Why have VAT on bikes?

[knonist]

Bike is actually quite expensive to buy and maintain these days.
A reasonably decent bike + accessories + decent tyres would cost over £600 easily, also consumable parts, checking up etc, another £100 per year.

So the starting up cost for cycling in the first year could be easily over £700! And if considering your bike might get stolen, then it could become a very costly habit to maintain.

If the government wanted to encourage cycling for the sake of healthier citizen (less health care cost in the future), and less dependent on fossil fuel, then why not waive the VAT on bikes and its accessories from source?

I know the ‘cycle to work scheme’ did pretty much the same thing, but it does not apply to people who do not work (i.e. students, house wives etc), and for the ones who works, a lot of companies refused to run it as it brings additional administration cost to them! I know even some big multinational companies in Cambridge refuse to run it just because of that reason.

Can we, as cyclists, make enough influence to make such thing happen or I am just dreaming?

 

[marinyork]

Because they have to grovel to Brussels/Strasbourg and beg to be able to levy a special rate, say 5%.

I quite agree on your general point though, absolutely.

 

[knonist]

Because they have to grovel to Brussels/Strasbourg and beg to be able to levy a special rate, say 5%.

I quite agree on your general point though, absolutely.

then how they manage to run cycle to work scheme?

 

[Garz]

As the business pays for it up front, they claim this back waiving the vat I presume.

 

[Gerry Attrick]

Please don't fool yourself that the Government have a policy to encourage cycling. If they did they would:

• Relieve VAT on bikes and parts;
• Build sensible cycle routes free of obstructions, pot holes, busses etc;
• Subsidise bikes and safety equipment;
• Give bikes priority in cities;
• Legislate for no cyclist fault accidents as in Belgium, Netherlands and others;
• Penalise motorists for needless short journeys;
• Give tax relief to cyclists;
• Make it compulsory for employers to provide safe bike storage;
• Ditto bus and railway stations;
• Provide sure and secure conveyance on railways;
• Provide bike stowage on long distance busses;
• etc.
• etc.

 

[joolsybools]

Please don't fool yourself that the Government have a policy to encourage cycling. If they did they would:

• Relieve VAT on bikes and parts;
• Build sensible cycle routes free of obstructions, pot holes, busses etc;
• Subsidise bikes and safety equipment;
• Give bikes priority in cities;
• Legislate for no cyclist fault accidents as in Belgium, Netherlands and others;
• Penalise motorists for needless short journeys;
• Give tax relief to cyclists;
• Make it compulsory for employers to provide safe bike storage;
• Ditto bus and railway stations;
• Provide sure and secure conveyance on railways;
• Provide bike stowage on long distance busses;
• etc.
• etc.

Absolutely, there's far too much tax to be made on fuel for them to takie it seriously and no real signs of an alternative way to get this duty.

 

[Bristol Dave]

The Gov. hate to not tax things. A read a statistic (on CC I think) that there are 30 million bikes in the UK. Even if they average out at £100 each, that is still a large chunk of wonga in Gov's pocket.

They have to pay for duck islands and moat clearance somehow

BD

 

[nigelnorris]

The cycle to work scheme I bought my bike through doesn't even pass on the VAT savings to it's employees, they deduct the full price from wages and keep the VAT for themselves.

I can't complain because it's not my employers scheme, a friend bought the bike for me via his scheme, but he was annoyed on my behalf.

 

[Lizban]

In short because the Gov needs the money - whilst we all agree it should be scrapped there are hundreds of other groups arguing the same about there 'cause'

And the Ride to work scheme leads to 60% savings so we haven't got it all bad

Judging by the increasing numbers in London (all I have experaince of) it doesn't seem to put people off

 

[nigelnorris]

And the Ride to work scheme leads to 60% savings so we haven't got it all bad

I think that this is a bit of an exaggeration. According to the calculator on Evans website, which is based on the standard terms for most schemes, a higher rate tax payer saves about 50%, regular tax rate earner more like 40%. But that doesn't take into account that you pay up to 5% admin charges up front then a minimum 5% buyout fee when the lease period is up. That brings the numbers that apply to almost everyone down to 40% and 30% savings repectively.

 

[Lizban]

I think that this is a bit of an exaggeration. According to the calculator on Evans website, which is based on the standard terms for most schemes, a higher rate tax payer saves about 50%, regular tax rate earner more like 40%. But that doesn't take into account that you pay up to 5% admin charges up front then a minimum 5% buyout fee when the lease period is up. That brings the numbers that apply to almost everyone down to 40% and 30% savings repectively.

40% Tax + 12.8% Ni + 15% VAT = 67.8% - less fees = 60%

 

[jay clock]

Agreed it would be nice not to have it. Should the same apply to gym membership, sports clothes, activity holidays etc?

 

[nigelnorris]

40% Tax + 12.8% Ni + 15% VAT = 67.8% - less fees = 60%

No that's not how it works. VAT is taken out before the balance is taken from your wages. Saving 15%.

Then 85% of the cost of the bike comes out of your wages, in the case of a higher rate earner 40% tax savings on that is another 34%.

Higher rate earners earn above the NI threshold so there is no real saving there. (A tenner according to the Evans calculator, .1%)

Total 49%. Less fees and termination payment. 40%

A basic rate tax payer gets 22% of the 85% back which is about 19%.

NI 12.5% (your number I've never been sure about that) of 85% is 10% saved. So there's a total of 44% savings, less fees bringing it down into the low 30s. Not as low as I orginally said because I'd forgotten the base rate is now 22%.

The Evans calculator shows a different figure because it still uses 17.5 as the VAT rate and 20 as the basic tax rate, but it is still ball park.

 

[Miquel In De Rain]

Why not? There is VAT on most other things.

 

[Lizban]

No that's not how it works. VAT is taken out before the balance is taken from your wages. Saving 15%.

Then 85% of the cost of the bike comes out of your wages, in the case of a higher rate earner 40% tax savings on that is another 34%.

Higher rate earners earn above the NI threshold so there is no real saving there. (A tenner according to the Evans calculator, .1%)

Total 49%. Less fees and termination payment. 40%

A basic rate tax payer gets 22% of the 85% back which is about 19%.

NI 12.5% (your number I've never been sure about that) of 85% is 10% saved. So there's a total of 44% savings, less fees bringing it down into the low 30s. Not as low as I orginally said because I'd forgotten the base rate is now 22%.

The Evans calculator shows a different figure because it still uses 17.5 as the VAT rate and 20 as the basic tax rate, but it is still ball park.

Good point well presented