Yet Another Cycling Forum
General Category => The Knowledge => Topic started by: citoyen on 10 September, 2020, 06:53:43 pm
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What are your options when your employer isn't on a cycle to work scheme and can't be persuaded to sign up? Are there any other legit ways to take advantage of the tax breaks?
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What are your options when your employer isn't on a cycle to work scheme and can't be persuaded to sign up? Are there any other legit ways to take advantage of the tax breaks?
I believe the official advice is find a better employer.
J
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What are your options when your employer isn't on a cycle to work scheme and can't be persuaded to sign up? Are there any other legit ways to take advantage of the tax breaks?
I believe the official advice is find a better employer.
J
Yes, I suspected as much.
I’m not asking on my own behalf so I don’t know if there’s any possibility of the employer in question being open to changing their mind. Apparently they used to be signed up to a c2w scheme but changes in the organisation mean they no longer are, and it doesn’t sound like signing up again is a high priority.
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If self purchasing, I would put it on a 0% credit card so at least you can spread out the cost if necessary.
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Having operated the various Cycle to Work schemes when managing an LBS the real end result of all the maths isn't that brilliant . . .
The LBS has to give up 10% to most of the schemes and 15% if it's a Halfords voucher (that's at November 2019, I believe it may be more now?) - accessories command a 15% kickback from the LBS to the scheme operator. That reflects in the total transaction cost and needs to be looked at in the light of the "tax and NI saving" for paying a higher price for the bike against self-funding (obviously if you can). There are also several schemes where the user has to pay an "exit fee" of a % of the value.
Various options with zero interest credit card options etc can make it work with a bit of research - and getting a better price from the LBS/bike supplier.
BUT from what I hear the current shortage of bikes (other than the mega-expensive models) means that discounts are hard to come by - market forces and all that.
Last time I looked the Green Commute scheme https://greencommuteinitiative.uk/ had some different approaches that may work in a more cost effective way.
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BUT from what I hear the current shortage of bikes (other than the mega-expensive models) means that discounts are hard to come by - market forces and all that.
Yes, you'd normally expect to see some good discounts on current year models at this time of year, but there's very slim pickings out there, and a lot of 2021 ranges don't seem to be available yet either.
Last time I looked the Green Commute scheme https://greencommuteinitiative.uk/ had some different approaches that may work in a more cost effective way.
Thanks, will pass that on. Looks like it still requires the employer to do the paperwork though...
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Mrs Trekker mentioned we could transfer the parts from her old commuter (and her first road bike bought to see if she liked it) onto a shiny new, more suitable frame.
Cannot find one....
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I bought a Synapse on my works C2W scheme about 7 years ago. List price was £700. By the time I'd paid the exit fee, and an "admin" fee, I saved about £70
Other schemes may differ, but if I was doing it again, I'd go 0% c/c
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AIUI a lot of employers have no mechanism in place to charge the admin/exit fee so you can make out handsomely that way.
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I've suggested to the prospective bike buyer that they focus on looking for the bike they want to buy, then working out the best way to fund the purchase.
As well as credit cards, a lot of the bigger retailers seem to offer finance packages too.
I've already decided what bike I would get (https://www.cannondale.com/en-gb/bikes/road/gravel/topstone/topstone-2) if it were me making the purchase, which is of course the most fun part of offering advice to prospective bike buyers...
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The LBS has to give up 10% to most of the schemes and 15% if it's a Halfords vouche[/i]
It's understandable why independents would dislike the Halfords voucher, but if the bike is available from them it's usable on all bikes including those reduced in a sale. It's certainly unfair that they've been allowed to be administrator and supplier, but from a purchasers perspective it's probably the best voucher to have, if Halfords can supply the bike you want.
The high transfer of ownership cost came about when HMCE clarified that giving it away was a benefit (I'm surprised anyone ever considered it otherwise) it didn't take long for the scheme providers to find a legal way around it by extending the period of time, lowering the value, before that transfer.
I dislike the scheme, those on low pay who would most likely benefit are excluded, whilst those buying new toys every year are rewarded.
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The employer doesn't have to use a scheme provider. They could just pay the shop directly, and set up a salary sacrifice arrangement to repay it.
Would mean no extra admin fees.
