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  • Talk to me about cycle to work scheme
  • Crag
    Free Member

    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.

    TIA

    LMT
    Free Member

    My employer doesn’t do it, hhmmm tesco one of the biggest employers in the country don’t do cycle to work, as much as i push my ptm and group ptm not enough people want it.

    Even argued the wiggins effect and nothing. 👿

    druidh
    Free Member

    If you’re a higher rate tax payer, probably.
    If not, probably not.
    If you have the cash to seek out a bargain in the sales, definitely not.

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    cookeaa
    Full Member

    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… IMO

    bencooper
    Free Member

    It’s a little unfair to blame HMRC when so many people were using it to buy bikes for “commuting” that were never for that purpose, and then doing it again 18 months later 🙂

    pdw
    Free Member

    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.

    Harry_the_Spider
    Full Member

    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.

    Crag
    Free Member

    Hmm, there’s some pretty damning opinions here.

    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!

    Harry_the_Spider
    Full Member

    It was worth doing for us. You won’t save a mega amount but it will still be cheaper than buying it yourself.

    titusrider
    Free Member

    Cycles scheme offer an extension to transfer ownership to them so U don’t have to pay the 25%

    pdw
    Free Member

    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.

    mefty
    Free Member

    dp

    mefty
    Free Member

    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.

    falkirk-mark
    Full Member

    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.

    Crag
    Free Member

    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.

    mefty
    Free Member

    All shops participate if companies self administer which I think is what PDW is doing. It is the administrators who have caused the problems (that said they are also responsible for the high take up.)

    Harry_the_Spider
    Full Member

    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!

    Crag
    Free Member

    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?

    mefty
    Free Member

    Am I over simplifying it?

    Nope, but doing a deal with a shop you might be able to negotiate a bulk discount.

    Harry_the_Spider
    Full Member

    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?

    Yep.

    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.

    Dibbs
    Free Member

    My current 3 year deal is due to end in December and I’ll be looking to take out another.

    Crag
    Free Member

    Thanks for all this gents, some really useful info.

    I may be back for advice when I come to actually set the scheme up………

    FuzzyWuzzy
    Full Member

    Only really worth it now for higher rate tax payers and if you can delay the transfer so you can still just pay a nominal amount. Otherwise you’re better off looking for bargains in the sale (especially at this time of year).

    Trimix
    Free Member

    Its still an interest free loan.

    I charge them a final payment of 5% to ensure its “hired” for long enough to avoid HMRC’s idea of a disposal value they would otherwise have been taxed on.

Viewing 24 posts - 1 through 24 (of 24 total)

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