Cycle to work scheme – Final purchase payment

I may be getting this a bit wrong, so sorry in advance if i am but…

The scheme saves 40% in tax but you then have to pay back a “fair market value” payment at the end of the 1 year agreement at a rate set by HMRC, currently 25% for a bike over £500. So really you only save 15%.

That can’t be right can it???

Basically yes, that’s right. You only really rent the bike, at the end of the scheme it’s still legally the property of your employer and (assuming they aren’t a bike dealer) the reality is everyone involved wants to transfer that ownership to you as cheaply as possible.

There are other options to just buying it off thmn though – e.g. the employer “gifts” you the bike, so you only pay the tax on that fmv rather than the whole amount, or you enter another even more artificial hire period for long enough to suppress the fmv further down and then pay/pay tax on a lower amount later.

It’s fiction piled on fiction but it does generally make economic sense.

Depends on the scheme/company right? I only used it for a cheap commuter bike but didn’t have to pay a fee at the end – technically I extended the hire for a further 5 years at no cost, until the value is considered negligible.

Probably still renting it, I sold it a few years ago

No one does that though, cyclescheme even steer you away from doing that.

Instead you pay a percentage of the purchase price (4% or 7% if below or above 500 quid IIRC? the figures may have changed, it’s been a while) to extend the scheme for a further 3 years, by which point, it’s a write off.

Edit – aye, as Kelron, I didn’t have to pay it at the end of my last one, but different employer to the first 3 times I’d used the scheme.

That’s only if you finish paying at the end of the first year… what you do is pay the first year – and then ride the bike for free for 2 more years… and then settle up.

Then the bike is only worth 3% so you pay that.

Ahhh…. thanks guys. Thats quite different to the literature. But they do have the “extend the lease” option.

The company we have (public sector) is called Cycle Solutions – Any experiences with them?

I just used them a couple of weeks ago to buy a Forbidden Druid (great bike btw). They were easy to work with. I bought the bike through Biketreks, who were brilliant.

I extended the hire period for a lower final repayment. As a basic rate tax payer, my overall saving by the end was 20%.

It is a swizz. You can’t know the final payment in advance, else it’s a Hire purchase scheme and thus not eligible for the tax relief. HOwever all the tax man actually wants is the TAX on the what they consider the final value. What you actually pay for it is irrelevant, if the tax is paid.

I’ve used cycle solutions twice (NHS), just bought a Banshee via LBS over 18 months saved around £500, if you buy direct from CS you get a 10% discount as well.

It is right. It is a hire purchase scheme. I got one last year. Will end up saving just £50 on a £900 bike after paying the continuation fee and the end purchase fee. The cycle to work scheme, properly administered, is cack. You’re better off negotiating directly or buying ex demo or something similar.

Sorry, ignore that. I though you had to pay again after the continuation fee. Seems you can just keep the bike after that.

I recently used cycle solutions and agreed to the extended hire period in advance. No final payment required. Saved £1400 as we get 12% discount off RRP also (lower rate taxpayer).

Done, thanks op

I know the scheme with my employer is much cheaper if you do a four year rental rather than a one year rental.

Now that there’s no upper limit on C2W I am so tempted to get a new Sentinel through Cycle Solutions/Leisure Lakes when my yearly benefits come round again.

Someone talk me out of it!

I’ve done it a couple of times now (albeit 5 years between) and never paid a final amount.

The scheme we have on Ireland is much simpler. You buy the bike through your employer saving the tax (plus other levies we have, usc, prsi) so save 29% or 52%. Pay it through salary sacrafice over 1/6/12 months and its yours from day one.

Another bung to the wealthy.

They should flip it around so higher rate taxed get a 20% discount and lower rate taxed get 40% discount.

Another bung to the wealthy.

You could look at it that way, I prefer to look at it in terms of if it wasn’t for the scheme coming along when it did, at least 2 of the bike shops in my town wouldn’t be there any more.

They should flip it around so higher rate taxed get a 20% discount and lower rate taxed get 40% discount.

I’d agree.

What you actually pay for it is irrelevant, if the tax is paid.

True, although charging less than the FMV makes it a taxable benefit which is more paperwork than simply charging the FMV.

So really you only save 15%.

It depends how the scheme is set up. As well as offering an option to defer until the FMV is lower, there’s no reason why the initial 12 monthly payments need to recover the full price of the bike.

I used to run an in-house scheme at my old employer, which also passed on the saving on the employer’s NI which employers typically pocket, and didn’t use vouchers so staff could buy discounted bikes from anywhere they liked. It can be a really good deal if you don’t get middleman voucher providers involved.

andy4d
Full Member
The scheme we have on Ireland is much simpler. You buy the bike through your employer saving the tax (plus other levies we have, usc, prsi) so save 29% or 52%. Pay it through salary sacrafice over 1/6/12 months and its yours from day one.

I did the same here too back in 2017 , just waiting for the next one to be available after 5 year gap , simple scheme and value increasing again this year.

The only good thing FF/FG/ Green crowd have done this year.

^^^^ it’s every 4 years now 😉. It changed a few months ago when they increased the limit. I am good to go again in 2022.