Cycle 2 Work scheme - what if you don't?
Discussion
My Employer is stting this scheme up at work...
http://www.bike2workscheme.co.uk/
But I live a little too far away to cycle in daily.
But - I quite fancy a cheap tri or road bike for training etc
Is it OK to use the scheme and ride in every now and then??
http://www.bike2workscheme.co.uk/
But I live a little too far away to cycle in daily.
But - I quite fancy a cheap tri or road bike for training etc
Is it OK to use the scheme and ride in every now and then??
I dont think its worth it.
You get a bike on HP without paying tax. But, at the end of the scheme you have to buy it, depending on how long it is before you buy it, it can be up to 25% of the value. The tax office back peddled on the deal the welching gits.
Second, our scheme was bike could only be ordered via Halfords, but the same bike was available elswhere for lots less.
Taking the above to points into account, most in our office concluded that in fact its not a cheap way of getting a bike.
You get a bike on HP without paying tax. But, at the end of the scheme you have to buy it, depending on how long it is before you buy it, it can be up to 25% of the value. The tax office back peddled on the deal the welching gits.
Second, our scheme was bike could only be ordered via Halfords, but the same bike was available elswhere for lots less.
Taking the above to points into account, most in our office concluded that in fact its not a cheap way of getting a bike.
The bike has to be mainly used for commuting, you do not need to commute mainly by bike.
The tax rules have been changed slightly, but new loopholes have been found and it still works out substantially cheaper than buying the bike yourself in most circumstances. Have a read up and do the maths before you buy, but don't be put off just because it isn't quite as good as it used to be.
The tax rules have been changed slightly, but new loopholes have been found and it still works out substantially cheaper than buying the bike yourself in most circumstances. Have a read up and do the maths before you buy, but don't be put off just because it isn't quite as good as it used to be.
Normally final payment is an extra month of what the payments have been. Some employers try to insist that you must use it for at least 50% of your commutes which is actally a load of b
ks as HMRC do not give any stipulations.
Work it out for yourself in terms of what you want to buy against discount etc. Those bikes that don't discount (Pashley, Brompton etc) then its well worth it.
Also remember you can load up on 'safety' extras also - better saddle carbon fibre bar ends, lights etc etc.
ks as HMRC do not give any stipulations.Work it out for yourself in terms of what you want to buy against discount etc. Those bikes that don't discount (Pashley, Brompton etc) then its well worth it.
Also remember you can load up on 'safety' extras also - better saddle carbon fibre bar ends, lights etc etc.
Mr Will said:
The bike has to be mainly used for commuting, you do not need to commute mainly by bike.
The tax rules have been changed slightly, but new loopholes have been found and it still works out substantially cheaper than buying the bike yourself in most circumstances. Have a read up and do the maths before you buy, but don't be put off just because it isn't quite as good as it used to be.
Funnily enough, I asked our HR administrator about this, they said they wouldnt exactly be standing outside your house, watching how you get to work!!The tax rules have been changed slightly, but new loopholes have been found and it still works out substantially cheaper than buying the bike yourself in most circumstances. Have a read up and do the maths before you buy, but don't be put off just because it isn't quite as good as it used to be.
Will is right, there are a few loop holes, but please be careful, my best mate (working for a council!) has just been told his scheme has been sold back to the Government, and he will need to either A) pay 25% for ownership transfer of the bike or B) 'rent' the bike for another 36 months. He wasnt even told of the transfer until he asked about settlement!
In either case, he will be overpaying...check the fine print carefully!
DarrenL said:
Funnily enough, I asked our HR administrator about this, they said they wouldnt exactly be standing outside your house, watching how you get to work!!
Will is right, there are a few loop holes, but please be careful, my best mate (working for a council!) has just been told his scheme has been sold back to the Government, and he will need to either A) pay 25% for ownership transfer of the bike or B) 'rent' the bike for another 36 months. He wasnt even told of the transfer until he asked about settlement!
In either case, he will be overpaying...check the fine print carefully!
He doesn't need to rent the bike for another 36 months, they will loan it to him free of charge for the next 36 months. After those 36 months the bike is judged to have negligible value and can be given to him FOC without raising the ire of the tax man.Will is right, there are a few loop holes, but please be careful, my best mate (working for a council!) has just been told his scheme has been sold back to the Government, and he will need to either A) pay 25% for ownership transfer of the bike or B) 'rent' the bike for another 36 months. He wasnt even told of the transfer until he asked about settlement!
In either case, he will be overpaying...check the fine print carefully!
Another option is that the company give it to him free as a taxable benefit, in which case he will have to pay income tax on the value of the bike (25% of the initial purchase price) but will not have to pay for the bike itself.
