cycle to work.......... i dont get it!

Discussion in 'Commuting' started by lip03, 2 Aug 2012.

  1. lip03

    lip03 Über Member

    Location:
    beds/ london
    as the title says i dont really get the cycle to work scheme.
    from what i understand you "borrow " your new bike from your employer
    then you pay X-amount monthly before your tax and n.i are deducted
    saving you X-amount per month on you tax and n.i?
    then after a year you pay X-amount to your employer and you keep the bike?
    i was told by my employer that the final payment would be low?? (in the tens of pounds)

    is this at all right?
     
  2. Elliot_W

    Elliot_W Regular

    Location:
    E11 1BL
    Yes, £50 it was for me (£1000 voucher) . Didn't really understand that bit seeing as I'd done my monthly payments earlier in the year. Crying shame is I used it to buy a MTB and have only ridden it twice, to cycle to work when it snowed. Can't seem to displace my old road bike!
     
  3. OP
    OP
    lip03

    lip03 Über Member

    Location:
    beds/ london
    so basically its like buying a bike on finance but you pay less not more?

    what a result that is! now i just have to wait untill my employer starts the c2w scheme again (aparently only do it a few times a year)
     
  4. mcshroom

    mcshroom Bionic Subsonic

    Location:
    Egremont, Cumbria
    Watch the low payment at the end thing. In the past this was the case, but HMRC tightened up the rules a couple years back so they expect companies to charge 18% retail value for bikes under £500 and 25% for bikes £500 and over after one year.

    How your scheme works in practice will depend how it is done.
     
  5. rvw

    rvw Veteran

    Location:
    Amersham
    Yes and no.

    It is a salary sacrifice hire scheme - you hire the bike for a period, out of pre-tax salary, so you do save tax and NI (and pension contributions, if that's relevant). Over the year (or 18 months, depending on the scheme details) you pay the full cost of the bike.

    At the end, the bike still belongs to your employer. If they choose, they can sell the bike to you. BUT (a) you can't agree up front with your employer that they will sell you the bike, as that makes the scheme a hire-purchase scheme, and that wouldn't qualify for the tax break. AND (b) they are supposed to charge a "fair market value" for the bike at the end. And HM Revenue and Customs have their own ideas about what is "fair". There's a table here showing what they think bikes are worth after various periods of time.

    If your employer charges you less for the bike, you may be deemed to have got a "benefit in kind" - i.e. you were given the bike at an undervalue - and you can be taxed on that. But that is still not bad - you'll pay 20% (40% if you are a higher rate taxpayer) on the difference between the actual cost to you and what HMRC think you should have paid.

    For example, a £600 bike will cost you £50 before tax per month - so for a basic rate taxpayer, you save 20% tax and 12% NI - real cost to you, £34 per month, £408 in all.

    Cost to you at the end say £40. HMRC value (25% of original cost) £150. "Benefit in kind" therefore £110, on which you pay 20% tax - £22.

    Total cost of bike = £408 + £40 + £22 = £470, saving £130.

    (Same example for a higher rate taxpayer: £600 bike - less 40% tax and 2% NI = £348, plus £40 at end plus £44 tax (£110 at 40%) = £432 - which is a bit unfair, when you think about it!)

    Hope this helps.
     
    Hawk likes this.
  6. NO ! I was told the same by my employer, but the final payment must reflect the true market value of the bike..... thats HMRC rules..... my employer stated that the final "purchase" payment (in our case payment no 19 of an 18 month contract), would be "no greater than the monthly sacrifice"... they can't legally say that.... a colleague here was asked to pay nearly £100 (i.e 25% of the original price) instead of the £12 odd he was paying every month........ it led to a huge row, and my employer is no longer running the scheme..... I bought some HOPE lights.

    At the risk of preaching to the converted here, you hire the bike from your employer for a fixed period, 12 or 18 months, and then at the end, buy it from them at its market value as a second hand bike. My employer deftly avoided the HMRC by passing over the final ownership of the bikes bought by other employees to a 3rd party company... my colleague (and recenly me) have made the final payment by debit card to that company.

