Buying a bike on a tax incentive scheme

[theboyfold]

Just been out looking at bikes with the good lady and she's set her heart on a smart Trek from our local Indy. Whilst we were there I picked up a leaflet about buying the bike through a scheme where the payment for the bike is taxen from your wages pre tax. Seems like a great idea however upon further reading there are a few questions I've got for anybody who's done it before.

The scheme mentions about a final payment to 'buy' the bike from your company, they can't tell you what this figure will be as it will then become a benefit in kind. What's the normal price that you have to pay at the end? Has anybody had any experience of this?

Also do you actually have to ride it to work? As the lady's current is over 35 miles each way, which is a tad far for a bike!

[neilus]

I think my company said the final payment part was 10% of the original cost, and yes you should use the bike for majority of your journeys to work.

See here

Neil.

[HOGEPH]

neilus said:

and yes you should use the bike for majority of your journeys to work.

Who's going to know if you don't?

[Bounty Hunter]

Hello IK stranger - Long time no attack?? (I'm out too gave my account to Gorvid a few months ago..)

I signed up to the scheme 3 years ago and I have just signed up again this past week. Hopefully I can help? Ours is through Wheelies, so my responses are only based on how they run it and it may change for you/your OH.

Firstly - Is she doing it on her work's scheme or on your scheme? As they don't let you buy a bike for the other sex ie - you can't get a girls bike, if she is happy riding a man's one (ooo err) then its OK - they won't know.

theboyfold said:

What's the normal price that you have to pay at the end? Has anybody had any experience of this?

My new agreement states that it will not be more than the monthly payment - The first one I did it was about half the monthly payment. So not much

theboyfold said:

Also do you actually have to ride it to work? As the lady's current is over 35 miles each way, which is a tad far for a bike!

Again my paperwork states "50% of the use of the bike must be to work" - I used the bike twice during the first scheme (A year later though I use it everyday to ride to work) - No one checks - I think most people don't ride to work on the bike. last year we had 100 odd sign up from the office and only 3 more bikes in the bike shed

Hope that helps

Tom

[Bounty Hunter]

Oh and your company has to setup the scheme - Some don't because of all the paperwork.

[theboyfold]

Bounty Hunter said:

Hello IK stranger - Long time no attack?? (I'm out too gave my account to Gorvid a few months ago..)

I signed up to the scheme 3 years ago and I have just signed up again this past week. Hopefully I can help? Ours is through Wheelies, so my responses are only based on how they run it and it may change for you/your OH.

Firstly - Is she doing it on her work's scheme or on your scheme? As they don't let you buy a bike for the other sex ie - you can't get a girls bike, if she is happy riding a man's one (ooo err) then its OK - they won't know.

theboyfold said:

What's the normal price that you have to pay at the end? Has anybody had any experience of this?

My new agreement states that it will not be more than the monthly payment - The first one I did it was about half the monthly payment. So not much

theboyfold said:

Also do you actually have to ride it to work? As the lady's current is over 35 miles each way, which is a tad far for a bike!

Again my paperwork states "50% of the use of the bike must be to work" - I used the bike twice during the first scheme (A year later though I use it everyday to ride to work) - No one checks - I think most people don't ride to work on the bike. last year we had 100 odd sign up from the office and only 3 more bikes in the bike shed

Hope that helps

Tom

Tom, that's very useful. She'll be buying it through her work (that is if they are signed up, but as it's a county council she thinks they will be)

As for IK, I gave up a long time ago when it started to take up too much time. Is the fight still going on?! Hopefully there are still a few 'boyfolds' happening every now and again to spice things up!

[Sarkmeister]

I know plenty of people at work who got a bike through the cycle2work scheme, and not one of them has had to pay the final fee.....

[miller38]

I work in a local independant shop and it depends on which scheme you're going to be using and which company your with as to the discount you'll recieve.

There are a number of schemes such as the cycle2work and they all vary slightly but the one which my shop runs works by your employer initially shelling out for the bike and then you buy it off them through paying less tax off your salary each month, so effectively you don't own the bike until the end of the 12 months, although it is your responsibility to replace it if its stolen or damaged in that time. Haven't heard anything about one final payment so that may be a scheme that i don't know about.

Usually you will end up saving between 25 and 50% depending on how generous your employer is so it does make sense if you're buying a bike, save money and no need to pay it all at once.

[Bounty Hunter]

theboyfold said:

Tom, that's very useful. She'll be buying it through her work (that is if they are signed up, but as it's a county council she thinks they will be)

As for IK, I gave up a long time ago when it started to take up too much time. Is the fight still going on?! Hopefully there are still a few 'boyfolds' happening every now and again to spice things up!

OK - should be fine then - by the look of the other posts there seems to be different ways to run the scheme

IK - I think the Ateam got all the other alliances together and ganged up on us and we went down. Last I heard was they were starting a different game.... I'm staying well away - I spend too much time on the PC as it is... "Doing a boyfold" was still a part of folklore when I left...