Finally, even if your company is unwilling to help, you don't want to go down the extended loan route and you end up buying the bike for 25% of it's initial value, there is still a good saving to be had especially now that VAT has risen to 20%.
Glade said:
The website I linked has very little information about the final payment.
Surely the price is spread over the term and paid off at the end... So why the final payment - the bike is actually the company's asset?
Yes, technically your company buys the bike and then rents it to you for a fixed period. At the end of this period the company then offers you the opportunity to buy the bike off them for "fair market value". Previously it was normally sold to you for between £1 and one months payment but the tax man decided that this was too cheap and therefore a benefit in kind, and set out a table of minimum values depending on the original value of the bike and the length of hire.Surely the price is spread over the term and paid off at the end... So why the final payment - the bike is actually the company's asset?
The ways around this are the ones I have outlined above, but even if you can't dodge it, it is still a good deal. You are saving the income tax, VAT and national insurance on the purchase price of the bike, plus getting a 0% loan, so even paying the maximum of 25% at the end still leaves you up on where you started.
Mr Will said:
Yes, technically your company buys the bike and then rents it to you for a fixed period. At the end of this period the company then offers you the opportunity to buy the bike off them for "fair market value". Previously it was normally sold to you for between £1 and one months payment but the tax man decided that this was too cheap and therefore a benefit in kind, and set out a table of minimum values depending on the original value of the bike and the length of hire.
The ways around this are the ones I have outlined above, but even if you can't dodge it, it is still a good deal. You are saving the income tax, VAT and national insurance on the purchase price of the bike, plus getting a 0% loan, so even paying the maximum of 25% at the end still leaves you up on where you started.
I dont think you are taking into account that you may be able to buy the same bike from a source other than your company cycle to work scheme for a lot less.The ways around this are the ones I have outlined above, but even if you can't dodge it, it is still a good deal. You are saving the income tax, VAT and national insurance on the purchase price of the bike, plus getting a 0% loan, so even paying the maximum of 25% at the end still leaves you up on where you started.
Depends on how you plan to fund the payment - and the gap. Having it trickle out of your income, pre tax, as a monthly payment worked out better for me than buying it outright as a lump elsewhere or putting it on a card and paying the interest over the term as well.
So depends entirely on your situation.
I would say the bike I ended up purchasing, there is no way I would have paid ticket price if I was liable for the entire amount. There were as good bikes available retail for the 'real' cost to me after the tax savings. That's what I compared it too.
But it came down to how I wanted the payments to be handled.
There is also a question of if you would prefer to own the bike outright. Leasing it through the scheme is just that, your employer owns it.
My employer will not ask for the bike back at the end of term (unless you really want to take ownership after the first year). They will continue to own it and lease it to you, for free. At some point the value of the bike descends to £0 so you can take ownership then. Or at some point before that on a sliding scale. It's only really the year 1 payment thats painful and this again depends on the initial purchase cost of the bike.
The risk in that scheme for me is if I get sacked or move jobs. I don't think it's as good as scheme as it used to be. But it's certainly not bad.
Careful consideration of the costs needs to be done coupled with what bikes are on the market in general and what ones are actually available for you to buy based on what scheme and what retailers you are 'allowed' to buy
So depends entirely on your situation.
I would say the bike I ended up purchasing, there is no way I would have paid ticket price if I was liable for the entire amount. There were as good bikes available retail for the 'real' cost to me after the tax savings. That's what I compared it too.
But it came down to how I wanted the payments to be handled.
There is also a question of if you would prefer to own the bike outright. Leasing it through the scheme is just that, your employer owns it.
My employer will not ask for the bike back at the end of term (unless you really want to take ownership after the first year). They will continue to own it and lease it to you, for free. At some point the value of the bike descends to £0 so you can take ownership then. Or at some point before that on a sliding scale. It's only really the year 1 payment thats painful and this again depends on the initial purchase cost of the bike.
The risk in that scheme for me is if I get sacked or move jobs. I don't think it's as good as scheme as it used to be. But it's certainly not bad.
Careful consideration of the costs needs to be done coupled with what bikes are on the market in general and what ones are actually available for you to buy based on what scheme and what retailers you are 'allowed' to buy
Huntsman said:
I dont think you are taking into account that you may be able to buy the same bike from a source other than your company cycle to work scheme for a lot less.
Depends on the scheme, ours would price match if you could find it cheaper elsewhere, including on the internet.Mr Will said:
Huntsman said:
I dont think you are taking into account that you may be able to buy the same bike from a source other than your company cycle to work scheme for a lot less.
Depends on the scheme, ours would price match if you could find it cheaper elsewhere, including on the internet.lingus75 said:
So, its down to the employer as to how much they want to charge me for the bike?
