What a total waste of time and money

[Red Light]

Just been looking at getting a new bike for commuting through Cyclescheme and was reading up on the changes in the tax position.

If you remember you used to hire the bike for 12 months out of pre-tax salary and then pay a nominal amount to take over ownership. But then the tax man got upset that the nominal amount was less than the market value of the bike and they might be losing out on some tax income. So they introduced a standard table of what the final payment should be which was a lot higher than people were typically paying.

So what has happened now? Well it seems you still hire the bike for 12 months as before out of pre-tax salary. But now because the final payment is so high, instead you now pay a one off "Continuation Deposit" and sign a "Modifying Agreement" to continue to hire the bike for a further 31 months. At the end of the 31 months you will have now hired the bike for 3yrs 7months which can be rounded up for tax purposed to four years. You then pay a final payment to own the bike at the four year hire rate of 3% or 7% (depending on the initial bike price) - instead of the one year rate of 18% or 25% - which is deducted from the Continuation Deposit (which I assume neatly matches). You don't even need to work for the same employer for the extra 31 months.

So HMRC has spent all that time and effort on the changes which have resulted in all the bike sellers and customers spending a lot more time and effort making changes. And to what effect on payments and tax take? None whatsoever!!! People can still buy a bike by hiring it over 12 months and then making a single nominal payment at the end of the 12 months. Now that's what I call a waste of taxpayer's money!!!

 

[jonathanw]

I would agree, if....I understood what you just said!

Tax is beyond me, or at least I wish it was

 

[400bhp]

They don't see it as a waste. If it puts off people purchasing a bicycle this way they will increase the tax take.

 

[Kiwiavenger]

It's good. Im about to do it. You can get a new bike every year for 7% of the cost (plus whatever pre tax payments you make)

I cant wait for my new bike in Jan!

 

[Edge705]

It's good. Im about to do it. You can get a new bike every year for 7% of the cost (plus whatever pre tax payments you make)

I cant wait for my new bike in Jan!

Its good and bad think of oit as an interest free way to buy a bike and you will always pay below the retail value simply because of the tax savings. However its getting more tight and this year it will not be as lucrative company's must pass on the VAT to their employees which reduces the overall discount.

There are arguments for and against for example a participating bike store might have discounted a bike and you go along and try to buy the bike they may not offer the bike on cyclesheme so you can be restricted.

Lets look at it another way at the moment bike stores are begging for our money we are seeing heavily discounted £750 105 componetry carbon road bikes some complete bargains if you shop around. On the other hand a cyclscheme buyer would get a £1000.00 bike for roughly the same money and be tied into the extended hire period so really who is better offf? The guy with hard cash who shops aqround or the cyclesheme employee thinking he's getting a bargain?

Losing the VAT element has certainly taken the shine off the discount and one other minor point to take into consideration is that helmets do not have a VAT element yet they apparently do through cyclescheme but you would get the employee tax free element making it roughly the same'ish price

 

[AnythingButVanilla]

I'd looked into the scheme but found it all so confusing and vague that it's easier just to buy the bike outright. At least I know that I 100% own it and don't have to fanny about at the end trying to pay a nominal amount and worrying about how much it might cost.

 

[Cubist]

I worked out I was saving 32% of the bike's value over 12 months. I shopped around very hard before deciding, but couldn't find anyone willing to discount that amount AND give me interest free credit to boot on a new model bike. I'm in!

 

[doog]

A scheme that has sadly lost its way. Do I feel sorry? Not really, it was abused to the hilt. People at work were buying new bikes every year, never using them for commuting and also buying bikes for their children and girlfriends etc.The latest rules make it unworkable and hardly cost effective given some of the discounts available - Ive still got my 2008 tricross from the scheme, commute daily and really cant justify a new bike just for the sake of having a new bike.

 

[Col5632]

I looked in the scheme as i wanted to get a decent ish road bike and prob keep my hybrid but i just couldnt get my head round how much it would actually cost me and if i was better off getting a bike this way, also my work is tiny and i know my boss would agree to it but dont know how easy it was for them to set the scheme up, if i end up with another bike i think it will be through interest finance, least that way i know im paying the same for 12 months and the bike is mine at the end of it

 

[400bhp]

A scheme that has sadly lost its way.

It hasn't.

It;s just that employers don't [want to?] understand the best way to utilise it (final payment can be treated as a benefit in kind hence you only pay tax on the final payment rather than paying the final payment in full).

 

[wiggydiggy]

The scheme istself is not 'a total waste of time and money' at all, but it really does depend on your employer and how they choose to implement it. I would agree CycleScheme/Government haven't exactly simplified things though with these changes which has led to this situation.

Personally its still a good deal for myself as my employer is using the 'P11d Tax Code Method' where my employer (on a £500 bike) regards 18% of its value as a fair market value in 12 months, and I pay the tax on that amount. So thats £500*18%=£90, then I pay 20% on that £90 so its £16 as final payment, previosuly I paid £20 though so a similiar payment may be expected.

What is still good is despite the limitation on bike RRP or having to find a nice retailer who will accept vouchers on sale bikes is that you can still spread the cost interest free over 12 months. Again personally the retailer I went with did accept the voucher on a 'sale' bike as it was now permanently reduced to that price rather than being 'in the sale' (its a 2011 model, and they now stock the 2012 model as standard).

I haven't personally come accross anyone that abused the system but from others talk here I have no doubt it did take place, if the scheme has been deliberately changed to discourage that its a shame that others abuse has led to it been withdrawn for some.

 

[Dan_h]

My employer stopped offering the scheme as they said it was too complex and took too much time to administer! Shame as I would have made use of it

 

[Jezston]

Same with mine. Said since the VAT stuff came in it wasn't worth it

Hasn't stopped me buying two bikes since, though!

 

[Norm]

So HMRC has spent all that time and effort on the changes which have resulted in all the bike sellers and customers spending a lot more time and effort making changes. And to what effect on payments and tax take? None whatsoever!!! People can still buy a bike by hiring it over 12 months and then making a single nominal payment at the end of the 12 months. Now that's what I call a waste of taxpayer's money!!!

Not the HMRC but your employers. There are plenty of ways that the savings can be just as good they were but many employers are too lazy or don't give a stuff or didn't want to do the scheme anyway and they are using the opportunity to blame HMRC when they pull out.

 

[cycleruk]

I'd looked into the scheme but found it all so confusing and vague that it's easier just to buy the bike outright. At least I know that I 100% own it and don't have to fanny about at the end trying to pay a nominal amount and worrying about how much it might cost.

i think buying it out right is a beter idea, less to go wrong!