Cycle to Work Scheme

[SquareDaff]

I remember there being a lot of debate on here about the changes to the "Cycle to Work" scheme proposed for Jan 2012. I believe it was something along the lines of adding VAT to the payments in line with some European edict?!?!

Checked my latest pay slip and there has been no change on my salary deduction under the "Cycle to Work" line. Does the change affect the monthly (or in my case 4 weekly) payments or just the amount of the final payment?

 

[lejogger]

Yeah, there was a European Court of Justice ruling against AstraZenica basically stating that VAT was payable on all salary sacrifice payments.
However whether you will have an additional charge depends when your scheme started. Further guidance came out in October stating that if your scheme started before 28th July then it would continue without the additional VAT charge until it finished.

 

[SquareDaff]

Further guidance came out in October stating that if your scheme started before 28th July then it would continue without the additional VAT charge until it finished.

Hmmm!! Will be interesting to see how this pans out. I have an email from the cycle to work scheme on 29/07/11 saying that my application had been accepted. Obviously I'd applied before this. I assume from what you've said that I would be liable for the VAT as the application was accepted a day after the deadline!!

 

[SavageHoutkop]

VAT was payable on all salary sacrifice payments.

Eh? I salary sacrifice into my pension, will this also count or has it always been 'vatted'??

 

[fossyant]

Eh? I salary sacrifice into my pension, will this also count or has it always been 'vatted'??

Nope does not apply for that. VAT is on goods and services ! Not Pension or AVC's

 

[Norm]

Although it possibly won't change anyway as most of the C2W schemes that I've seen have been on the full price of the bike anyway. It's usually only smaller schemes which could offer, shall we say 'enhanced' tax savings.

 

[fossyant]

Depends upon the company - some let you get away with the VAT saving as the company 'reclaim' that part - well, they did do !

 

[lejogger]

Hmmm!! Will be interesting to see how this pans out. I have an email from the cycle to work scheme on 29/07/11 saying that my application had been accepted. Obviously I'd applied before this. I assume from what you've said that I would be liable for the VAT as the application was accepted a day after the deadline!!

It is dependant on when your agreement was signed, not when you received your email, so I don't know if that makes any difference??

 

[lejogger]

Nope does not apply for that. VAT is on goods and services ! Not Pension or AVC's

That's right. Arrangements affected will be C2W vouchers, Face Value Vouchers, Food and Catering, Cars, Car Parking, Computers etc.

Childcare vouchers and private medical care won't be, along with pensions etc.

 

[SquareDaff]

It is dependant on when your agreement was signed, not when you received your email, so I don't know if that makes any difference??

It's an electronic signature via the company website. This would have been about 10 days before which may explain why there's been no change in my case!

 

[fossyant]

That's right. Arrangements affected will be C2W vouchers, Face Value Vouchers, Food and Catering, Cars, Car Parking, Computers etc.

Childcare vouchers and private medical care won't be, along with pensions etc.

For now - the government will find a way !

 

[lejogger]

Although it possibly won't change anyway as most of the C2W schemes that I've seen have been on the full price of the bike anyway. It's usually only smaller schemes which could offer, shall we say 'enhanced' tax savings.

Norm makes a good point... It very much depends on the scheme.

The only way you would pay more is if your company bought the bikes and then reclaimed the VAT themselves, and then took the salary sacrifice payments totalling only the net amount. The new ruling means that VAT is due on the salary sacrifice, so you have to make repayments totalling the net cost of the bike plus VAT.

Some companies will have reclaimed the VAT but then taken back the full cycle cost in the salary sacrifice to make a profit for themselves. In this case you've repaid the full cycle cost inclusive of VAT so nothing further would be due. These companies will now miss out on this element of the profit as it will have to be paid to HMRC.

Finally, some companies (like the NHS) (at the time) couldn't reclaim the VAT anyway, so it was paid on the cycle and was paid in the salary sacrifice. Rules on this have also changed, so these companies can now reclaim the VAT, but the salary sacrifice values wouldn't change as the VAT element would be paid to HMRC.

It's all swings and roundabouts really, and just brings the public and private sectors into line with what savings can be made.

 

[wintonbina]

I personally won't bother again with C2W. I had to sign up for another 3 years so called lease at 7% before the bike becomes mine! Next time its either cash buy or the LBS interest free deal. Just my take

 

[potsy]

We are in the process of moving over to monthly pay, one of the 'benefits' according to the firm are the ability to sart offering salary sacrifice benefits like C2W and the Childcare schemes.
Can't say I'm that excited about it tbh, maybe a few years ago when the benefits were greater.

 

[Grizzly]

I personally won't bother again with C2W. I had to sign up for another 3 years so called lease at 7% before the bike becomes mine! Next time its either cash buy or the LBS interest free deal. Just my take

I'm the same. The first time I got a bike through C2W they took the final payment at the end of the agreement and it was no more than my previous monthly payments. This time I had the choice of paying £180 and the bike is mine, return it or pay £68 for a 3 year extension. The bike was only £750 but I got some other stuff with it that took the total to near £1000, therefore the calculations are on the £1000. Next time it'll be the LBS (the guys are great) and 0% interest, though I'm having problems persuading the wife.