- Talk to me about cycle to work scheme
based on previous Vs current practises as I understand it for C2W I wouldn’t have another whirl on it now, I managed to pay a final transfer of ownership cost of £50 I worked out that over the whole course of the scheme and including the transfer of ownership charge I have saved about £25 maybe and been forced by a rather rigid implementation of the scheme to buy a bike I wasn’t that keen on from a retailer I didn’t really want to use… Lesson learned I suppose.
Since then I’ve heard of others simply refusing to pay the transfer of ownership charge and handing the bike back as it it would essentially have been cheaper to just buy the bike in a normal transaction to start with… The final valuation of the bike can be done a couple of ways, But HMRC now seem to want their full Tax claim out of it one way or another.
What was once essentially a “Tax efficient” govenment backed hire-purchase scheme is now a pretty inefficient hire-purchase, and HMRC dabbling has basically ruined it… IMOPosted 5 years ago
I’ve started looking at pushing for this scheme to be run at my place of work and initial conversations with the powers that be would suggest that they are all for it.
I suppose the question is, is this really worth doing these days.
My understanding is that because of the changes in the VAT treatment, as well as the suggested 25% disposal value (on 12 month agreement), the savings to be had are now quite negligible and maybe as little as 20%.
All of the online calculators I’ve looked at seem to ignore the transfer of ownership cost at the end of the agreement and only focus on the tax/ni savings on the actual loan cost and are claiming a 32% discount for standard rate taxpayers.
Has anyone got any experience of either being part of, or indeed running the scheme. I’d be interested to hear what kind of savings people are actually getting, as well as any advice on what kind of loan repayments and resale value people are making to make it as attractive as possible for employees (ie. me) whilst being cost neutral for the company.
TIAPosted 5 years agopdwMember
It depends entirely on the scheme.
I run our company scheme, and it’s worthwhile. 35% savings (including final transfer) for basic rate, 43% for higher rate. And you can use it to buy a bargain in the sales.
I’ve heard of plenty of other schemes that don’t offer the same savings, and restrict where you can buy from or what you can buy.Posted 5 years ago
I set up one at my last place. Quite easy to do if you have finance and purchasing dept on side. It’ll take you a couple of hours to get the paperwork templates done (rip off the Evans one) and the Consumer Credit Licence can be downloaded for free.
Big saving to be had if you could sort out a deal with your LBS. We did and got 10% off on all purcahses.
Calculator is on HMRC website. Guidelines on final settlement price based on 12 month loan period were 18% of rrp for bikes below £500 and 25% above. No settlement fee on helmets, lights and other other bits and bobs other than the bike.Posted 5 years agopdwMember
pdw – would you be able to send me particulars of how you run the scheme please. I’d be interested to see how I can get the 35% savings!
99% of the value of the bike is recovered through the hire payments. The payments are calculated taking into account the fact that the Employer is saving Employer’s NI.
For a £1k bike, that’s £833.33 ex VAT. 99% is £825.00. If you make a salary sacrifice of £724 it works out neutral to the employer after considering the Employer NI saving. Under new rules, you’ve got to pay VAT on that amount so you actually sacrifice £869 (split over 12 monthly payments), which is £592 net (basic rate).
Final transfer is done after 3 years for £25.63. HMRC FMV is £120, so that’s a taxable benefit of £94.37. Employee pays £25.63 plus £30.20 tax. The £25.63 is calculated to exactly cover the remaining 1% and Employer’s NI on the taxable benefit.
Overall employee pays £592 + 25.63 + 30.2 = £647, and it’s exactly neutral for the company.Posted 5 years ago
HMRC don’t really deserve to be criticised on this, they have implemented the law, unfortunately some of the scheme administrators overpromised and many companies seem to misunderstand what is required on termination.
PDW’s post shows how the scheme can still deliver significant savings to employees without costing a employer more than the administration costs. However, many employer can’t be bothered to adminster it and therefore outsource it which gives rise to lack of flexibility and additional costs.Posted 5 years agofalkirk-markMember
My own experience was I bought a discounted bike that would have been £900 ( shop wanted 10% more because of admin fees on btw scheme). The goalposts got changed during the loan period and at the end I reckon the bike cost £750 inc purchase tax at end of agreement.So I would personally not do it again bearing in mind not all shops participate in the scheme.Posted 5 years ago
pdw – thanks for that, very useful and makes it look like it should be very worthwhile.
We’re only a smallish company (45 employees) and I’ll be administrating the scheme rather than outsourcing it. That way, we can shop around for the best deals rather than being tied into particular shops at not so great prices.Posted 5 years ago
An advantage of doing it yourself is that the company can buy the bikes on a credit card, so the LBS doesn’t have to pay scheme fees. If you ask them nicely they may pass this discount on to you.
Sort your members out and go in. If you say that you want to buy half a dozen bikes over the next couple of weeks with no scheme or finance fees (LBS pay fees if you buy a bike on HP) they may pass some savings on to you.
Our LBS sorted out sizing, billing, free delivery and so on. Making it very easy to buy from them (not so daft eh?). We must have dropped about £5k with them in a week!Posted 5 years ago
If we self adminster, is it not a case of us (the company) just buying a bike (from wherever we like) and setting up a salary sacrifice/loan agreement with the employee? Does the retailer need to be aware that the cycle is being bought for a Cycle to Work scheme? Am I over simplifying it?Posted 5 years ago
If we self adminster, is it not a case of us (the company) just buying a bike (from wherever we like) and setting up a salary sacrifice/loan agreement with the employee?
Does the retailer need to be aware that the cycle is being bought for a Cycle to Work scheme?
Nope. But if you tell them you are buying in bulk… see above posts.
Am I over simplifying it?
Nope. Dead easy.Posted 5 years ago
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