It looks like my employer is not going to take this scheme on as there is some question about the further tax implications of a salary sacrifice scheme (Vague I know, sorry). Does anyone know anything about this?
Bike Forum
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Cycle to work scheme - tax implications
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Posted 2 years ago #
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That's the official line. Is the reality that it's too much of a faff and the accountant doesn't want a bike?
Posted 2 years ago # -
Well, that's what I think, but bizarrely head of finance does ride, as does our chief and other chief officers.........I just don't think they trust the staff and just assume everyone is going to take the P**s!
Posted 2 years ago # -
It could just be that the employer doesn't want the initial outlay to buy the bikes in the first place and then have to recoupe the money from staff, who in the current climate may not be with the company for the full 12 months and so would leave the company with a 2nd hand bike that would be useless/next to worthless/a pain to dispose of.
In effect the company is acting as a lender to allow the employee to buy the bike and if everyone wanted to spend £1k on a bike and say 20 people took up the C2W scheme thats £20k out of the companies coffers which they only get back in dribs and drabs.
In short i can understand why some compaines will not do the C2W scheme at the moment, they prob feel the money would be better spent elsewhere.
Posted 2 years ago # -
Ask them to explain what the "further tax implications" are. Do you have health care or company cars or any other such scheme?
Posted 2 years ago # -
That's why we haven't got it our place (although we do have healthcare and nursery voucher salary sacrifice schemes).
Their problem was the (very high) risk that none of the bikes would be used for commuting. Fair point, because in the event of a audit they would be in trouble.
Posted 2 years ago # -
I work for a large local government employer, one of the largest employers in the region so most staff tend to stay a while, but yeah I can imagine they would rather not shell out the initial costs.
We do have the childcare scheme.......so they already have one salary sacrifice scheme set up.
Posted 2 years ago # -
It could just be that the employer doesn't want the initial outlay to buy the bikes in the first place
Isn;t this where people like "cyclescheme" come in, do they not do the whole purchase thing and you pay them back? or have I got it wrong? If nto I can;'t really see any use for cyclescheme
Posted 2 years ago # -
We do have the childcare scheme.......so they already have one salary sacrifice scheme set up.
it works in exactly the same way. Someone's playing silly buggers. Ask for details as to why there's a difference
Posted 2 years ago # -
Their problem was the (very high) risk that none of the bikes would be used for commuting. Fair point, because in the event of a audit they would be in trouble.
Why would the employer be in trouble? the employee, maybe...
Posted 2 years ago # -
That's what I though NBT. I'll politely ask the question when I am back in next week
I think cyclescheme will administer the lot for you for £500, but not sure if they wil purchase for the company too.
Posted 2 years ago # -
As far as I know, the scheme explicitly states that there is no onus on the employer to record usage for commuting, so in the event of being asked in an audit they just say they don't record it and that's that.
The employee also remains liable for the remaining cost of the bike if they leave (so you pay what's left, without the rest of the tax benefit) so the employer doesn't get stuck with second-hand bikes.
As far as I can see, cyclescheme help handle some of the paperwork and give a central place for all of it to go though, saving the employer making payments directly to local bike shops, etc. The employer is still buying the bike and having that on their books.
Doesn't seem to be any harder to set up than a nursery voucher scheme. The cynic in me sees why female-dominated HR departments can be bothered with nursery vouchers but C2W just seems like far too much bother.
Posted 2 years ago # -
If salary sacrifice is by way of salary already paid to an employee being paid back then you get taxed on it - that's the only complication I can see, adn shouldn't affect you.
If an employee leaves IIRX they have to pay back the remainder of the RRP of the bike without the tax benefits. That's why I'm not going for it atm as I hope not to be here in a year!
Posted 2 years ago # -
Well with the scheme that i set up the C2W company issued the vouchers once the company had paid the money to them, you then go along to the shop with the voucher and give the shop the voucher in exchange for the bike and they send the voucher off to the C2W company so they can get paid.
Clareymorris - If you work for local government then i can't see why they wouldn't do it. My other half works for a local council and they have just started it up so i doubt its a tax thing otherwise central government wouldn't allow any of the councils to do it, would they ?
