£102.30

[Norm]

I don't think they should be reclaiming the full amount including VAT from the employee, the only saving the employer makes is from the NI reduction. If your employer is getting the VAT from the purchase of a bike from the employee then this is essentially stealing from the taxman.

Golly, there'll be a lot of schemes "stealing from the taxman" then.

If you read the regulations, rather than basing your ideas on the rules of one or two schemes or stuff you have read on the 'net (you get some very dodgy advice on sites like this, after all, I'm on here! ) you'll see that the employer can reclaim the input tax on the purchase of the bike without having to pass on the reduction to the employee. It's down to the employer whether they do pass on the saving.

In a case like this, where the employer is already unkeen to even start the policy, leaving the employer to have the savings from the VAT and the E'ers NI means that the savings are split roughly equally between the employer and employee. If the employer passes on the savings, they "make" around 17% from the purchase and the employee could save over 50%, which is a little one-sided, IMO.

YMMV.

 

[davidg]

They can't expect the reclaimed tax AND the same amount again from an employee though!

that's true...I am pretty sure they take the VAT off before the -ee has their salary sacrifice part. Was on mine. although my company could only claim back 60% of the VAT (or so i was told!)

 

[stoofer]

The whole scheme was put in place to encourage people to cycle, not as a money making initiative for employers though. Given that, don't you find it a bit rich if they charge the full RRP to the employee? Why not charge more that the RRP - say add another 10% on top for admin costs? Rather than base my ideas on the rules of one or two schemes, I've based them on what should be regarded as just - although I do appreciate that "just" and "business" are seldom used in this context!

 

[Debian]

Re CTW

As I thought, my employer can't be arsed to put anything in place that remotely benefits the employee! I got this response from HR this morning and would welcome comments on where to go from here:

We have been aware of the Cycle to Work Scheme for some time and whilst sympathetic to the “green” aspects of the Scheme we do not participate in it for the following reasons.

The Scheme operates on the basis of salary sacrifice requiring formal agreements and employment contract variations to be put into place which meet HMRC requirements. In view of the significance of these agreements as contractual documents professional advice would be required in order to ensure their compliance with all relevant employment and taxation legislation, the cost of which cannot at present be justified.

In addition, as you will no doubt be aware, the salary sacrifice arrangements proposed do not relate to the purchase of a cycle by an employee – instead employees would be sacrificing a sum from salary in return for the use of a loaned cycle. The ownership of the cycle would remain with us and would therefore give rise to additional administration e.g. maintaining records of ownership, use, and depreciation (as well as dealing with valuation and PAYE compliance issues in the event that the cycle is sold to the employee at the end of the loan period) as well as involving directs costs relating to insurance and maintenance of such an asset.

At present the potential saving in employers’ national insurance would be small and insufficient to justify the introduction of the Scheme. However these matters are reviewed at intervals and I will let you know if circumstances change and we decide to participate in the Cycle to Work Scheme in the future.

*mutter, mutter, barstewards, must find new job! *

If anyone skilled in these matters would actually like to PM me a response that I can send to the tight arsed barstewards then I'd be very grateful.

 

[Norm]

The Scheme operates on the basis of salary sacrifice requiring formal agreements and employment contract variations to be put into place which meet HMRC requirements.

This bit, at least, is correct.

In view of the significance of these agreements as contractual documents professional advice would be required in order to ensure their compliance with all relevant employment and taxation legislation, the cost of which cannot at present be justified.

This bit is a "not necessarily".

Agreements can be downloaded online (you could start with the one from Cycle Scheme, for instance, although being careful not to breach copyright regs) and the tax authorities have proved very relaxed with chasing the details.

In addition, as you will no doubt be aware, the salary sacrifice arrangements proposed do not relate to the purchase of a cycle by an employee – instead employees would be sacrificing a sum from salary in return for the use of a loaned cycle.

Also correct.

The ownership of the cycle would remain with us and would therefore give rise to additional administration e.g. maintaining records of ownership, use, and depreciation (as well as dealing with valuation and PAYE compliance issues in the event that the cycle is sold to the employee at the end of the loan period) as well as involving directs costs relating to insurance and maintenance of such an asset.

This was the major hurdle for me but, after reflection, I got past it in a number of ways.

• Records of ownership - that's pretty straightforward, either a paper list or a note in your personnel file should suffice.
• Records of use - you could sign a letter indemnifying your employers from tax issues arising from the Cycle to Work scheme if Mr Taxman did come a-knocking and find anything amiss.
• Depreciation - make sure that the limit on the purchase price is below the company's capitalisation limit. Most companies only capitalise assets over £1,000, some have even higher limits. Conveniently, unless your employers have a consumer credit licence, they can't "lend" you anything over £1k anyway. The capitalisation limit is specific to your employers but keeping the bikes out of the assets pool was the major issue for me. Your HR Person didn't even mention the joys of the capital allowances pool.
• Valuation - most schemes set the value at 5% of the original purchase price after 1 year. This generally accepted limit would not incur any further liabilities.
• Maintenance and insurance - irrelevant smoke screen, as the employee is responsible for both in every set of scheme rules I have seen.

At present the potential saving in employers’ national insurance would be small and insufficient to justify the introduction of the Scheme. However these matters are reviewed at intervals and I will let you know if circumstances change and we decide to participate in the Cycle to Work Scheme in the future.

This was precisely why I said above that the employer should not pass on the VAT savings. They may be more amenable to setting up a scheme if they make 35% (they get 5% at the end when you buy the bike) on each bike rather than just the 12.8% they are currently seeing.

 

[Debian]

This was precisely why I said above that the employer should not pass on the VAT savings. They may be more amenable to setting up a scheme if they make 35% (they get 5% at the end when you buy the bike) on each bike rather than just the 12.8% they are currently seeing.

Thanks Norm.

We can't reclaim VAT unfortunately.

 

[skrx]

Saves me 0.00p a week I must be one of the few of who doesn't make any savings.

How do you come out even? How would you get to work (or wherever) if you didn't use your bike? Walking would be cheaper, driving or public transport more.

I have a spreadsheet where I've kept some figures:
* Total cost of bike + bike stuff. So far, that's just over £800. Bike + insurance + tools + locks + lights + mudguards + insurance excess + more locks added up pretty fast
* Alternative commute cost -- £760 for a London Zone 2-3 annual travelcard
* Other transport costs or savings. If I cycle into central London that counts as a £1.80 saving. If I take a bus that's a £1.20 "cost", as it would have been free with the travelcard.

I'm currently £40 in the red, but by the end of the year I should be £400 in the black :-).
(Although if my bike hadn't been stolen I'd have been £50 better off.)

 

[Norm]

Thanks Norm.

We can't reclaim VAT unfortunately.

Sorry, Debian, I forgot you work for a charity, don't you?

 

[swee'pea99]

I love it when I see the Evening Standard boards announcing 'Fares up again!'. When I started out I was only saving about £90/month - now it's £116/month. And unlike most of you fellows, I spend naff all on the bike - tyres & brake blocks off ebay, and a fiver's worth of chain lube a year and that's about it. Well over a grand a year saved - and that's a big chunk of my 'discretionary' cash - ie, money other than what I can't but spend, on stuff like utilities, insurance, food for the family and tennis balls for the hound.

 

[Debian]

Sorry, Debian, I forgot you work for a charity, don't you?

Yes Norm.