Any CoDirector/Ltd co setups who use the RideToWork scheme?

[_daveR]

If so how did you set it up?

What structure did you go with? (Co loaning the bike to the employee or employee paying by salary sacrifice etc)

Any advice on it from a general perspective?

Ta.

[Griff Bitch]

http://www.dft.gov.uk/pgr/sustainable/cycling/cycl...

I do payroll for 3 companies that have used the scheme, they have all used the salary sacrifice route.

[_daveR]

Ive seen the dfl site already. The problem I have is that I dont pay myself as my employee, more than minimum wage. So if I went for it then it would have to be loaned from the Co to the employee.

[Griff Bitch]

Then just loan it to yourself and claim the capital allowances on it. If you don't earn enough you can't use salary sacrifice.

[_daveR]

Isn't there a threshold on value to enable me to claim capital allowances on it though?

[thewave]

_daveR said:

Ive seen the dfl site already. The problem I have is that I dont pay myself as my employee, more than minimum wage. So if I went for it then it would have to be loaned from the Co to the employee.

Even at minimum wage it's still worth doing.
Basically the company picks up the tab for the bike, say £1000.
The company can then claim the vat back £148.93, then the bike is also capitalised, and capital allowances claimed at 50% in the first year £425 @ 20% corp tax (saving a further £85 in year one) and at 20% of the (25% residual balance thereafter) about £20 in year two £16 in year three.

So after three years the bike has cost you as an employee the net cost of the bike, and saved the company about £100, so as you're the director, it's a saving of £250. Not bad. Don't be fooled that you have to join a Halfords Scheme either, just purchase the bike, treat as an asset, and set up a payment from your salary to cover the cost of the bike over say 3 years. You don't own the bike, but at the end of the 3 year period, you can buy the bike at a silly residual.

You only need an agreement in place between the employee and employer.

All info here http://www.dft.gov.uk/pgr/sustainable/cycling/cycl...

[Eric Mc]

Once employers start exploiting such government incentive schemes using salary sacrifices, the government loses enthusiasm for such schemes and abandons them.
Salary sacrifice is effectively the best way to ensure these schemes never last long.

You read it here first.

[_daveR]

But I am not able to set it up using the sacrifice method as I do not earn above minimum wage, a key requirement set out by the dfl.

My understanding is that I would essentially loan it to the employee and they could then but the asset from the company (at a fair price) after a set amount of time?

Im also on a flat rate VAT scheme which makes for a bit of a pain as I cannot claim back the VAT (although my expenses are generally quite low so the VAT I charge tends to outweigh the VAT I spend.)

Edit: Eric, I was under the impression that the Salary Sacrifice method is the suggested means of payment from Hector/DFL?

Edited by _daveR on Tuesday 20th November 13:38

[Eric Mc]

Not sure about that.

It all gets very political at times. It does depend on the mood of the government as to when they eventually decide to shut a scheme down.

Back in the 80s, the government of the day wanted workers to feel part of the enterprise culture. So tax efficient "profit related pay" schemes were introuduced. However, they were eventually scrapped when it was realised that employers were exploiting the definition of "profit" and using "salary scarifice" methods to pay "profit related pay".

More recently, the govermnment had a scheme whereby employees could obtain free computers and computer related equipment through their job at no tax or NI cost. Again, after a short while, that scheme was closed down due to perceived abuse by employers.

All such schemes are vulnerable to the whim of a Chancellor.

[mouseymousey]

thewave said:

Don't be fooled that you have to join a Halfords Scheme either, just purchase the bike, treat as an asset, and set up a payment from your salary to cover the cost of the bike over say 3 years. You don't own the bike, but at the end of the 3 year period, you can buy the bike at a silly residual.

You only need an agreement in place between the employee and employer.

All info here http://www.dft.gov.uk/pgr/sustainable/cycling/cycl...

It's my understanding that under the salary sacrifice scheme the employee does actually own the bike a the end of the sacrifice period.

If the company loans the bike to the employee rather than going down the salary sacrifice scheme then the employee doesn't own the bike, but does have the option to buy it at it's current value at the end of the scheme.

[thewave]

_daveR said:

But I am not able to set it up using the sacrifice method as I do not earn above minimum wage, a key requirement set out by the dfl.

My understanding is that I would essentially loan it to the employee and they could then but the asset from the company (at a fair price) after a set amount of time?

Im also on a flat rate VAT scheme which makes for a bit of a pain as I cannot claim back the VAT (although my expenses are generally quite low so the VAT I charge tends to outweigh the VAT I spend.)

Edit: Eric, I was under the impression that the Salary Sacrifice method is the suggested means of payment from Hector/DFL?

Dave, the salary sacrifice scheme is the only way the employee can gain the advantages of tax and NIC. In your situation I assume you can still arrange a hire agreement over say 3 years and pay via a deduction from your salary (increase your remuneration to cover the deduction?) Then purchase the bike at the end of the agreement at it's market value? The company still gets to claim capital allowances on the bike, and if the bike cost more than £2k you could still claim the vat back (expensive bike though)

Alternatively - see last paragraph

mouseymousey said:

thewave said:

Don't be fooled that you have to join a Halfords Scheme either, just purchase the bike, treat as an asset, and set up a payment from your salary to cover the cost of the bike over say 3 years. You don't own the bike, but at the end of the 3 year period, you can buy the bike at a silly residual.

You only need an agreement in place between the employee and employer.

All info here http://www.dft.gov.uk/pgr/sustainable/cycling/cycl...

It's my understanding that under the salary sacrifice scheme the employee does actually own the bike a the end of the sacrifice period.

If the company loans the bike to the employee rather than going down the salary sacrifice scheme then the employee doesn't own the bike, but does have the option to buy it at it's current value at the end of the scheme.

"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 (see section 4 above) no tax charge will arise"