Cycle to Work Scheme - Over £1,000

[Daljit]

Hi

i hope people don't mind me raising this question. I've searched the site and found a few relevant responses, but just wanted to share my own thinking on the subject.

I can't quite work out how it is a) illegal or b) against the spirt of the scheme to buy a bike over £1,000 by paying the difference directly to a bike shop. Let me explain:

The scheme is outlined in full in a Dept of Transport publication (www.dft.gov.uk/pgr/sustainable/cycling/cycletoworkguidance/pdf/518054/) which is referred to by HMRC in their own documentation (eg www.hmrc.gov.uk/specialist/cycles_bus_passes.pdf).

The DoT clearly states that there is no limit on the value of a bike and any equipment, but that any employer running this scheme, which is a form of consumer credit,

"will need the cover of a consumer credit licence. In order to facilitate the scheme the OFT has issued a group consumer credit licence designed to cover employers setting up Cycle to Work schemes so that employers need not apply individually for credit licences for this purpose. Employers will be covered by the group licence so long as they are undertaking activities within its terms. The group licence covers only consumer hire business, (not the making of hire-purchase agreements - see section 9.3 below) for the purpose of providing employees with bicycles and or bicycle equipment up to the value of £1000, including VAT and not taking into account any income tax exemption under an employee benefit scheme, that is, the market price the employer pays or seeks to recover from the employee by way of hire charges.

If employers also undertake regulated business other than that described in the group licence or wish to offer packages in excess of £1000, they will need to obtain a standard consumer credit licence to cover that business." [section 9.1]

Now, i wouldn't want my employer to break the law by offering more consumer credit than they are licenced to do so - which of course is £1,000. And of course the scheme itself doesn't have a limit - the limit is imposed by the group consumer credit licence. If i were to pay for any amount over £1,000, i don't see how HMRC could be unhappy with this, because i'd be using my own cash (ie taxed income), and therefore not gaining any tax breaks on this payment. My employers wouldn't be upset provided it was made clear to them that they own the bike (and of course i use it regularly to commute), and that they reserve the right to dispose of the bike at the end of the hire period as they so wish. The risk would lie with me, in that i am effectively paying for a porportion of a bike that i will, and may never, own. I'm prepared to take this risk - i can't see my employer wanting to sell the bike on the open market at the end of the hire period.

Any thoughts?

thanks

Daljit

 

[Norm]

Spot on. Unfortunately, most schemes don't seem to allow for that sort of logic and flexibility.

 

[Red Light]

My employer did it - and they are usually sticklers where HMRC is concerned. So it is possible.

 

[roubaix murry]

Yeh I used the max voucher and paid for the remainder. I think it depends on which scheme your employers use.

 

[Long Distance]

same here i used the max voucher amount and paid another 400 quid on top (as a "deposit") to buy a bike with

 

[benb]

You may have an issue when the end of the lease is up, as you will have to pay for the bike at market value. I don't know how or if they will adjust this final payment to take account of your initial cash payment.

 

[Bicycle]

I did it too.

I wanted a particular mix of bits and the LBS couldn't do it for the price.

We talked about options, then I showed up with a saddle and a pair of pedals in a bag.

I'm not sure whether I did anything naughty.

The bike I ended up with was OK for the money.

I still have it.

 

[Paul_L]

As i understand it the final payment for bikes in excess of the voucher is still a % of the value of the bike, not the value of the voucher.

So you get a £1500 bike, £1000 on the voucher and £500 in cash. HMRC guidelines recommend the final payment will still be 25% of £1500, so you maybe paying a lot more for your bike than you think.

Quite a few bike shops now offer 0% finance over 24 months. I think that is a better way to go for bikes in excess of £1000 than C2W.

 

[Paul_L]

You may have an issue when the end of the lease is up, as you will have to pay for the bike at market value. I don't know how or if they will adjust this final payment to take account of your initial cash payment.

yes, that was my point and the advice i was given is thay they don't.

 

[GrumpyGregry]

so say you buy a £1500 bike with £500 of your own dosh plus £1000. Precisely which 1/3rd of said fine steed do you own and which 2/3rds belong to your employer? What happens if you and said employer fall out during the hire period, or you get made redundant, or what value does the bike have at the end of the scheme....?

 

[suecsi]

In theory, any outstanding payment on the bike (that was in the voucher value) must be deducted from final salary, including the VAT (it is usually a net deduction based on the net voucher value). This then negates any savings made so far.

Verbatim from C2W -

if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay i.e. without any tax exemptions.

Not sure how extra payments are handled.

We didn't apply ours over 12 months as we are a very small company where we don't know whether we will continue to trade from month to month sometimes, so those who have signed up have had the full net value of the bike deducted from one monthy salary less £1, and got the tax and NI savings in one chunk.

This means that in the event of redundancies, only £1 will have to be deducted from the final pay.

 

[Norm]

so say you buy a £1500 bike with £500 of your own dosh plus £1000. Precisely which 1/3rd of said fine steed do you own and which 2/3rds belong to your employer? What happens if you and said employer fall out during the hire period, or you get made redundant, or what value does the bike have at the end of the scheme....?

As pointed out above, the bike belongs to the employer, any money you paid is irrelevant for legal purposes or for calculating the final value.

 

[suecsi]

Certainly C2W aren't that clear on what happens in the event of redundancy/leaving the job, other than to mention the deduction from final salary. I would assume, though checks would need to be made with the relevant scheme administrator, that since this would be end of the employer to employee hire period, ownership of the bike would pass to C2W or whatever scheme admin, similar to the HMRC final market value guidelines (where C2W 'hire' the bike to you for another 36 months for a % fee, and then after that you finally own it outright.

Either way, you don't own the bike for several years, whether you stay with the employer or not. I'd have thought that the Final Market Value would be based on the certificate value though - how would C2W know otherwise, if your friendly LBS was happy to accept cash for the difference?

 

[benb]

I'd have thought that the Final Market Value would be based on the certificate value though - how would C2W know otherwise, if your friendly LBS was happy to accept cash for the difference?

Because the make and model of the bike are recorded on the scheme.

 

[Soltydog]

It will be interesting to see how bikes with a rrp over £1k are valued at the end of the scheme. My current c2w bike was £1200, but the supplier discounted it to £1k as my original choice was on a stupidly long leadtime.
Our scheme runs for 18months so value should be less than 25%
It's the 3rd time i've used it, the first scheme never asked for a final payment, so I guess that bike still belongs to my employer my second one was for just short of a grand with all my accs & the final purchase price was around £50(1 months payment), so hopefully this one will end the same.