Cycle to work scheme advice

[malraff]

Hi all

i am about to venture into the world of road bikes, and was going to use the cycle to work scheme until i saw

" after 12mths, ownership of bike transferred from employer to cycle scheme where i can then buy bike for retail cost"




whats that about? surely its just elevating any cost savings in the first place?


or what sort of fee do they expect back for the bike valued at 800 this year - which im sure will be less next year


mal

 

[twobiker]

Expensive , at least at my firm.

 

[okeydokey79]

At my company u pay back 18% on the 13th payment of the value u had in vouchers for the bike.

 

[malraff]

as they say if something looks to good to be true then its usually is!

pity was looking forward to getting a bike a little better than i first expected!

 

[okeydokey79]

Wen I had my 1st bike 2yrs ago it was only 5%

 

[malraff]

18% ! that would add another 140 quid to the cost - the whole scheme seems a little pointless! much like a lot of the governments green policies - just being seen to be doing something rather than really helping

 

[2Loose]

After a years worth of payments, for bikes worth over 500 quid, Cyclescheme want EITHER:

a> 25% of the retail value to transfer ownership to yourself.
b>A much smaller one off payment (7%) to transfer ownership to you in a further 3 years time.

These are their methods of complying with HMRC tax regs. Obviously a lot of people take option B as the bike remains with you but technically remains the property of them while it depreciates further.

My link

As other threads have discussed, this isn't the govt's doing really...cyclescheme could have chosen other ways to transfer ownership, but then there would be less profit in it for them.

 

[Red Light]

There are ways round this that have been worked out by most of the scheme providers such as extending the length of the hire contract at no extra cost to you. Its a result of something I've come across in a number of other instances of the HMRC right hand not having a clue about what the Government Policy left hand is wanting and doing things in the name of increasing tax collection that have totally adverse consequences.

 

[okeydokey79]

I still make a saving buying my bike this way so good 4me, anysaving is good

 

[malraff]

i think id rather just own my bike from the offset rather than save a few pennies - which is all it will really end up as - and not until 2014! hilarious really!

 

[father ted]

It seems to depend on what your company wants to do and how they adapt and implement the HMRC rules. I took out £850, paid £39 per month then a final payment of £51. So I paid £519, a saving of £331 . I never had the option to lease the bike for a further 3 years. You also get a nominal amount off your NI payments during the lease period.

Current HMRC rules are for the end of lease period are:
This year HMRC have introduced new rules for the buy back of the cycles at the end of the “lease” period. They consider the provision of cycles under the Cycle2 work scheme as a taxable benefit and therefore are seeking a higher buy back figure than the previous 5%.
Their proposals were:-

To have each cycle individually valued.
Cycles valued at £500 or less – buy-back amount to be 18% + vat
Cycles valued over £500 – buy-back amount to be 25% + vat

 

[okeydokey79]

Do mine over 13mths and save about £160 and don't have pay out in 1 go.

 

[lejogger]

Hi all

i am about to venture into the world of road bikes, and was going to use the cycle to work scheme until i saw

" after 12mths, ownership of bike transferred from employer to cycle scheme where i can then buy bike for retail cost"




whats that about? surely its just elevating any cost savings in the first place?


or what sort of fee do they expect back for the bike valued at 800 this year - which im sure will be less next year


mal

Which cycle to work scheme do your company use? They vary tremendously with regards to how much money you can save, and with regards to when you can take ownership.

Worst case scenario on a cycle worth £1k, you can pay 12 monthly payments of £56.66 (£83.33 - 32% tax and NI) and then not be given the option to purchase. Meaning you pay £680 for the priviledge of hiring a bike for 12 months and then giving it back to your employer.
If you were given the option to purchase then the worst case would be a £250 charge, which added to the £680 means you've paid £930 for a £1k bike but spread most of the payment over the year.

Obviously there are more scenarios which are much better. On my scheme for example you'd pay the 12 x £56.66 but then my employer gift me the cycle as a benefit in kind. Over the following 12 months you'd only then pay tax on the £250 benefit equating to £50. So 12 x £56.66 in year one and 12 x £4.17 in year two means you've paid £730 for a £1k bike.

There are ways around paying anything at all for the final purchase fee but this would mean delaying the transfer of ownership until the bike had zero residual value. (i.e. 6 years and over).

Obviously, if you are a higher rate tax payer your monthly payments on a £1k bike drop to £40 so there are even greater savings that CAN be made.

Clearly though it is all dependant on which scheme your company operate and how sympathetically they operate it. In my eyes it's still a worthwhile venture, but it's subjective to your own personal circumstances.

 

[Alexvs]

As said there are a number of these schemes. I used CyclePlus which my employer actually runs and is where you choose the value of your bike upto £1k and get it from a listed LBS. You then have Cycle2Work which is the halfords only scheme where you have no choice but to buy from them. If it's either of these schemes then it's run by a company called P&MM possibly under your employers SalaryPlus/Lifestyle scheme and you pay over 12 or 18 months (depending on which your employers signed up for) with the final payment being 16%, 21% (for 18 month), 18% or 25% (12 month) depending on which side of £500 your voucher is worth.

I took out a £600 voucher over 18 months and paying £21 and maybe some change per month with a final payment of £126 taking my total to £504ish which is more than enough of a saving for me. If you couldn't afford the final payment then you can agree to extend this with your HR department at their discretion. I personally think it's a great scheme and even suggested it to my brother as his company also had it on offer. The way I see it is I'm saving a sum of money (however little it may seem in the grand scheme of things) on my tax and national insurance payments and also getting a bike and kit I otherwise wouldn't have been able to afford.

Obviously if you're on another scheme you can ignore my ramblings above

 

[lejogger]

As said there are a number of these schemes. I used CyclePlus which my employer actually runs and is where you choose the value of your bike upto £1k and get it from a listed LBS. You then have Cycle2Work which is the halfords only scheme where you have no choice but to buy from them. If it's either of these schemes then it's run by a company called P&MM possibly under your employers SalaryPlus/Lifestyle scheme and you pay over 12 or 18 months (depending on which your employers signed up for) with the final payment being 16%, 21% (for 18 month), 18% or 25% (12 month) depending on which side of £500 your voucher is worth.

To the best of my knowledge (and I've campaigned for, set up, and run our scheme for 2 years) the Halfords scheme is in-house, nothing to do with P&MM. They provide the online sign-up system and promotional material, but then bow out once your employers pay for the cycles leaving the organisation to manage the salary sacrifice and final payment at their discretion.
It may be that P&MM are used as a company to manage the salary sacrifice if finance is taken out rather than your employer paying for the cycles up front. Obviously if your employer does borrow the money to purchase the equipment less of the savings will be passed on in order to fund the interest charges.

A small point as well, although you do only purchase bike through Halfords on the C2W scheme, you're not restricted to Halfords own instore brands, you can use the special order line where they are able to source most brands.