The bike to work scheme has been brought up on many occasions at my work. I’m a regular cyclist so it tends to be me who fields questions.

Finance team are being somewhat oppositional to the proposal, we are a company of about 25, 3 of us would like to see the c2w scheme in operation, not just for ourselves, though immediately it would be, but for future employees to have the opportunity to make savings etc etc, you all know the script.

Convincing the finance and HR dpts has been a PITA, the MD approved but said finance heeds to figure it out, then finance said it’d need reviewed and discussed with HR. Meantime of the original 5, 2 got fed up and bought bikes, so no longer need it.

The main concern is what happens if an employee leaves during the hire. Which I think is pretty simple, they’ve signed a hire agreement term, so pay the remaining balance of the term, plus, if they want to keep the bike, the tax on the residual value. all detailed in a lease agreement (which I put together as a demo for the teams)

I’d like a last chance to tackle them, but need to be armed with what’s in it for the company. As we all know the ‘benefits’ of cycling to work are kinda fluffy, this needs to be financial.

so, my understanding is:

– company buys bike.
– company claims tax off purchase (as they would any cap ex), this can no longer be passed onto the hirer, so is a company saving
– company has marginally reduced tax and NI per month as is off pay after salary sacrifice.
– Company can offset purchase cost of bike against tax return, as they do for all other capex items. not sure of number of years this is over, or depreciation rate, but I think it’s 20% of value.

Does anyone know the answers to the latter and can confirm what I’m thinking about the benefits to the company are correct?

thanks in advance.

Perhaps your company don’t want to fork out 25K on bikes.

That was the reasoning at my old place, even though only a couple of us were interested, they might have ended up with a 175k bill if everyone had taken it up.

To be honest, shopping around for a end of line bike and an interest free credit card can sometimes be better on your pocket.

Its a hire scheme, you hire the bike off your work, if you leave, you leave the bike too.

Can’t your company subscribe to a third party like cyclescheme to run this for them ?

Yep, a third-party scheme means it’s no more effort for them than any other salary sacrifice scheme like childcare vouchers. Employer just gets an invoice for the bike value, and sets up the deductions from salary.

Perhaps your company don’t want to fork out 25K on bikes

That was a concern, but isn’t a realistic concern considering all that cycle or may wish to cycle.

Steering clear of third party schemes, as the way I see it, the effort is the same, just setting up a salary sacrifice based on the invoice we give to the purchasing person, all of which I’d guide folk though. My personal feeling is that 3rd party schemes don’t include for small IBD’s.

I’d understand using a 3rd party would be easier if there were 20 people lined up to have to process all at once, but it’s currently for a few of us, and even if it did get to that, we can tell people to hold off etc, it’s a small, informal company.

Its a hire scheme, you hire the bike off your work, if you leave, you leave the bike too.

as far as I’m aware, with 3rd party schemes, if you leave, and don’t move to a company operating using the same system, you still need to pay the balance to the end of your hire agreement.

yep, from cyclescheme FAQ’s
Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 14-working days following collection of the goods. This means that 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.

Think I’ve googled my way around this one:

Company can offset purchase cost of bike against tax return, as they do for all other capex items. not sure of number of years this is over, or depreciation rate, but I think it’s 20% of value.

The 20% is depreciation, which is then a company expense, which can be offset against the tax bill.

If company is claiming VAT back they need to account for it monthly on the hire as it is a vatable supply. So no company benefit here other than cash flow as they receive the benefit and charge over 12 months.

20% depreciation is not a tax reducer. Thats capital allowances which depend on your other additions as a whole but often 100%.

Your finance team shouldn’t have questions like this if doing their job properly!

I do it every year as an employee and to be honest if I was an employer I don’t think I would be that happy about offering it to my staff. It seems like it is a pain for the admin department to sort out and causes paperwork at end of year and audit times. Plus the company having to have the cash to pay for the bikes. I’m the only person to do it at work an I set it up and run it myself. Not what you want to here but that’s my experience of it.

If company is claiming VAT back they need to account for it monthly on the hire as it is a vatable supply.

Is that not accounted for in the VAT saving not being passed on to the hirer? as in the hirer pays the vat charge?
or would it be better if they didn’t claim the vat back, what would that change?

Your finance team shouldn’t have questions like this if doing their job properly!

the questions are from me.
🙂

I do it every year as an employee and to be honest if I was an employer I don’t think I would be that happy about offering it to my staff. It seems like it is a pain for the admin department to sort out and causes paperwork at end of year and audit times. Plus the company having to have the cash to pay for the bikes. I’m the only person to do it at work an I set it up and run it myself. Not what you want to here but that’s my experience of it.

Thanks, so in essence, there is no real benefit of any sort to a company to offer the C2W scheme?

what do you have to do to manage it yourself? was it just setting it up, or do you have to input on the end of year finances?