[theboyfold]

Bounty Hunter said:

"Doing a boyfold" was still a part of folklore when I left...

It was my single biggest contribution to that game!!

[pdV6]

IIRC HMRC are happy with a figure of 5% of the original cost.

[Fourmotion]

miller38 said:

Usually you will end up saving between 25 and 50% depending on how generous your employer is so it does make sense if you're buying a bike, save money and no need to pay it all at once.

This isn't something your employer decides. You'll save tax at either 20% or 40% (so using your full entitlement of £1000 tax free that's £200 or £400). Depending on your employer's VAT status, which is not at their disgression (it is a percentage calculated by HMRC depending on their taxable sales), you could save up to 13% as your employer can claim back the VAT.

Most schemes see the employer buy the bike outright, and you pay the full cost (less any VAT they reclaimed) back to them on a tax free basis over a period of usually twelve months, so no final payment is needed.

Your employer saves employer's NI at 12.8%, which is usually the financial benefit they get from it, which goes towards administering the scheme. Plus their staff should be fitter and healthier for riding to work.

[ClassicMercs]

I would recommend setting up your own self administered scheme - good independents have paperwork you can use. May only work well for smaller schemes - say up to 20 people.

Then you can get discounts on buying - the scheme's charge 10% admin to cash in your vouchers - the retailers will give this - or more back to the purchaser.

And I have heard that certain areas of the Public Sector are working on a 3% final payment !!! I have evidence from our local council - and await it from our NHS trust. If so - that's all we will pay in 51 weeks time when our year is up.

[hondafanatic]

Fourmotion said:

...so no final payment is needed.

Unless the employee wants to purchase the bike (at a fair market value). I've seen all sorts of figures banded about from between 2.5% and 10% of the original price. It hasn't been tested yet so I've not seen HMRC commit to a final figure.

If the employer just gives the bike to the employee at the end of the 12 months, then it is still classed as benefit in kind. If the employer/employee are happy to leave the bike as company porperty and just keep riding it, then no final payment is needed.

That's my understanding anyway. So I could be wrong.

ETA - I run the scheme for my company and to be honest it's a doddle. I've not used any of the cycle2work schemes that are out there. I called HMRC to get the correct tax codes, entered them into the PAYE system, and walked across the road with a company cheque and bought the bike. They gave me a VAT receipt and it's as easy as that. My monthly salary reflects the salary sacrifice and Robert's you mother's brother and all that.

Edited by hondafanatic on Thursday 25th June 09:38

[Chris71]

Allegedly the final payments have a habit of going missing, so there's a good chance you'll only pay the salary sacrifice part.

[theboyfold]

Cheers for the feedback people. So far she's stalled on the purchase and thinks she will buy it normally and not through the scheme. The things that worry her are that she won't own the bike, that it could take up to 6 weeks to process and the fact that you should ride it to work (Her commute is too long for a bike ride)

So I think if she does end up buying one it will be at the full purchase price...

[gjohnsto]

HOGEPH said:

neilus said:

and yes you should use the bike for majority of your journeys to work.

Who's going to know if you don't?

I thought it was that the majority of the bike's journeys must be to work....which is slightly different. You would be fine riding it to work twice over the year, assuming you only took it out the shed 3 times.

[pdV6]

gjohnsto said:

HOGEPH said:

neilus said:

and yes you should use the bike for majority of your journeys to work.

Who's going to know if you don't?

I thought it was that the majority of the bike's journeys must be to work....which is slightly different. You would be fine riding it to work twice over the year, assuming you only took it out the shed 3 times.

I think the stipulation is that the bike should be used for at least part of 50% of your journeys to work.

But again, who's checking?

[theboyfold]

pdV6 said:

gjohnsto said:

HOGEPH said:

neilus said:

and yes you should use the bike for majority of your journeys to work.

Who's going to know if you don't?

I thought it was that the majority of the bike's journeys must be to work....which is slightly different. You would be fine riding it to work twice over the year, assuming you only took it out the shed 3 times.

I think the stipulation is that the bike should be used for at least part of 50% of your journeys to work.

But again, who's checking?

So you could ride to the garage to get into the car?

[hondafanatic]

theboyfold said:

pdV6 said:

gjohnsto said:

HOGEPH said:

neilus said:

and yes you should use the bike for majority of your journeys to work.

Who's going to know if you don't?

I thought it was that the majority of the bike's journeys must be to work....which is slightly different. You would be fine riding it to work twice over the year, assuming you only took it out the shed 3 times.

I think the stipulation is that the bike should be used for at least part of 50% of your journeys to work.

But again, who's checking?

So you could ride to the garage to get into the car?

Technically, you could ride to the train station, leave that bike there, get off at whatever train stop is nearest and use a second bike for the end part of your journey. Although both bikes have to come under the £1000 limit (unless your company has applied for a raised limit at a cost of between £300 and £600ish).