Cycle to work scheme?

[DBCohen]

Actually, following on from my figures query, I have just noticed that you were on the EMPLOYER part of the website, not EMPLOYEE. Thos figures do not represent the costs to you, the punter.

Sure enough, tap a £1000 cost into the employee saving calculator, and you find that the cost to you over 12 months is £483 without that final fee.

Forget about it not being yours during the period of the agreement, even if it is 4-5 years - as I said previously, no employer actually wants your bike back off you at any point.

 

[DBCohen]

* What period are you talking about?

After my salary sacrifice finishes (12 months) they'll take a returnable deposit off me as "rental". and give it back to me after (hmm) 2 more years, I think. At that point the bike is mine.

 

[HarryB]

The transfer of ownership at any time as a benefit in kind is certainly allowed.
It's documented better than I can explain it here:

Evans Cycles | Ride2Work | Transfer of Ownership Options

What I don't know is if the employer has any flexibility with the rental charges. Like you say it's probably bound up in the regulations but can anyone confirm this?

I can see that but we are not being offered that option. I think (I haven't had the letter as it finished in April) that I will be asked for £70 + VAT to transfer ownership to from my employer to Cyclescheme for 3 or 4 years(?). After that I will get ownership.

Savings depend on your rate of tax and NI of course and unfortunately my contract ended at the end of a financial year so while I am better off by quite a bit this month - that might be due to the change in allowance rather than the cyclescheme.

 

[HarryB]

After my salary sacrifice finishes (12 months) they'll take a returnable deposit off me as "rental". and give it back to me after (hmm) 2 more years, I think. At that point the bike is mine.

2 years is not so bad I suppose - my battery would be pretty knackered by then though!

 

[HarryB]

Actually, following on from my figures query, I have just noticed that you were on the EMPLOYER part of the website, not EMPLOYEE. Thos figures do not represent the costs to you, the punter.

Sure enough, tap a £1000 cost into the employee saving calculator, and you find that the cost to you over 12 months is £483 without that final fee.

Forget about it not being yours during the period of the agreement, even if it is 4-5 years - as I said previously, no employer actually wants your bike back off you at any point.

I thought I was linking to some general info - neither employer or employee? As I have said (probably repeated now) that the further years of ownership are a problem to me as I don't want to keep them that long. Everybody must make their own decision but for me not worth it.

 

[DBCohen]

Understood, Harry. The problem really is that Cyclescheme was never intended for e-bikes used on a daily basis, as your issues imply. They expected most scheme users to buy a mid-range ordinary bike, not e-bikes with consumable parts. An non-electric bike is not going to wear like an e-bike on daily use.

 

[Mussels]

The transfer of ownership at any time as a benefit in kind is certainly allowed.
It's documented better than I can explain it here:

Evans Cycles | Ride2Work | Transfer of Ownership Options

What I don't know is if the employer has any flexibility with the rental charges. Like you say it's probably bound up in the regulations but can anyone confirm this?

The Evans calculator conveniently misses out a couple of items, the end of term payment which is now substantial and the lack of discount that you would get if you didn't use the scheme.
The discount doesn't happen because the middle men who offer to do all the paperwork for your company demand a large kickback from the retailer, this is why many ebike companies have said no to making their bikes available on the schemes. The third party companies usually restrict the maximum value (for everything - bike, helmet, lock etc) to £1000, this makes buying an ebike difficult and means you pay full whack for all extras.
So after one year it costs an extra £250 to get your £1000 bike, add on the £100+ discount that wouldn't have been hard to get for most bikes and suddenly the discount is looking pretty small. Then think about the restricted retailers you can use due to the middlemen's contracts and it all seems a bit meh.
I'm really not interested in the longer term rental workaround and I expect many companies won't be either as it adds unwanted problems.

 

[andyh2]

I guess any attempt to encourage people to cycle to work, instead of using a car, is a good thing but this does seem to be a bit of a mess.

I would expect there to be 3 main things that make a difference;
1. Does it feel safe?
2. Is it normal?
3. How much does it cost?

1 and 2 are linked and are down to infrastructure and how many people cycle. Holland and Danemark stand out as places where the infrastructure is in place and cycling is seen as normal by everyone. I don't think either of those countries give tax breaks on bike purchase.

