Is the bike still the property of the employer even though most of the initial cost is paid by the employee? ...or have I got it around my neck?
Fanks 🙂
I got a road bike on it around 18 months ago. It's not yours until you make the final payment. This is supposed to be around £10 (according to the literature).
hiya
It's the property of the employer until you make the final payment (percentage of the market value) at the end of the repayment period.
Hope that helps.
It remains the property of your employer and they have the right NOT to sell it to you at the end of the "lease" period.
It is YOUR responsibility to insure and maintain it.
Oh aye, as my esteemed colleague says... you may not get the option to own it... bear this in mind.
Thats one of the reasons why we dont offer a top up on a voucher at the shop - people might get a fright when they get told they don't own the bike.
I'm still confused, what payments are made to who by who after the initial, discounted, purchase?
Assuming your scheme runs over 12 months, then you'll pay 1/12 of the "purchase" price from your salary each month. At the end of the 12 months, your employer [i]may[/i] (i.e. will) give you the option to buy it from them. While there is some debate over the amount of this final payment and the way it is calculated, in practice it tends to be between £10 and £50.
The problem is that this arrangement cannot be entered into contractually at the start of the lease, else it becomes Hire Purchase and that would fall foul of the tax -break scheme.
You need to apply to your employer for a voucher/letter of collection for the value of the bike you wish to buy INC any accessories.
You then swop the bike for the voucher.
You will then pay your employer an amount per month from your pre-tax (gross) income usually a 12 month period.
Personally you wont hand over any cash. The discounted purchase to which you refer is the amount you pay for the bike in total. You will escape ay VAT and of course you will be paying it back from your pre tax income.
If the bike you want is £1000 then you will get a voucher for £1000, not, for example, £600 that you may end up paying.
Make any sense?
The Cyclescheme website is pretty good.
Oh - and you don't get a "discounted" purchase price. It's just that the payments are made before tax. In effect, you save 20% or 40% depending on your tax band. You may also be eligible to save the 15% VAT.
You can calculate some figures here http://www.cyclescheme.co.uk/employee,intro.htm
and some stuff to read http://www.cyclescheme.co.uk/employee,faqs.htm
>You will escape any VAT and of course you will be paying it back from your pre tax income.
But some employers don't pass the VAT saving on to the employees. Most do but state employers like NHS and tightwad companies (like mine) don't.
Aha! Yep, understood, and may I say, explained beautifully!!
Thanks for your patience 🙄
allthepies - correct. I was assuming he would. My mistake.