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I've suggested to the prospective bike buyer that they focus on looking for the bike they want to buy, then working out the best way to fund the purchase.
If they can come up with some self employed income, the first £1,000 is considered a trading allowance and tax free (Though you can't additionally claim expenses)
2 - 3 hours Deliveroo a week = £1,000 tax free bike spend a year.
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The employer doesn't have to use a scheme provider. They could just pay the shop directly, and set up a salary sacrifice arrangement to repay it.
Would mean no extra admin fees.
Except the cost of the time for the internal person to do that admin...
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BUT from what I hear the current shortage of bikes (other than the mega-expensive models) means that discounts are hard to come by - market forces and all that.
Yes, you'd normally expect to see some good discounts on current year models at this time of year, but there's very slim pickings out there, and a lot of 2021 ranges don't seem to be available yet either.
Last time I looked the Green Commute scheme https://greencommuteinitiative.uk/ had some different approaches that may work in a more cost effective way.
Thanks, will pass that on. Looks like it still requires the employer to do the paperwork though...
Green Commute is pretty flexible in my experience ;) - they worked out a get-around for the original £1,000 limit ... seemed like a fiddle but was perfectly legal .... worth talking to them direct
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The employer doesn't have to use a scheme provider. They could just pay the shop directly, and set up a salary sacrifice arrangement to repay it.
Would mean no extra admin fees.
This. Sure, there is a time cost to the employer, but salary sacrifice doesn't seem that unusual nowadays to sort out.
I haven't done it because last time I wanted to, the rules seemed to keep getting reinterpreted around final purchase price, and I didn't want the hassle of figuring out what the correct interpretation was when the benefit appeared to be shrinking quite a bit.
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The LBS has to give up 10% to most of the schemes and 15% if it's a Halfords vouche[/i]
It's understandable why independents would dislike the Halfords voucher, but if the bike is available from them it's usable on all bikes including those reduced in a sale. It's certainly unfair that they've been allowed to be administrator and supplier, but from a purchasers perspective it's probably the best voucher to have, if Halfords can supply the bike you want.
The high transfer of ownership cost came about when HMCE clarified that giving it away was a benefit (I'm surprised anyone ever considered it otherwise) it didn't take long for the scheme providers to find a legal way around it by extending the period of time, lowering the value, before that transfer.
I dislike the scheme, those on low pay who would most likely benefit are excluded, whilst those buying new toys every year are rewarded.
Not sure that you've got the right end of the stick re Halfords - my understanding is that :
- if the employer uses the Halfords scheme (i.e. as the manager of the scheme) and you buy the bike from Halfords you pay RRP, not a sale price (at store level there's probably an unofficial deal to be done?)
- if the employer uses the Halfords scheme (i.e. as the manager of the scheme) then the LBS can supply any bike brand but must give up 15% of the sale price.
To add to earlier comments - there is quite a lot of abuse of the whole tax benefit scheme - I had a customer who bought an Ultegra crank power-meter set (can't remember the brand) using the voucher to offset payments against his higher rate tax - he called to collect it in his very large 4x4 vehicle of the variety manufactured in Warwickshire . .. . oh, and he'd bought a £900+ bike on the scheme for his wife in the previous purchasing window for which he was eligible (not from me)
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Not sure that you've got the right end of the stick re Halfords - my understanding is that :
- if the employer uses the Halfords scheme (i.e. as the manager of the scheme) and you buy the bike from Halfords you pay RRP, not a sale price (at store level there's probably an unofficial deal to be done?)
- if the employer uses the Halfords scheme (i.e. as the manager of the scheme) then the LBS can supply any bike brand but must give up 15% of the sale price.
No, all the Halfords brands accept Halfords vouchers against discounted items, always have, I administered a scheme about ten years ago and it was the case then. Here's what Tredz say (First google hit)
Yes, you can use your Cycle to Work voucher on any discounted or clearance bikes and eligible accessories.
https://www.tredz.co.uk/help-advice/customer-service/shopping-services/cycle-to-work/halfords-cycle2work
Cyclescheme have also signed up some of the bigger players to commit to accepting vouchers for discounted bikes
https://www.cyclescheme.co.uk/community/featured/sale-bikes-on-cyclescheme
It is tough for the small independents, even tougher if they don't understand what they're up against.