Posted 2 years ago # -
don't think they trust the staff and just assume everyone is going to take the P**s!
wonder what their stw names are ?
(shouldn't affect tax, just NI isn't it ??)
Posted 2 years ago # -
Tax issues were mentioned as the reason our re-launch was delayed. There were no problems first time round though.
Posted 2 years ago # -
My place won't do C2W either despite a number of people including the director of R&D hassling HR. We wouldn't do the nursery voucher scheme either as it was too much work to administer (or was until our payroll officer came back off maternity leave and then it was in within the month
)The main reasons given for not doing the C2W though are:
If an employee leaves they often don't pay for the bike leaving the company out of pocket (we got badly stung with home computers scheme) and it can cost more than you recover to chase it through the courts.
Not enough people would take it up, how they know without offering the scheme I don't know. There are a number of us who ride regularly and a significant proportion of the workforce live within a couple of miles of the factory.
People may not use the bike to commute on, so what as stated above, not the company's problem.
Reality is out head of HR doesn't ride and can't be arsed. he's leaving next month though so we'll have to have a go at his replacement as soon as thye get here.
Posted 2 years ago # -
<Sighs>
It just depresses me when I hear HR depts say that the scheme is too costly to administer / too difficult to change systems. I was one of the first to put the scheme in in the NHS and it worked really well.
The scheme is similar to Childcare vouchers in that the deduction is made from your salary before Tax and NI are calculated. Just like pension contributions too from a tax point of view. To administer it, all you need is for someone to operate a spreadsheet and to input the deductions into the payroll system. Even for a 1500 strong organisation, this was an easy task.
If someone leaves, your HR systems should be robust enough to catch anyone leaving before their final salary payment is made and deduct the balance in full from the final salary payment. If they aren't, your HR teams ability to perform basic control function has to be called into question.
If the loan period is an issue, it can be reduced. An alternative is for the employee to pay up front in full or give a cash security. It's a solution if an inelegant one and not one I would be keen to pursue.
From an Audit perspective ( I sit as a Non Exec on an Audit Committee away from my day to day role), I couldn't care less about whether a company keeps a record of journeys to and from work on a bike lent out through the scheme. There is no audit requirement to maintain such records either by the employee or the employer. If an internal auditor raised this as an action point, I would suggest that they aren't adding value in their role.
For clarity, there are no tax issues with the scheme other than the obvious one that your HR / Payroll provider fail to appreciate who their stakeholders are and that they are there to provide a service that supports the organisation and its staff. HR is one of my core responsibilities and it annoys me to hear that there are still HR Depts out there who follow their own agenda. A good HR team is one that is fair, doesn't pick sides and offers impartial advice and support to everyone in the organisation. This is basic stuff but something which many HR practitioners appear to forget.
If anyone has issues and is fobbed off, feel free to e mail me (address in profile) and I'll be happy to help and provide advice if required.
Cheers
Sanny
Posted 2 years ago # -
Sanny - lots of good information there. I am certainly going to push a bit more for some information when I get back in.
Cheers,
Clare.
Posted 2 years ago # -
For companies with large members of staff, or small companies with tight cashflow, there could be some cashflow constraints which could prevent them for wanting to offer it. Unlike the nursery scheme which is done month by month with little risk to the company should the employee leave, with the cyclescheme, the company is buying a depreciating asset and in the current climate I can understand why an MD might not want to do this.
We looked into the option of someone paying for the bike upfront to remove the risk, but this then effectively becomes a benefit in kind so is therefore taxable. The idea of the scheme is that the company owns the bike and rents it to the employee by salary sacrifice. At the end of the rental period, the company can then sell the bike for a nominal sum to the employee.
Posted 2 years ago # -
Sanny, don't suppose you fancy becoming our new HR manager, could do with someone who actually knows what they're doing.
Posted 2 years ago # -
Sanny its paul on the isle of wight here. I may be in touch with you about this shortly. Im trying to get this introduced at work presently. Its early days though....
Posted 2 years ago # -
"Tax implications" sounds like they are fobbing you off. Tax calculations can be confusing to the uninitiated but any HR/payroll person worth their salt should be able to administer the scheme.
