Bike purchase

frivolous_fay

Hoping to find a few cyclists here... the Travel board didn't look too likely

Does anyone know much about the Cycle to Work scheme? B/F would like to buy a folding bike for commuting, and he's looked into it.

http://www.cyclescheme.co.uk/

Other than a token tax incentive and the fact that you don't have to pay in full up front, the benefits don't seem all that great. After two years your employer may choose not to sell the bike to you :eek: despite you paying towards it for two years. If they do choose to sell to you, the employer must sell the bike to you at a fair market rate... which may well be similar or more than it would have cost initially on top of what you've already paid :eek:

You're not allowed to get anything in writing to set your mind at rest... as to confirm that the employer will sell to you in 2 years would constitute a hire purchase agreement, and violate the rules of the scheme :rolleyes:

To me it seems as though there are too many potential sticks, and not a whole lot of carrot! Are we missing something?

Idiophreak

Have you read the stuff on evans cycles about it? (something like evanscycles.com/ride2work)

From what they say, you get a pretty good tax incentive (last time I checked I saved something like 42% on the bike I wanted) and then they suggest (iirc) a "token" payment to have the bike handed over...

It seems fairly straightforward to me...

frivolous_fay

I don't think a token payment would be in line with the rules.

The tax saving might be greater if VAT could be removed, but it's not a possibility with my B/F's employer.

This is from Cyclescheme: (I think it's basically the same process, just administered by different companies)

Who actually owns the bike?


The bike and goods remain the property of your employer until the hire period finishes.
If your employer buys the bikes using external finance then the finance company will own the bikes during the hire period and not your employer.

Either way, at the end of the hire period you may be given the opportunity to buy the bikes for a fair market value (plus VAT).


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What happens at the end of the loan period?


It's your employer's choice whether they opt to sell you the bike at the end of the hire period. If you choose to become the owner of the goods, you may be offered the opportunity to pay the Fair Market Value for them from your net salary. Your employer needs to assess each bike separately as to its worth but in our experience the market shows values to be around 5% of the original value. If you choose not to buy the bike you will be charged the equivalent of the Fair Market Value to dispose of the goods, probably to a charity.
The fair market value cannot be stated before or during the scheme as this could be considered a benefit in kind as hire-purchase does not warrant any tax-relief.





Not only do you not own the bike until you've handed over the fair market value, but you're expected to insure your employer's property :rotfl:

custardy

RM offer it with halfords.
so a £500 bike is approx £370 once paid.
the RM set up lists the final buy back fee(IIRC £30) or you can pay a disposal fee of around the same amount

danielle24

I am in the middle of setting up this scheme at work and I think it is worth it. I've petitioned finance to do so because I too want a folding bike! We will be paying ours off over ten months/a year like our season tickets and if we leave the company (government department) before the end of the term we have to pay the balance remaining including tax. A good brompton is around £350 when the tax benefit is applied so £35 over ten months and I am not planning to leave any time soon!

Does his work have the scheme set up already? If not, try and make sure it's not linked to a single bike chain such as Evans or Halfords - it's best if he can get vouchers to take into any store in order to get the best deal. Evans is OK but Halfords really isn't that flash for folding bikes or any others.

frivolous_fay

custardy wrote: »

the RM set up lists the final buy back fee(IIRC £30)

Naughty RM

'The fair market value cannot be stated before or during the scheme as this could be considered a benefit in kind as hire-purchase does not warrant any tax-relief.'

I think part of the confusion may be due to the site I've been looking at indicating that you pay two years of instalments... THEN the final market value payment on top... which, realistically, would mean full price + 24 instalments.

But then... I've just noticed that it also does say that the fair market value is usually 5% of the original price... um... helloooo? I've heard folding bikes keep their value really well! :rotfl:

B/F's employer is ostensibly the NHS so I think there's an arrangement in place... not sure if it's linked to a particular retailer.

Idiophreak

Bit confused...Evans say:
"At the end of that period, your company can transfer ownership for a nominal fee." - nominal, to me, doesn't relate to any kinda market value...And I can't see that they'd mislead people like that...There's surely a misunderstanding somewhere.

In any case...nobody would do it if you had to pay the full amount less 40% or whatever over two years, but then pay the full amount again to get the bike...So I don't think that can be the case.

frivolous_fay

Yes, I see... very different interpretations of the scheme!

frivolous_fay

Looks like B/F is stuck with cyclescheme and their weird terminology... as that's who his company use.

custardy

18 Monthly Net Salary Reductions of: £ 19.36
Collection and Disposal Charge: £ 35.00
Lower Rate Taxpayer Total: £ 383.48
No advance payment is required. You hire a bicycle and bicycle safety equipment for a fixed period of 18 months, the collection and disposal fee is payable at the end (out of net pay). This shows the after tax cost, CLICK to view more details.
Higher Rate Taxpayer Costs
18 Monthly Net Salary Reductions of: £ 16.65
Collection and Disposal Charge: £ 35.00
Higher Rate Taxpayer Total: £ 334.70

Who owns the bicycle and cycling safety equipment?
Cycle2Work schemes operate as a lease: Royal Mail Group is technically hiring the equipment to you for a fixed-period.

thats from the RM/halfords site,but if IIRC you can pay the disposal fee as a purchase payment

Savvy_Sue

Just be careful you get the RIGHT folding bike. My brother has two: one he bought and hates (although he says it might be better with a new saddle). So he bought an expensive one, possibly a Brompton if they're the bees knees.

His advice to my son who's about to buy a bike (not necessarily folding) was "Make sure he spends a lot of money on a really good lock - ideally get it postcoded and chipped too, and distress it ASAP." You might think the lock is less necessary with a folding bike, but they're quite heavy and awkward and there WILL be times you want to lock it up somewhere!

The distressing is to make it less attractive to thieves, although it would of course also affect the final value.