I’m sure on paper there is some small financial benefits to a company plus the health benefits I’m just saying that the admin time and paperwork probably is more hassle than its worth for a company especially when questions are being asked at end the end of the financial year and audit time which already seems like a stressful time (not that i’m involved).

I cant remember how I set the scheme up as its been about 7 years ago. I know when my old policy finishes I open 2 internet browsers. One as an employee and one as the administrator Click request a new certificate, approve the certificate then wait for the invoice and take it straight to the admin girls to pay. The process from requesting to me receiving the certificate takes about a week.

Never really understood this scheme – it looks very much like a tax payer subsidised way for cyclists to get cheaper bikes whether they ride to work or not. Not a big fan unless of course I have missed something. Somebody has to pay for the tax take shortfall, ie all of us.

I cant remember how I set the scheme up as its been about 7 years ago. I know when my old policy finishes I open 2 internet browsers. One as an employee and one as the administrator Click request a new certificate, approve the certificate then wait for the invoice and take it straight to the admin girls to pay. The process from requesting to me receiving the certificate takes about a week.

I take it this is a cyclescheme type setup you have, not a self setup?

ta

Ours is through cyclescheme.co.uk.

Re the VAT the hirer would pay the Vat yes, but point was that it’s often assumed there’s a vat saving for the employer but there’s not. The hire is a vatable supply regardless of claiming the input vat at purchase. So you would claim it in full as employer and have to account for it on the hire which can be a pain if your HR don’t talk to your finance team as there’s not a money trail to follow as it’s a salary sacrifice scheme.

My point earlier wasn’t meant to read as abrupt sorry. I meant that your finance team should know all this so there’s not really anything for them to ask you about. Refer them to the cycles scheme website even if you are running one yourself as it answers nearly all questions really well.

Good luck! I set one up and we had 3 people use it but don’t think anyone else will in future and those who cycle and have used it found it a faff and would rather use a 0% credit card as savings have reduced a bit from the first years of the scheme now HMRC have tightened up on the final value rules.

lovewookie – Member

Its a hire scheme, you hire the bike off your work, if you leave, you leave the bike too.

as far as I’m aware, with 3rd party schemes, if you leave, and don’t move to a company operating using the same system, you still need to pay the balance to the end of your hire agreement.

yep, from cyclescheme FAQ’s
Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 14-working days following collection of the goods. This means that 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 quite. I left a cyclescheme using company halfway through the year after buying a bike (my second from them).

Cyclescheme didn’t even want to know who I was going to work for, they just instructed HR to add the full remaining debit balance to my final paycheque.

While unwecome at the time as it made Christmas a little on the tight side, I *think* it actually resulted in me coming out a little better overall than from the regular monthly payments as I’ve sidestepped the whole month 13 and +2years for depreciation thing. Think it actually was a minor tax improvement too.

OP, tbh, if your company is looking sideways at c2w for the reasons you state, then going 3rd party is probably pretty much your only hope as it takes all the bits they’re viewing as problems and makes them someone elses’. Doesn’t cost them any more and is probably actually cheaper for them. Is limiting for you as it takes away any of the possiblilities from higher loan amounts due to credit licenses. Most massively, it saves them needing to track depreciating assets for several years and taking additional tax advice on how to deal with this period…

OP, tbh, if your company is looking sideways at c2w for the reasons you state, then going 3rd party is probably pretty much your only hope as it takes all the bits they’re viewing as problems and makes them someone elses’. Doesn’t cost them any more and is probably actually cheaper for them. Is limiting for you as it takes away any of the possiblilities from higher loan amounts due to credit licenses. Most massively, it saves them needing to track depreciating assets for several years and taking additional tax advice on how to deal with this period…

Yeah, I think it’s had opposition from the initial ask. The boss was more amenable to it as he saw the assets and ni reductions as money for old rope, and as he’d become interested in cycling, he saw another advantage. The admin however were more ‘why would you cycle to work?’, since then the company has become employee owned, so decisions are made by committee. So I guess my options are limited, if non existent. :-/

The £1000 limit is on the hire amount. You should be able to top up for more, but the company will own the bike. Might be a risk but others did that for ours.

We went 3rd party as admin is a doddle.

Its not a hire. Its a salary sacrifice purchase. Company owns the bike until complete payment plus an additional deposit/payment. Refundable if bike returned (otherwise its a hire purchase). We set it up ouselves as bike shops wouldnt give us a good deal on C2W scheme.
We claimed the VAT back and offset the purchase price.

The hire is a vatable supply so needs to be charged to your employee. Vat neutral.

tbh If I was a (small) employer I wouldn’t bother either, except for myself as Director when I’d just get the company to buy a bike for me – job done 🙂