[Closed] Cycle To Work Initiative - OnYourBike

a fiver IIRC

I've paid £30 and £40 on £1,000 bikes after 12 months.

As for the savings - remember that you're only getting it approx. half price if you pay higher rate tax.

At my work the final payment is 5% of the original price of the bike

Well, the savings on this particular scheme (to me) are "just" the income tax and the employees NI contributions, so as basic rate taxpayer it's roughly a 30% saving. If the "fair market value" of an 18 month old bike is less than 30%, then great, it's worth doing. If "fair market value" of the bike is 30% after 18 months, then I've not really saved anything, and a bike shop offering 0% credit would work out about the same (slightly higher monthly payments but no "balloon payment" on the end). If the "fair market value" is over 30%, then actually ends up more expensive.

As mentioned in the original post, from an employees POV, it doesn't seem to be the most generous of schemes. Not sure who's pocketing the VAT and any savings on employers NI contributions...

G

As above - FMV will likely be less than 5%, so that's still a 25% saving. What do you want - charity?

I guess the problem with agreeing the "fair market value" up front is that it's pretty much stating (at the start of the term) that the employee *will* be given the option to buy the bike at the end of the term. I don't claim to be any kind of financial services wizard, but from my reading of the HMRC blurb, as soon as you state that there will definitely be an opportunity to buy the bike at the end of the term, that then makes it a hire purchase agreement rather than a loan agreement, which according to the DfT document quoted below falls outside of the scheme.

There should be no automatic entitlement for the employee to take ownership of the cycle and cyclists’ safety equipment at the end of the loan period. If the loan agreement (technically a hire agreement under the Consumer Credit Act 1974 (CCA)) allows for ownership of the cycle and cyclists’ safety equipment to pass to the employee upon the exercise of an option, the doing of any other specified act by either party to the agreement, or the happening of any other specified event, the resulting agreement is likely to be hire purchase in which case the tax exemption available for a loaned cycle may not be available.

However, at the end of the loan period, the employer may choose to give the employee the option to purchase the equipment. Typically this would be offered at substantially less than the original value of the equipment, but to prevent a taxable benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the fair market value of the equipment. No tax relief is available to the employee for the purchase so, where the price is recovered from salary, it must be deducted from their net salary. VAT will also be payable on the purchase price by the employee on the supply by the leasing company or the employer as owner of the equipment.

Alternatively, the employer may wish to allow their employees to continue to use the cycles and cyclists’ safety equipment you have supplied after the initial loan period has ended, without transferring ownership. As long as the employee continues to meet the conditions of the tax exemption no tax charge will arise.

For fuller guidance on transfer of ownership, you may wish to refer to the HMRC website http://www.hmrc.gov.uk/news/comps-and-bikes.htm

What do you want - charity?

Obviously if there's a saving to be had, it seems quite a good way to buy a new bike. I'm keen to make a saving, but without all the facts about the scheme, I can't really work out what the saving will be. I appreciate that any saving is better than no saving at all, but I have seen some rather more generous percentages bandied around by folks on this and other forums.

The original post was just wondering what would constitute "fair market value" so I can get an idea of the total cost of buying a bike through this scheme (assuming I'm given the option to buy it at the end of the term and I exercise that option). Thanks to all who have responded. Not sure how they arrive at 95% depreciation in 18 months, but it's good info. Thanks!

As you say - if they write it down, it becomes HP and doesn't qualify for the tax break. I guess there's always the risk that (a) your company decides on a different FMV and/or (b) your company decides [b]not[/b] to make it available for you to purchase at the end of the lease period. The scheme has been running for over three years now, and I've not read any reports of an employee being screwed over yet. I reckon it's a fair risk to take.

And as I said - discounts depend on your tax band and on whether or not your company discounts by the VAT amount too. Mine didn't - but then I got the 17.5% VAT equivalent to spend on other goodies.

TBH - if you were only saving 20%, and depending on what you're after, you might get a better deal going straight to a bike shop.

Evans' website has a savings calculator. I just got a Genesis Core 40 yeasterday on the scheme as a supplement to my Maverick. It's a great bike and will cost me £42 a month for a year (my employer doesn't charge anything at the end of the scheme). I can't afford not to save that sort of money, it's a no-brainer.

The cyclescheme blurb suggests 5% - as said above it's just a technicality so it doesn't count as hire purchase. By that time you have paid back all the money your employer has outlaid for the bike in the first place. so there's no reason why they should want more off you (unless they are bastards of course :P).

(unless they are bastards of course :P)

You've met our HR department then? 😉

It seems they'd forwarded the mail to OnYourBike to respond, and had a nice phone call this morning from them. The chap I spoke to says that 18 month fair market value of 5% is generally accepted as the industry standard for these schemes. He also mentioned that they (OnYourBike) suggest either this or that the employee be allowed to keep hold of the bike and continue to use it until it's three years old when any insurance company would have depreciated the value down to near-as-dammit zero anyway, then charge the employee a nominal sum (such as £1) just so it's not seen as a taxable benefit.

Of course, this side of things is out of his hands, and is between the employee and the employer. It speaks volumes that our HR department (who were the only people who could give a proper response) sent my query down the line to some people who aren't really able to deal with it.

Looks like it'll probably be about a 25% saving overall, so probably worthwhile doing unless I can get a killer deal in the bike shop for cash.

Not sure how they arrive at 95% depreciation in 18 months

the term 'fair market value' is misleading - it's more like writing a cost off in business.