Cycle to work scheme - is it worth it?

Guesthouse

1886 wrote: »

I'd love to see the figures for people who have bought a bike on the Cycle to Work Scheme and then actually used it, even once, to cycle to work!

It's a tongue in cheek title

It's supposed to be used for at least 50% of commuting journeys but there's no requirement for employers to enforce that.

Guesthouse

I found our scheme had only a marginal benefit but it still amounted to a 0% APR loan when I was in need of a new MTB because my old cheapo one was falling apart.

Since I cycle to work every day (unless I absolutely have to go somewhere like shopping afterwards) the scheme meant I could get a new bike of a higher quality than I would probably have paid actual cash for.

Am I saving? Well I still have to pay VED, insurance, MoT and servicing for our car but I'm covering maybe 1500-1800 town commuting miles by bike so I'm not using that petrol.

Anything else? I'm a trouser size down and back to my 18 year old weight. My commute takes 10-20 minutes depending on my route/weather/road or MTB and I can replicate that day in day out. If you're driving and you get caught in even a moderate traffic jam on the road route it's 25 minutes out your day.

Altarf

Guesthouse wrote: »

It's supposed to be used for at least 50% of commuting journeys

That is not correct.

It is not that 50% of commuting journeys that should be made by bike, but at least 50% of the bike's use should be for commuting.

Use the bike only twice, once for commuting, and the "test" is met even if you drive to work on every other occasion.

Guesthouse wrote: »

there's no requirement for employers to enforce that.

That is correct. Taking the example above, your employer can see that you commuted to work once, but it would be impossible for them to know how many times you used it for non-work journeys.

Also the bike may not be used for the full journey to work, for example only as far as your home railway station, so your emplyer may never even see the bike.

JamesMc69

Just wanted to add that i think without a doubt the cycle to work scheme is great.

Only thing having set one up in my own company is that the best thing to do is outsource all the admin of it to a third party worth it for the easy of use - something like Cycle Solutions works..

r-ingram

JamesMc69 wrote: »

Just wanted to add that i think without a doubt the cycle to work scheme is great.

Only thing having set one up in my own company is that the best thing to do is outsource all the admin of it to a third party worth it for the easy of use - something like Cycle Solutions works..

I would say the opposite about outsourcing the admin; this drastically effects the possible savings such that it may not actually be beneficial to the employee.

Firstly, as stated previously, because the third party demand a commission from bike shops (10% in the case of CycleScheme, for example), few shops will sell bikes at a discounted price. For example, a Dawes Galaxy model I was able to buy for £1000 was only available at the full RRP on CycleSheme, at £300 more. Other shops will sell at their discounted prices but add a fee (for example, Planet-X £100; Spa Cycles 12.5%, Condor Cycles, £50 etc.) Consequently, the price that the employee has to buy the bike for is more than they would pay as an ordinary customer, and this erodes the possible savings.

Secondly, in relation to the end of the hire period (as that is what the scheme is, not a hire purchase scheme), there is the issue of disposal of the bike. The bike is the property of the employer, there is nothing to stop the employer giving the bike to the employee free of charge (which in my view would be the right thing as the employee has paid hire fees equivalent to the cost). Alternatively the employer can do what they like with their bike (see what mine did, below).

HMRC has revised guidelines that state that a £1000 bike would, if gifted to the employee at the end of a 1 year hire period, would be a benefit in kind of £250. This isn't a problem, the employee merely pays their relevant tax rate on £250 over the next year via a tax code adjustment. This would cost £50 for a basic rate tax payer. Unfortunately, many employers have decided that they must charge the employee to buy the bike. Worse still, CycleScheme and maybe others, have tried to convince employers that this issue is a terrible hassle so that they let CycleScheme handle it. My employer fell for this and they acceded to CycleScheme's suggestion that they give CycleScheme the bike I had hired, free of charge. CycleScheme could then ask me to pay them £250 to have the bike!!!

Had I accepted that arrangement (which was not known to me at the start of the scheme, as they are not allowed to offer to sell the bike to you), the saving I would have made on getting the bike through the scheme would have been exceeded by the extra I paid to the shop and the CycleScheme charge at the end of the contract. I would have lost money by using the scheme (meanwhile, CycleScheme are laughing all the way to the bank as a £1000 bike has netted them £350 purely for administrating part of the arrangement - the employer still needs to arrange the salary sacrifice, which is the only real admin involved).

I would suggest the following:

Employers run their own schemes; it is actually a relatively minor administrative issue, and the employer does in any case benefit by over £100 per £1000 bike by virtue of reduced NI contributions, and can also get various other tax benefits on a depreciating asset. It is easy to find documents for contracts and salary sacrifice online, it is easy to download forms from other schemes to see what paperwork is necessary.

Employers allow employees to buy their bike from any bike shop they wish to use and pay the bike shop directly. The employee can therefore choose any bike from any shop they choose, and get the same price as any other customer.

At the end of the year hire period, the bike is gifted to the employee who then pays income tax based on its supposed value (£250 on a 1 year old £1000 bike, for example).