3. the cost is surely in comparison to other modes of transport. The difference in cost of commuting by car or public transport compared to cycling is already quite high, especially in central London where cars have a charge to enter.

On the specifics of the cycle scheme;
From an employers perspective in addition to any administration costs of the scheme there will be a cost for purchasing a bike outright at the start and then getting the money back over time from the employee ie what interest rate are they charged on borrowing capital. In the private sector it would be reasonable to pass this on as part of the hire cost. Maybe not an issue in the public sector.
Provided that's taken into account I see no reason why any residual value (25% after 12 months etc) could not be deducted from the hire charges.

12.5% charge by cycle to work scheme operators to the cycle shop seems high. And why are they charging the shop rather than the employer?

There's a child care voucher scheme which allows parents to have a salary sacrifice in exchange for child care vouchers up to £243 per month for registered child care. The admin cost is 2.5% - 5% and charged to the employer. The employer is happy enough as they save the employers NI (currently at 12%) on the salary reduction. And the employee is happy to save about £75 per month on childcare costs.

For the self employed they don't really need a scheme as they can claim 20p per mile for cycle use connected with their business as part of their business costs.

 

[WALKERMAN]

Two of the Cycle To Work people in the office got their final bill on Friday and weren't very happy. They agreed to the scheme 12 months ago before the 25% but ended up still having to pay it instead of the 5% originally stated.

 

[tillson]

Two of the Cycle To Work people in the office got their final bill on Friday and weren't very happy. They agreed to the scheme 12 months ago before the 25% but ended up still having to pay it instead of the 5% originally stated.

Our organisation has all but stopped the scheme because of this. When it was first launched in 2008, it was only intended to last 3 months, but it proved so popular, they kept it running. The new higher final valuations have all but wiped out any benefits to using the scheme. It's virtually dead now, which is a shame.

I seem to remember that when I purchased my bike in 2008, 50 Cycles were passing the, "middle man" commission onto the customer. I had to pay £100 on top of the list price for the bike. The Pro Connect cost about £1500 + £100 commission then and with the Cycle Scheme savings on the first £1000, the total cost to me was about £1200. Had I been required to pay the new 25% final valuation, the bike would have cost me about £1450, a saving of only 50 quid and not worth the bother.

Yes, it seems like they, whoever "they" may be, have managed to kill the scheme off. I'm sure the new rules make sense to someone, somewhere.

 

[Mussels]

Yes, it seems like they, whoever "they" may be, have managed to kill the scheme off. I'm sure the new rules make sense to someone, somewhere.

They aren't new rules, rather the original rules are being enforced now when they weren't in the past.
The original idea was badly flawed to start with.

 

[tillson]

They aren't new rules, rather the original rules are being enforced now when they weren't in the past.
The original idea was badly flawed to start with.

Yes, "they" are actually HMRC who have supposedly clarified the rules regarding the final valuation of the bike after the hire period.

Before this clarification, it worked well. The punter received a discount on the bike, bicycle dealers probably noticed a bit of a boost in sales and more journeys to work were made by bike. It may not have been technically 100% within the taxation rules, but I think that the benefits taken as a whole made sense.

One thing is very clear now after the HMRC's, "clarification", and that is that an incentive to use a bike instead of the car has been killed off.

 

[Jon]

If you work at a LGA governed school under the CYPS then you can access the CTWS through the LA. I would have saved overall £200 on a £1k bike. My personal opinion is, its not worth it because its quite restrictive and you dont own the bike until you pay a final valuation fee at the 12 month period or another fee at the 4 year mark. I like to customise my bikes and under the CTWS technically although people do, you shouldn't mess with the bike

 

[Mussels]

One thing is very clear now after the HMRC's, "clarification", and that is that an incentive to use a bike instead of the car has been killed off.

If petrol savings are to be considered then there's still financial incentive to use a bike, it's just that there's no financial incentive to use the cycle to work scheme.
Companies can probably still get around it by lowering the monthly payments, I'm surprised that wasn't done ages ago.