    I am convinced that our HR people had no idea of how it worked, and were railroaded into it by the local bike shop, who then sold literally hundreds of bikes..... I defnintely think the scheme was mis-sold to the workforce, and wish now I'd listened to those cynical old bu99ers who could see it for what it was. I wouldn't do it again.

    Best you think of it is as an interest free loan on the bike.
     
  7. There weren't any "changes in the rules"... it's just that companies chose to apply them strictly in accordance with HMRC rules in the first place... then that was pointed out to them (my employer) they dropped it like a hot cake.
     
  8. OP
    OP
    lip03

    lip03 Über Member

    Location:
    beds/ london
    18% of the bike i am looking at is £77.20 total cost after saving is £292 so £368 for a £429 bike not too bad i suppose
    net monthly cost to me is £24.31
     
  9. fossyant

    fossyant Ride It Like You Stole It!

    Location:
    South Manchester
    The Scheme isn't as good as it was. To avoid the 25% charge, you 'rent' the bike for a further two years at no fee, then pay about 5% to take ownership.

    My employer stopped it once these changes came in, but now offer interest free loans upto £1000. There are still some savings to be had, but it's not great, you might get a better deal on a 2012 'current year' bike at the minute as 2013 bikes will be out soon, and then take out shop 0% finance.
     
  10. CopperCyclist

    CopperCyclist Veteran

    I was worried about the final fee, finding out about the final 25% payment thing AFTER staring it - doh...

    However, for a 950 pound loan, the final payment for my bike (paid off last month) was only 47 quid, so I was very happy!
     
  11. mikmurray

    mikmurray Regular

    my final payment was around what i would normaly pay for the bike per month, alot of boys in work had diff bikes at diff prices, and they all said the same....the final payment was the same as the monthly salary sacrife.
     
  12. Leodis

    Leodis Veteran

    Location:
    Moortown, Leeds
    I joined CycleScheme in Jan, took £1000. Was £77 a month + £68 (i think) admin fee to CS + the 7% to loan the bike out again next year, hardly a saving.

    I left the employers in May and they took £720 from my redundancy and after 4 payments and said they would pay it plus tax. No sure what CS will say when I tell them this in Jan next year when looking for more money, guess I could say I bought the bike from old employers?
     
  13. biggs682

    biggs682 Smile a mile bike provider

    Location:
    Northamptonshire
    a few people on my workplace think it looks good , but you dont get nought for nowt
     
  14. jaynana

    jaynana Well-Known Member

    Location:
    NW London
    ask me cos i just completed one year on cyclescheme and completed the contract, just last week!

    all the way up to paying for the bike pre-tax, pre-NI is correct. ie, through the year (or 18 months depending on the scheme) you pay monthly installments. so if u r a 20% tax payer your bike will be roughly 20% cheaper.

    at the end of the year you have 3 options:
    1. pay the balance as per the market value of the bike (nobody takes this option really)
    2. pay another one-off fee between 3% to 7% of the value of the bike to 'hire' the bike for 3 more years.
    3. return the bike.

    most ppl go for option 2, i did too.

    [edit: with option 2] technically the bike is still owned by cyclescheme, but you're even allowed to get another scheme and buy another bike. (the issue here is that th bike cannot be transferred to you for this price, cos then it becomes a 'benifit of kind' which then needs to be taxed).

    at the end of the 3 years the bike will be written off in their books so it will get transferred to your name free of charge.

    so net net - you benifit the % of tax+ni you pay.

    j


    j
     
  15. to jaynana....
    I just made my final payment on my lights to buy them outright... I asked the lady on the phone if that was full and final settlement, and she said, yep, that was it... no more paperwork, no signature needed..... so hopefully that's it......so i think that is option 1... I bloody hope so, cos I got the lights for my GF and she's left me .... so I was paying for something I wasn't actually using, though she DOES use them ! Be gutted if I've got to give them back now......
     
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