I did quote the relevant paragraph in the guidance regarding VAT that is applicable when your company signs up with a scheme provider whereby there is a provision of a voucher:

 

 

 

The guidance document says nothing about charging VAT on rentals when your company runs your own scheme. The previous guidance (2011) clearly stated at the bottom of page 12:

 

A deduction from salary or similar charge to staff in compensation for noncompletion of salary sacrifice arrangements for the loan of cycles and cyclists’ safety equipment is outside the scope of VAT. It is not consideration for VAT purposes and no output tax is due from the employer and the employee is also not required to pay VAT (see section 7).

 

It follows that if your company runs a self administered scheme, they may elect not to charge VAT.

The total amount of VAT on rentals in a not for profit scheme is about £67.

 

This guidance is outdated. this is the current guidance. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/457866/cycle-to-work-guidance-update.pdf

 

Scroll down to section 2 at the bottom of page 2

There's a couple of aspects of GCI's scheme that don't make sense to me?

 

Firstly, it is the employer who provides the credit. To utilise your licence, GCI must provide the credit, so presumably are doing so on an interest free basis?

 

Secondly, you appear to claim there are no exit fees, so how do you deal with HMRC's market value guidance (especially as I recall that did not apply to bikes of over £1,000).

 

I do know my way around this scheme, having set up my employer's and now being on my third bike. We also benefit from a CC licence.

 

The issue is the hire of the bike not the credit. Employers providing loans to employees are not included in the CCA for loans of less than £15k so the salary sacrifice isn't a regulated activity. Consumer hire is, so the employer must be regulated for Consumer Hire for hire agreements over £1K. We hire the bike directly to the employee using our FCA authorisation.

 

At the end of the scheme, we make the employee a free of charge loan of the bike at the end of the initial hire and appoint the employee as our agent to dispose of the bike to a third party of their choosing at the end of the loan. They can of course keep the bike. The transfer value for tax purposes at that point is negligible. This is what other C2W providers do as well but they charge the employee a 7% deposit. We don't.

 

As regards your CC licence it's probably not for Consumer Hire which is what you'll need. It's now all FCA and no longer CC.

This guidance is outdated. this is the current guidance. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/457866/cycle-to-work-guidance-update.pdf

 

Scroll down to section 2 at the bottom of page 2

 

Hi Rob,

 

this is the breakdown for a self administered scheme including accounting for VAT. Savings: 44% for basic rate tax payers, 53% for higher rate tax payers. How much does your scheme save for these two categories?

 

http://wooshbikes.co.uk/C2W-with-VAT.jpg

Hi Rob,

 

this is the breakdown for a self administered scheme including accounting for VAT. Savings: 44% for basic rate tax payers, 53% for higher rate tax payers. How much does your scheme save for these two categories?

 

http://wooshbikes.co.uk/C2W-with-VAT.jpg

I'm sorry I don't understand your calculations.

Rob,

 

Column B represents the user perspective.

You put into cell B2 the inc VAT price of the bike (£1,000), B3 the gross monthly amount of salary sacrifice (£67).

 

Cell B4 = 12 * B3, 12 month salary sacrifice (£804).

Cell B6 = B4 * 12%, employee's national insurance

Cell B7 = B4 * 20%, 12 month tax on sacrifice

Cell B8 = B4 - B6 - B7, net deduction on salary sacrifice (£546.72 over 12 months) - This is the inclusive VAT amount of rentals.

Cell B13 = C11 * 1.2, buy out including VAT (£9.50 * 1.2 = £11.40)

Cell B14 = B8 + B13, total cost to the user (£546.72 + £11.40 = £558.12)

Cell B15 = B2 - B14, net saving, £1,000 - £558.12 = £441.88

 

Saving ratio for the user: 44.19%

 

Column C represents the employer's perspective.

