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  • Cyclescheme payup time. – Warning: boring money.
  • mountaincarrot
    Free Member

    It’s the year end payup time for my Cyclescheme. Sorry about this. I though someone may be interested in some real-world Cyclescheme costs. If any financial whizz could elucidate on holes in my understanding it would be helpful.

    £1000 down December ’07 (Cost to my employer £825 because they pay no VAT)
    12 monthly payments of £74 off gross salary. (ie employer picks up 12×74 = £888). (Why the extra cost?).
    Cost to me = 12 monthly payments of approximately £44 (after tax and NI) = approx £528, plus the final bill (I just got) to Cyclescheme for £57. Meaning I paid about £585.
    My employer appears on the face of it to make about £63 gain, (888-825), and also picks up further from not needing to pay their employers NI contributions on the £888 which they didn’t pay me. (How much was that? – It doesn’t matter to me much).

    So I don’t know why monthly was £74 (gross) rather than £69 (= £825/12). Was this some sort of charge to cover my employers accounting costs?

    Finally, the bike seems to have been given over to Cyclescheme, who are valuing it at 5% + VAT of it’s purchase value, so a final cheque I’m about to write to Cyclescheme (not to my employer) for £57 will close the deal. So is this £50 where Cyclescheme make their money?

    Effective cost to me will be somewhat over £585 because last years (meagre) pay rise would have been a percentage on my £888 reduced gross salary. Perhaps additional £15 nett PA. I’ll account for this perhaps over 2 or 3 years before it equalizes, and so guestimate an extra £40 for this cost. I lost nothing on pension pot(which I would have done with money purchse) because it’s (remarkably) still a Final Salary set-up here.

    So for £1000 bike, effective cost will be approximately £630. Not exactly 50%, but I didn’t expect that.

    Can anyone shed any light on the holes in the above?

    And before anyone asks, – Yes I do use it every single day!

    MrNutt
    Free Member

    I think your employer should have actually made (saved) considerably more, my figures worked out:

    The bike costs £999.00 from the shop, after the things that can be claimed back (VAT, Capital Allowance, etc) the bike actually only costs <the company> = (less than) £450.23

    Hiring it to me for £16.35 per week brings in £850.20 in 52 weeks

    Thus meaning that <the company> make a profit of about £399.00 (probably more if you include the reduction in SC1 NIC payments) on the hire of the bike 52 weeks!

    But as its salary sacrifice so there’s savings on Tax & NI (as <your company> do) so the “end of the day, wallet impact” price I pay for the bike is only: £643.28 (not to mention the savings on fuel). All in all you get a bike worth a grand for about £650.00 and <the company> make a tidy £400.00 in the process!

    ..my guess is that the companies that run the schemes for companys claim back the depreciation of their “assets” as well, but thats just guess work really! (I ran the scheme with no third party company involved, help came from Red Planet Bikes in Swindon in the shape of form templates)

    Stu_N
    Full Member

    £1000 down December ’07 (Cost to my employer £825 because they pay no VAT)

    £851 cost to employer as VAT is pre-vat price x 1.175 (851 x 1.175 = 1000). This assumes they have complete recovery on their input VAT as well. If your company makes any exempt supplies then they won’t get all their input VAT back so some of it will end up as a cost. It’s impossible to guess what that would be though.


    12 monthly payments of £74 off gross salary. (ie employer picks up 12×74 = £888). (Why the extra cost?).

    The extra is only £37 (maximum). Could be interest, overheads of running the scheme, anything really. It’s only 4.3% of the £851 they pay out for the bike which doesn’t seem unreasonable.

    Cost to me = 12 monthly payments of approximately £44 (after tax and NI) = approx £528, plus the final bill (I just got) to Cyclescheme for £57.

    Meaning I paid about £585.

    My employer appears on the face of it to make about £63 gain, (888-825), and also picks up further from not needing to pay their employers NI contributions on the £888 which they didn’t pay me. (How much was that? – It doesn’t matter to me much).

    £37 gain (max) as above. They will save another 11% (I think – not looked at employer’s NI for a while) on the gross salary you’ve sacrificed = about £80.

    So I don’t know why monthly was £74 (gross) rather than £69 (= £825/12). Was this some sort of charge to cover my employers accounting costs?

    Possibly, plus finance costs – they are shelling out £851 which they get back over the year so they will have to cover that somehow.

    Finally, the bike seems to have been given over to Cyclescheme, who are valuing it at 5% + VAT of it’s purchase value, so a final cheque I’m about to write to Cyclescheme (not to my employer) for £57 will close the deal. So is this £50 where Cyclescheme make their money?

    Possibly, they have to make some money somewhere along the way – will probably also charge a fee to your employer and make a margin on the bike (buying for less than RRP but charging RRP to your employer, for example) – they are a business after all.

    Effective cost to me will be somewhat over £585 because last years (meagre) pay rise would have been a percentage on my £888 reduced gross salary. Perhaps additional £15 nett PA. I’ll account for this perhaps over 2 or 3 years before it equalizes, and so guestimate an extra £40 for this cost. I lost nothing on pension pot(which I would have done with money purchse) because it’s (remarkably) still a Final Salary set-up here.

    Do they really do pay rises on post-sacrifice salary rather than notional annual salary? That sounds bizarre to me

    So for £1000 bike, effective cost will be approximately £630. Not exactly 50%, but I didn’t expect that.

    Can anyone shed any light on the holes in the above?

    And before anyone asks, – Yes I do use it every single day!

    At the end of the day you’ve got a £1k bike for about 600 quid. Your employer doesn’t have to offer Cyclescheme and probably isn’t making any money out of it, and if they are it’s not much. They are possibly paying out slightly less cash overall, but have taken on the costs, risks and hassle of running the scheme. Ultimately you’ve saved £350-400 (assuming of course you’d have bought a similar bike anyway!) and it’s probably break even or small cost saving for your employer relative to paying you the salary. WIN/ WIN I’d say.

    EDIT – forgot about Capital Allowances. That’s quite hard to calculate but could be about 28% of the bike’s price saved in Corporation Tax if you work for a large company, less if you work for a small company, but probably won’t get all the tax relief in the first year.

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    Stu_N
    Full Member

    MrNutt – how do you get from £999 to £450.23?

    MrNutt
    Free Member

    I’ll have a look for my workings out tomorrow, there was a couple of Tax savings/rebates that I found, I’ve got it all down somewhere! 🙂 (there’s also the reduction in N.I. that the employer has to pay)

    firestarter
    Free Member

    Cyclescheme charge companies to register 50 quid iirc and only pay the shop 90 percent of your total voucher claimed

    Badgerpoo
    Free Member

    Mine works differently: You can claim up to £800 towards bike & accessories. Work generate a cheque payable to the bike shop. You then pay 800/12 = £66.67 gross (£44 net) per month. At the end of the year you pay 5% of the £800 = £40.

    Total paid: £568

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