Posted 2 years ago # -
There is a further implication for the employee - as the money for the bike is coming out of your gross pay you in effect end up with less gross pay and hence pay less pension contributions and National Insurance. This may have implications for you in the future.
Posted 2 years ago # -
end up with less gross pay and hence pay less pension contributions
which given my main pension lost £2k worth of value last year is probably a good thing, less in means less for the monkey investment people to lose. As for the NI, the fact you've paid anything into the state automatically disqualifies you from claiming anything anyway.Posted 2 years ago # -
Hi,
Newbie Dave here. I work in the accounts dept (we cover "HR" too, under the Wages and Salaries banner) and am willing to help out our employees as much as possible.
We recently set up a Childcare Voucher scheme and I've have done salary sacrifice with other things so that's not a problem.
The initial outlay might be as we have quite a few people who are decently serious about their cycling (I'm pleased to say), and some who cycle to work - which includes me sometimes. As long as it's a few at a time the company coffers will stretch that far.
I'm not worried about proving the commuting usage on the bike. It's unlikely that anyone will look at it and unless they sit outside the factory for a few weeks logging how we come to work, it's not going to be proven that it's a problem.
What concerns me is the second-hand value of the bike at the end of the rental period. From my internet research and anecdotal evidence a lot of employers settle at 5% of the cost price. If you can pick a reasonable condition bike up for 5% of it's cost why would anyone buy new? I will happily stretch things as far as the tax man is concerned but it must be justifiable to him. I run a tight ship on tax and an inspector will find little to query in our books I hope - this would be something they could easily query and the company would be left with the bill, which is grossed up as well. A S/H value of 50% is more realistic, so I could justify 40% I'm sure, but how do people "get away" with only 5%? The scheme just doesn't work if I have to charge my employees half the cost after they paid all of the cost out of gross pay!
Any thoughts please?
DavePosted 2 years ago # -
I did wonder that the other day - if you lease a car, are you expected to pay the full value of the car over the lease period, then get the chance to buy it on top of having paid the equivalent of full price already?
the question is what's the bike worth to your company, not what you think you could get for it
Posted 2 years ago # -
A piece of ammunition for the debate is that people who cycle to work take less sick leave and this saves employers money - I couldn't get the original research but found lots of references to it with a quick google.
apeal to your employers best interests - reducing sick time saves them money
Posted 2 years ago # -
Well another way forward would be to put the money up front!
Posted 2 years ago # -
There may be a few technicalities to address to around the salary sacrifice, but they'll probably already be doing that for other tax-free benefits and pensions. More info on the HMRC website here:
http://www.hmrc.gov.uk/specialist/sal-sac-question-and-answers.htmIt's a pretty lame excuse really, though limiting it to £1k is understandable if the company isn't already authorised under the consumer credit act.
Posted 2 years ago # -
What concerns me is the second-hand value of the bike at the end of the rental period. From my internet research and anecdotal evidence a lot of employers settle at 5% of the cost price. If you can pick a reasonable condition bike up for 5% of it's cost why would anyone buy new? I will happily stretch things as far as the tax man is concerned but it must be justifiable to him. I run a tight ship on tax and an inspector will find little to query in our books I hope - this would be something they could easily query and the company would be left with the bill, which is grossed up as well. A S/H value of 50% is more realistic, so I could justify 40% I'm sure, but how do people "get away" with only 5%? The scheme just doesn't work if I have to charge my employees half the cost after they paid all of the cost out of gross pay!
This is the bit thats always bothered me (and my accountant), its ok for the public sector as we know that the taxman won't give two hoots - but for a private business to sell assets at less than value to employees...
That is called, benefit in kind, and is taxable.
Also if any of you own your own business (needs to be a LTD), then the company can just buy the bike, and any employee can use it free of charge - just like any other asset, and it has a 12 month depreciation tag. This way you don't need any stupid scheme, nor have any employee deductions, and it comes out of your corp tax. And you can buy a new one every year - just ebay the old one and put the monies back in the business.
Posted 2 years ago #
Topic Closed
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