 

Cell C4 = - B4, 12 month gross salary sacrifice (-£804)

Cell C5 = C4 * 13.8%, employer's national insurance contribution (-£110.95)

Cell C9 = B8 *20/120, VAT due on rentals (which is same as net deductions)

Cell C10: - C2 * 20/120, VAT recovered from purchase (£91.12)

Cell C12: C2 + C4 + C9 + C10, net disbursement (£1,000 - £804 - £110.95 + £91.12 = £9.50)

To balance the disbursement, the employer will sell the bike for £9.50 + VAT.

 

The lower panel is the same calculation but done for higher rate tax payer.

 

 

http://wooshbikes.co.uk/C2W-with-VAT.jpg

 

Using your scheme and on a £1,000 bike, how much does it cost the user at the end of the day?

Edited April 11, 20179 yr by Woosh

Rob,

 

Column B represents the user perspective.

You put into cell B2 the inc VAT price of the bike (£1,000), B3 the gross monthly amount of salary sacrifice (£67).

 

Cell B4 = 12 * B3, 12 month salary sacrifice (£804).

Cell B6 = B4 * 12%, employee's national insurance

Cell B7 = B4 * 20%, 12 month tax on sacrifice

Cell B8 = B4 - B6 - B7, net deduction on salary sacrifice (£546.72 over 12 months) - This is the inclusive VAT amount of rentals.

Cell B13 = C11 * 1.2, buy out including VAT (£9.50 * 1.2 = £11.40)

Cell B14 = B8 + B13, total cost to the user (£546.72 + £11.40 = £558.12)

Cell B15 = B2 - B14, net saving, £1,000 - £558.12 = £441.88

 

Saving ratio for the user: 44.19%

 

Column C represents the employer's perspective.

 

Cell C4 = - B4, 12 month gross salary sacrifice (-£804)

Cell C5 = C4 * 13.8%, employer's national insurance contribution (-£110.95)

Cell C9 = B8 *20/120, VAT due on rentals (which is same as net deductions)

Cell C10: - C2 * 20/120, VAT recovered from purchase (£91.12)

Cell C12: C2 + C4 + C9 + C10, net disbursement (£1,000 - £804 - £110.95 + £91.12 = £9.50)

To balance the disbursement, the employer will sell the bike for £9.50 + VAT.

 

The lower panel is the same calculation but done for higher rate tax payer.

 

 

http://wooshbikes.co.uk/C2W-with-VAT.jpg

 

Using your scheme and on a £1,000 bike, how much does it cost the user at the end of the day?

 

Gross salary sacrifice will be £1,000 / 12 = £83.33 Where do you get £67 from?

Gross salary sacrifice will be £1,000 / 12 = £83.33 Where do you get £67 from?

by trials. I start at £50 a month, then increase it until the net disbursement goes low enough. If you put £68 a month into cell B3, the employer can give the bike away at the end, saving an invoice.

 

Don't take me wrong, I like what you do.

The employer can't give it away. HMRC have a table of fair market value you must use when the transfer takes place. They simple work on the age of the bike: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21667 Page 2

yes, I am aware of this.

In either case, as long as any payment that the employee makes for the cycle is equal to or more than the market value, there will be no tax charge under the employment income rules. If the employee pays less than market value, the difference will be taxable as employment income.

The valuation table gives 25% of ex VAT value as fair market value after one year, a £1,000 Big Bear will be valued at £250 including VAT.

It does not cause any problem when the total net deduction is higher than £250 - that is the case for our test case, a 20% tax payer will have paid £558.12.

yes, I am aware of this.

 

The valuation table gives 25% of ex VAT value as fair market value after one year, a £1,000 Big Bear will be valued at £250 including VAT.

It does not cause any problem when the total net deduction is higher than £250 - that is the case for our test case, a 20% tax payer will have paid £558.12.

No, you are mixing the issues again. The £250 / 25% is the 'buy out' price at the end AFTER the rentals. You are comparing £558.12 with £250. You should be comparing £11.40 with £250.

Wander, as long as the sum of (rentals + final sale) inclusive of VAT is more than 25% of the original purchase price inclusive of VAT, you can word it any way you like.