What if I pay the whole amount of the loan in one go, what implications would that have as it wouldnt even mean the money was out of the business.
Yes and no. They can charge you what they like, but if this is lower than the value set out in the HMRC table (based on the original price and the age of the bike) then the difference becomes a taxable benefit.What if I pay the whole amount of the loan in one go, what implications would that have as it wouldnt even mean the money was out of the business.
In general, the longer you keep the bike the cheaper it gets. Paying it off in one lump is pointless.
http://www.hmrc.gov.uk/manuals/eimanual/eim21667a....
The table is near the bottom.
seems foolish creating a scheme to encourage cycling to work, then tax it out of existence!
Why depreciate an asset like a £500 cycle over 6 years!
The table is near the bottom.
seems foolish creating a scheme to encourage cycling to work, then tax it out of existence!Why depreciate an asset like a £500 cycle over 6 years!
Glade said:
http://www.hmrc.gov.uk/manuals/eimanual/eim21667a....
The table is near the bottom.
seems foolish creating a scheme to encourage cycling to work, then tax it out of existence!
Why depreciate an asset like a £500 cycle over 6 years!
They haven't taxed it out of existence, even with the 25% payment it still works.The table is near the bottom.
seems foolish creating a scheme to encourage cycling to work, then tax it out of existence!Why depreciate an asset like a £500 cycle over 6 years!
What I believe though is that it wasn't HMRC's intention to make the employee pay the 25%. I think they were hoping that the companies would continue to sell the bikes to the employees after 1 year for a nominal (£1) fee and the employee would just end up paying tax on the benefit in kind (~£50 on a £1k bike).
It is the cycle-scheme companies which have complicated it by spotting the age loophole and running with it, but it's not as bad as it first seems. After the first year the bike is owned by cyclescheme (not your employer) so you are free to leave the company, take advantage of the scheme again, or do whatever else you want without penalty.
Mr Will said:
Glade said:
http://www.hmrc.gov.uk/manuals/eimanual/eim21667a....
The table is near the bottom.
seems foolish creating a scheme to encourage cycling to work, then tax it out of existence!
Why depreciate an asset like a £500 cycle over 6 years!
They haven't taxed it out of existence, even with the 25% payment it still works.The table is near the bottom.
seems foolish creating a scheme to encourage cycling to work, then tax it out of existence!Why depreciate an asset like a £500 cycle over 6 years!
What I believe though is that it wasn't HMRC's intention to make the employee pay the 25%. I think they were hoping that the companies would continue to sell the bikes to the employees after 1 year for a nominal (£1) fee and the employee would just end up paying tax on the benefit in kind (~£50 on a £1k bike).
It is the cycle-scheme companies which have complicated it by spotting the age loophole and running with it, but it's not as bad as it first seems. After the first year the bike is owned by cyclescheme (not your employer) so you are free to leave the company, take advantage of the scheme again, or do whatever else you want without penalty.
£500 Bike, that costs
£287.5 With Scheme "discount" available on my salary <==== this looks quite attractive...
but the total cost is:
412.5 including the 25% Payment.
And as they hide the final payment - there is only the briefest reference on that site - its really not as good as it sounds.
I was thinking you're Saving £200+ but actually only saving £90 - thats 1 tank of petrol, and a Ginsters!
ETA... and for £90 saving it's not enough for an impulse buy.
Edited by Glade on Wednesday 30th March 21:34
Glade said:
I should qualify that, I won't be at my current employer for 6 years... so will end up paying the 25%
£500 Bike, that costs
£287.5 With Scheme "discount" available on my salary <==== this looks quite attractive...
but the total cost is:
412.5 including the 25% Payment.
And as they hide the final payment - there is only the briefest reference on that site - its really not as good as it sounds.
I was thinking you're Saving £200+ but actually only saving £90 - thats 1 tank of petrol, and a Ginsters!
ETA... and for £90 saving it's not enough for an impulse buy.
No, you are missing a small point. After the first year, your employer doesn't own the bike any more, they give it to cycle scheme, who then lend it to you for the next 5 years. You can leave the company after the year is up without having to pay for the bike at that point.£500 Bike, that costs
£287.5 With Scheme "discount" available on my salary <==== this looks quite attractive...
but the total cost is:
412.5 including the 25% Payment.
And as they hide the final payment - there is only the briefest reference on that site - its really not as good as it sounds.
I was thinking you're Saving £200+ but actually only saving £90 - thats 1 tank of petrol, and a Ginsters!
ETA... and for £90 saving it's not enough for an impulse buy.
Also, a sub £500 bike attracts a lesser final payment than a more expensive one (16% IIRC)
You are also leaving out of the equation the interest free monthly payments, which would normally attract an extra charge.
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