Everyone is happy; the employee is cycling on a bike with a significant saving and has a warm glowing feeling about their employer. The employer gets a happy, fit employee, and improves their green credentials at no net cost to them; the bike shop (hopefully a local independent one) makes a sale and maybe retains a customer for ongoing servicing and future business; HMRC are happy because this is entirely compliant with the scheme.

If the above isn't available, then the next best thing (IMHO) is to use a Scheme like Evans (or Planet-X (their own scheme) Cyclesurgery/Wiggle etc.), as they don't charge a premium, any discounts that are available are passed on, and they have a wide range of makes and models available. Many shops do their own scheme that has these advantages.

M.Johnson_2

If you are on low income and have a low income exemption certificate for NI contributions then is it still worth it? We are non tax payers anyway, but can not get credit for a nice bike. This is the only way we could afford a nice new Ebike. I like the look of the Juicy Sport for £885, the employer agreed for the CTWS, but I know we have bad credit file will we still be accepted?

WiggyDiggyPoo

M.Johnson wrote: »

If you are on low income and have a low income exemption certificate for NI contributions then is it still worth it? We are non tax payers anyway, but can not get credit for a nice bike. This is the only way we could afford a nice new Ebike. I like the look of the Juicy Sport for £885, the employer agreed for the CTWS, but I know we have bad credit file will we still be accepted?

You will be accepted as this is one line of credit that isn't affected by a poor credit file, but as to how being on low tax/NI contributions will affect it I'm not sure.

In my simplistic mind I guess your savings will be less (as you don't pay as much tax/NI) than a higher rate taxpayer but you can regard it as an interest free loan for the bike?

r-ingram

M.Johnson wrote: »

If you are on low income and have a low income exemption certificate for NI contributions then is it still worth it? We are non tax payers anyway, but can not get credit for a nice bike. This is the only way we could afford a nice new Ebike. I like the look of the Juicy Sport for £885, the employer agreed for the CTWS, but I know we have bad credit file will we still be accepted?

Credit file doesn't matter, your employer deducts payments from your pay (if you leave they deduct the remainder before you get your final pay). The issue concerning final disposal of the bike may be an issue; they are not allowed to agree to sell it to you at the start of the contract as this would make it a hire purchase agreement rather than a hire agreement, and that would not be subject to the tax benefits of the CTWS. Many employers do, however, give the employee an "indication" of how the disposal will be handled, even though they are not allowed to do so.

Another issue is that people on or near to the minimum wage would find they take home less than the minimum wage as a result of the deductions, and this too, is not allowed (as it is a "salary sacrifice" rather than a payment from your actual pay). The CTWS is therefore not technically available to those in this position. On the other hand, there has been some suggestion that employers must demonstrate equal opportunity for all employees to receive this benefit, and for those on minimum wage one possible solution is to lend employees bikes (owned by the company) free of charge.

Actual implementation varies widely amongst employers, and many flout (or at least seem ignorant of) the rules. As this may benefit the employee, no one really seems to mind.

Looking at the scheme as a whole however, it seems to reward those on higher earnings rather than those on the lowest; for instance a minimum wage earner can't access the scheme; a low rate tax payer can benefit by 20% tax + NI payment; higher rate by 40% + NI, and top rate by 45% +NI, so the wealthier you are the more saving you get! For the lower rate taxpayer the saving is marginal and they may well do better accessing an interest free loan from a bike shop with a discounted bike, rather than a CTWS bike that they are sold at a higher price.

Looking at CTWS as an interest free loan rather than offering a real saving may appeal to some, but remember, you don't, and may never* actually own the bike, yet you will have paid for it.

(* not intending to scaremonger, the vast majority of employees will get their bike, but there is the potential for the employer just to sell the bike on the open market at the end of the hire agreement should they so wish. There is always the possibility of a "rogue employer" doing this, or some workplace aggravation muddying the water...)

So, CTWS is a great concept (and I have had 2 bikes on the scheme, though saved little or nothing, but I am happy), but the rules of the scheme don't really favour those who need it most (lower paid). I believe that if the government really wanted to promote cycle-commuting they could be far more inventive with the design of such a scheme, not to mention the whole issue of making our streets safe for cyclists and pedestrians. Unfortunately, the current government knows the importance of the car lobby to their particular voter demographics, so true commitment to environmentally friendly transport is unlikely...

tara747

I've only read the first few posts - so sorry if I'm repeating someone esle - but if you only look at it in terms of pounds and pence, then cycling is not for you.

WiggyDiggyPoo

tara747 wrote: »

I've only read the first few posts - so sorry if I'm repeating someone esle - but if you only look at it in terms of pounds and pence, then cycling is not for you.

What an odd thing to say!

C2W can be a great help for the type of people on here, e.g. those with strict budgets and unable to take credit/have savings to buy a bike outright.

Speaking from experience I was able to get a bike whilst on my DMP that did not affect my repayments that I would have otherwise been unable to buy.

In real terms this was because I didnt have the cash up front at the start of my DMP to buy a bike, indeed I was on my dads old bike for a few months until I got my first C2W bike.

It was cheaper than public transport (£25 p/m vs £50 p/m) so I could actually pay more towards my debt by using C2W!