In my model for basic tax rate payer, the total paid is £465 + VAT (£558 inc VAT), if your are the employer, you can rent out the bike for nothing, and sell the bike at the end for £465 + VAT or a set any arbitrary rental and charge the difference at the end, for example, if you want the final sale to be £208.33 + VAT (£250 inc VAT), then set the rentals amount to £558 - £250 = £308 inc VAT in the hire contract.

As I said, as long as the end user pays in total more than 25% of the original price, there is no problem with HMRC.

Ahem..... leave it to the professionals.

 

If you guys find it so tricky can you imagine Employers wanting to get involved?..............

 

Nor can I.

 

GCI have bundled it up neatly and have approval, why mess about?

If you guys find it so tricky can you imagine Employers wanting to get involved?..............

 

I don't find it tricky. Most members don't deal with PAYE like I do.

It's much less hassle than dealing every month with payslips, pension contributions and tax forms.

But you are wrong in your assumptions and calculations. It's all a bit strange, why creat such a fuss about something that has already been taken care of by someone who really understands the rules?

 

Maybe you simply like to be in the lime light?

 

All the best, David

Wander, as long as the sum of (rentals + final sale) inclusive of VAT is more than 25% of the original purchase price inclusive of VAT, you can word it any way you like.

Wrong again.

 

The problem with anything tax related is a little knowledge is a dangerous thing.

 

This thread has already shown that you were wrong about:-

The National Insurance rate.

Charging VAT.

A credit licence.

The basis for the VAT charge.

& a couple of other points.

 

As has been suggested above leave it to the professionals. I’ve checked through what I can find about the GCI scheme & am struggling to find any holes in it.

But you are wrong in your assumptions and calculations.

do you know where I was wrong?

the self administered schemes are not in direct competition with the scheme providers. In fact, you can download sample C2W contracts from various universities for free. The aim is to make C2W as popular as possible. The scheme providers are often in competition with one another and adding cost and complexity where there weren't.

This thread has already shown that you were wrong about:-

The National Insurance rate.

Charging VAT.

A credit licence.

The basis for the VAT charge.

& a couple of other points.

 

Why don't you correct my numbers?

Why don't you correct my numbers?

Don't need to, you appear to have already accepted that you were wrong on the points listed.

 

You are equally wrong on your latest statement.

 

I could probably get a book & do my own conveyancing. Do I? No not a chance, I'll leave it to a solicitor.

 

Likewise if I ever wanted to do C2W I'd use a company like GCI. I'd just accept that they know what they are talking about without putting an awful lot of effort into a scheme of my own just to save their 5% charge. More chance of them getting all the documentation right than me.

Wander, I did not admit I was wrong and if anything, you just admitted that you don't know anymore than I do.

BTW, I use a solicitor when I buy a property and I act for myself when I sell.

... if anything, you just admitted that you don't know anymore than I do.

Strange conclusion to reach.

 

Do you do your own filings at Companies House as well? Maybe you should get someone to look at your most recent filings & correct them before you get them wrong next year as well.

 

Please don't get me wrong here. I admire your company & what you do. It's just there are some things that you should leave to professionals.

yes, I do our accounts too. Did you spot anything wrong?

Edited April 11, 20179 yr by Woosh

Wander, I did not admit I was wrong and if anything, you just admitted that you don't know anymore than I do.

 

Given the failure of Wander to correct your figures and statements, that is how I am reading it as well.

 

Wander, back up your claim by correcting the figures.

 

Saying "don't need to" isn't an acceptable reply, given that the request of you doing so by Woosh, is a fair and reasonable one.

Edited April 11, 20179 yr by EddiePJ

Saying "don't need to" isn't an acceptable reply, given that the request of you doing so by Woosh, is a fair and reasonable one.

In your opinion!

But if you read back you'll find Woosh has made a number of mistakes already.

yes, I do our accounts too. Did you spot anything wrong?

Yep, mistakes in more than one of your filings. But do you really want me to point them out in an open forum? I'll PM you.

OK, wander.