 

[BrianSmithers]

I work in a school (in Bexley) and they certainly are supporting this, but not at school level, but rather the local authority. The local authority would certainly be able to navigate all the VAT red tape. So as has been suggested bu others, go higher. Try using the advanced search on Google and restrict searches to your local authority website and search for "Cycle to work". We seem to be very fortunate here with support for the scheme, the school is even installing a bike shed for staff.

 

[tillson]

There is still support for the scheme, but now that the tax rules are being implemented properly, ie the buy back price has increased by 500%, it isn't worth doing anymore. There are no savings to be gained.

Because the purchase price is usually the full price when buying through a scheme, you could probably negotiate a better deal by turning up at the bike shop with the cash.

 

[Phill Wheatley]

AVOID CYCLE to WORK SCHEMES - plenty of other and better deals out t

Hi, I think you are lucky you couldn't access it. If I knew now what I did then, I would negotiate a reduction for cash, or take 0% finance on many deals out there. I have just completed 12 months cycle scheme hire and have had to pay an extra £70 to be told I need to keep it for a further 3 years. HMRC rules changed in Aug 2010 on bikes £500+ and some LA's use loan companies to underwrite it. AVOID CYCLE to WORK SCHEMES - plenty of other and better deals out there

 

[tillson]

Hi, I think you are lucky you couldn't access it. If I knew now what I did then, I would negotiate a reduction for cash, or take 0% finance on many deals out there. I have just completed 12 months cycle scheme hire and have had to pay an extra £70 to be told I need to keep it for a further 3 years. HMRC rules changed in Aug 2010 on bikes £500+ and some LA's use loan companies to underwrite it. AVOID CYCLE to WORK SCHEMES - plenty of other and better deals out there

Are you being asked to pay the hire fee for a further three years, or have you been told that you can't dispose of the bike for three years?

 

[cwah]

I was almost going to buy my bike under the cycle to work scheme. I did some research regarding this scheme, I called them and had few answers for us customers that may go for it without knowing what it worth.

1. The tax deduction "benefit":
They advertise saving up to 50%... But that's not going to be true for most of us. This need to be confirmation, but here is my deduction:
a. If your salary is under 35K/year (which is the majority of the population), you are not among the "high tax payer" people. Expect your "saving" to be around 30%.
b. If your salary is over 35K/year you may expect either 40% saving or maybe 50% saving if you're really on top. I haven't done research more research but I think that unless you earn 70K/year or more you won't benefit 50% "saving".

2. Now about the "saving":
a. Once you're under the Cycle to work scheme, the bike doesn't belong to you. Your company will rent the bike for you for a period (usually 12 months). During this period, you'll have to hire the bike and pay 50% to 70% of the bike price.
b. Once the 12 months lease is over (remember you'll have already paid 50% to 70% of the bike price), you'll have the option to purchase the bike for 25% of the bike initial price. Again, remember that the bike doesn't belong to you. Your company was renting the bike for you. If you want it, you can buy it.

3. Example of a £1000 bike purchased under the cycle to work scheme:
a. Suppose you want to purchase a £1000 bike
b. Suppose your salary is under 35K/year, which mean you'll have 30% "tax saving"
c. Like most of the people, you'll certainly want to own the bike after 1 year of use...

==> At the end of the year lease:
- You'll have paid 70% of the bike price. Which is £700.
- You'll have to pay 25% of the bike initial price to purchase it. Which is £250
- You'll have paid a total of £950. Which is £50 saving.


Remember 3 things from the scheme:
1. For most of the people, "saving" would be around 30%.
2. 30% to 50% saving is true only if you only want to hire the bike and leave the bike to your company at the end of the lease.
3. If you want to buy the bike at the end of the year, your real saving would be around 5%

 

[tillson]

==> At the end of the year lease:
- You'll have paid 70% of the bike price. Which is £700.
- You'll have to pay 25% of the bike initial price to purchase it. Which is £250
- You'll have paid a total of £950. Which is £50 saving.

Which is not worth the effort.

Remember, the £50 saving is on the full recommended retail price of the bike. If you turned up at a bike shop with the cash ready to do a deal, or research the model that you are interested in on the internet, you will easily save more than £50.

The (revised / clarified / adjusted) buy-back value has killed off this scheme.