Cycle to Work Scheme

[Edge705]

Be careful.

After a further 2 years, the cycle will be 3 years old ( I assume your initial hire period was 12 months) therefore according to HMRC there will still be a residual value of 8% on a bike with an original cost of <£500 or 12% on a bike with an original cost >£500. If you transfer ownership for £0 then you have to ensure a p11d is completed on your behalf to declare the BIK and will be liable to pay tax on this residual value.
The residual value of the bike only becomes negligable and stops incurring a BIK liability after either 5 years for a sub £500 bike or 6 years for one costing more than £500.

Indeed if we get into the symantics I should have clarified my employer transfers ownership to Cyclescheme who then take 7% refundable and who then hire it to me for a further 36 months after which ownership is transferred without penalty although they keep the 7% . I think its also worth pointing out VAT @20 % is included in your estimates above of which the employee is not liable for.

 

[lejogger]

I think its also worth pointing out VAT @20 % is included in your estimates above of which the employee is not liable for.

Employee is liable to pay VAT as per original point of thread. Employers claim back the approx £200 VAT on the £1k bike but employee still pays hire value of £1k gross (before tax and NI deductions) to their employer. £200 of this gets paid to HMRC as output tax, the remainder offsets the value paid out to buy the equipment.

 

[lejogger]

my employer transfers ownership to Cyclescheme who then take 7% refundable and who then hire it to me for a further 36 months after which ownership is transferred without penalty although they keep the 7% .

Seems a long-winded way to do it but obviously though Cyclescheme need to make their profit from somewhere. I'd rather pay the tax on the £250 and get the ownership transfer out the way when the bike is still only 12 months old but I appreciate that isn't possible in your case where the third party company are the owners of the equipment rather than your employer.
I assume you don't pay anything further to cyclescheme over the course of that 36 months??

 

[wiggydiggy]

<SNIP>

Obv all cases are individual, and I appreciate the rough figures!

I was kind of generalising that with an average saving of 30% (ish) the Cycle to Work scheme for me can and is beaten if I see a bike reduced in a sale by the same or more and if it offers int free credit its a better deal. I did actually see some bikes that were £1k-1.2k reduced to £600/700 that I would have bought, but had neither the funds nor permision for credit.

So.... As ever all cases are indivudual, and in 2 years I will be shopping hard for the best value bike for my needs but I can take solace in the fact that like you say I can always splash upto £1k on a bike, int free and save about 30%.

 

[Edge705]

I assume you don't pay anything further to cyclescheme over the course of that 36 months??

No nothing at all but I would point out you are correct in that it appears to be long winded. On the positives i guess its put a hell of a lot more bikes on the road/pavement and I dare say the ratio to their intended use will probably be small as in the case of the local schools half of the staff at one school got bikes for their kids for xmas! I understand why HMRC put the restriction on they do otherwise the scheme could be used for tax avoidance but i do think a great deal more of thought could have gone into the scheme as its not the best in its current format.