outset then your OH will be taxed on the benefit of the market value :

HMRC wrote:

The exemption for certain loaned cycles will be prevented from applying if any agreement builds in from the outset an automatic transfer of ownership to the employee at the end of a loan

If the bike is offered after the initial 'hire' year - then the full 25% will be payable ie £162.50

http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

Also worth reading this warning from HMRC regarding the lack of benefit if they find such arrangements aren't open to all employees within the workforce :

http://www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf

AirlieBird

GeorginaAlexi wrote: »

Once loan is paid back his employer will offer to sell him the bike at the cost of tax on the market value eg; bike cost £650; will be worth 25% of its original value (£162.50) therefore the cost of the bike will be £32.50.

No, you've misunderstood somewhere along the line. If he chooses to purchase the bike after 1 year it will cost 25% of the original value (+ VAT, if the original value excludes VAT).

If you are a basic rate taxpayer there is little saving now in purchasing the bike after 1 year. The way around this is after the first year to ask the employer to continue loaning you the bike at zero cost until such time as the fair market value judged by HMRC (in the table provided by MikeYorks) is a more reasonable amount.

Yorkie1

The rules changed while I was during my hire purchase period. I am not convinced it saved me any money over the period. But I guess if you treat it like an interest-free loan then it's no harm.

jimmo

Am I the only one whose eyes watered at the concept of using a £1,000 bike for commuting?

Never mind the tax relief, you have to ask yourself whether it is right for you.

About 30 years ago I bought a second hand bike for £25, spent another £10 doing it up and used it 11 months out of 12 for commuting 10 miles each way for 5 years.

Based on my salary then I would say that, at present day prices, that would be about £175 but I did know what I was doing.

Cycling is not for everyone and its pretty dangerous.

I would suggest that if you love cycling there are possibilities for tax saving but if you love money saving there is a distinct probability that your tax saving won’t pay for your funeral.

John_Pierpoint

I splashed out £40, 30 years ago, on my second hand bike and used it to avoid "parking" at the railway station - and I used it today to go shopping (thinking what is the male equivalent of a "bag lady", as I free wheeled past the pensioners with overloaded shopping bags on wheels.)

But it is a different world now:
Here is an interview with a multi millionaire philanthropist explaining that wealth gives you access to the luxury (overpriced) bike market.
A Nobel prize for Economics was given to a guy who worked out that homo sapiens is naturally competitive, and so there is no limit to the resources that will be consumed in the desire to acquire "beautiful" objects. (Is a fold up bike more utilitarian that a hand bag ?)

http://www.bbc.co.uk/programmes/b017w65t

So in these days of ceramic bearings (the nearest thing to perpetual motion that I have ever seen) and titanium frames, a £1,000 bike is a bit "cheap".

So I would suggest a spare, for when the bike gets stolen, yes my bike (by then worth perhaps £15) was stapled to the station forecourt bike rack with a "D" lock almost as valuable as the bike and some scum bag had tried to lever off the lock!

So getting back on topic - How many tons of CO2 would be emitted by a commuter in a car?.
Obviously it depends on your journey and in wet hilly UK, a bike commute of (say) 6 miles each way would keep you very fit.
It is a simple calculation, the factor to use in printed on every new millennium car's V5C Registration ("Log book") together with a load of other information about its environmental emissions.

http://en.wikipedia.org/wiki/Vehicle_Excise_Duty

There is a whole new tax system (have you paid an electricity bill recently?) based on units of carbon, but I am willing to bet that the supervisory levels at HMRC have no idea of the rates and the rules of this parallel taxation system.

So we have one part of government trying to get people onto bikes and public transport and HMRC making sure their efforts are strangled at birth.

And what is it that is strangling the economy, beside the little problems in Greece etc. Yes it is oil prices, jacked up at the pumps by massive amounts of VAT and excise duty.

Why? Because the Chinese have traded up from their push bikes!

http://en.wikipedia.org/wiki/Automotive_industry

What goes around comes around