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Not sure that you've got the right end of the stick re Halfords - my understanding is that :
- if the employer uses the Halfords scheme (i.e. as the manager of the scheme) and you buy the bike from Halfords you pay RRP, not a sale price (at store level there's probably an unofficial deal to be done?)
- if the employer uses the Halfords scheme (i.e. as the manager of the scheme) then the LBS can supply any bike brand but must give up 15% of the sale price.
No, all the Halfords brands accept Halfords vouchers against discounted items, always have, I administered a scheme about ten years ago and it was the case then. Here's what Tredz say (First google hit)
Yes, you can use your Cycle to Work voucher on any discounted or clearance bikes and eligible accessories.
https://www.tredz.co.uk/help-advice/customer-service/shopping-services/cycle-to-work/halfords-cycle2work
Cyclescheme have also signed up some of the bigger players to commit to accepting vouchers for discounted bikes
https://www.cyclescheme.co.uk/community/featured/sale-bikes-on-cyclescheme
It is tough for the small independents, even tougher if they don't understand what they're up against.
I stand corrected - I haven't managed the shop since November 2019 - my recollection was from an employee of a Halfords voucher using employer who came to us having been thwarted at a Halfords store, IIRC he wanted a Boardman - he bought a previous season Bianchi that I had in stock and was keen to get rid of :thumbsup:
The real killer for the LBS was the 10 or 15% cost they had to bear.
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The employer doesn't have to use a scheme provider. They could just pay the shop directly, and set up a salary sacrifice arrangement to repay it.
Would mean no extra admin fees.
Except the cost of the time for the internal person to do that admin...
Which is negligible. The biggest issue for the employer is cost as they have to pay for the bikes initially. If there is only a couple, no problem but rolling it out and encouraging all employees to take advantage could be expensive especially for a small business.
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I would say cycle schemes are intended for larger employers. The tax breaks for the employer and employee are available without a scheme and much better prices can generally be achieved, however it does need an willingness from the employer.
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Except the cost of the time for the internal person to do that admin...
Which is negligible. The biggest issue for the employer is cost as they have to pay for the bikes initially.
Isn't that the case whether they use a scheme or do the administration themselves?
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What are your options when your employer isn't on a cycle to work scheme and can't be persuaded to sign up? Are there any other legit ways to take advantage of the tax breaks?
I believe the official advice is find a better employer.
J
A bit extreme, just because of a bike. :P
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A bit extreme, just because of a bike. :P
It's less extreme than moving to a better country.
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A bit extreme, just because of a bike. :P
It's symptomatic of wider issues. Suggests they don't take the needs of their employees seriously, not willing to make efforts to reduce environmental impact of their business, not willing to listen to what their employees are saying.
It may not be a red flag, but it's certainly a waved yellow.
J
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A bit extreme, just because of a bike. :P
It's symptomatic of wider issues.
J
Might also mean that some staff earn so little that they can't offer the scheme. That may be an indication that they're a poor employer, but it isn't always the case.
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Might also mean that some staff earn so little that they can't offer the scheme. That may be an indication that they're a poor employer, but it isn't always the case.
Yup.
J
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Or they are planning on sacking everyone in a few months. So not much point signing up for a 1 year agreement...
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A bit extreme, just because of a bike. :P
It's symptomatic of wider issues. Suggests they don't take the needs of their employeescitizens seriously, not willing to make efforts to reduce environmental impact of their business country, not willing to listen to what their employees citizens are saying.
It may not be a red flag, but it's certainly a waved yellow.
J
Sounds about right for the move country option, too...
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It's a bit of a strange perk really (they mostly are), the tax benefits roll upwards, so I have always doubted it does much for the bottom of the workforce. But then cycling (even cycle-commuting) is a very middle-class affair. As such most companies who offer the scheme are probably the employers of reasonably paid middle-class professionals.
I felt a bit bad (as really it's just tax avoidance, I could afford the bike) – but not bad enough not to – using it to get a Brompton, but it was a fair saving. I think I had to pay £30 to make it mine at the end. I did try to get another Brompton this year, but the wait to get one through Halfords meant we didn't bother this time around (the mothership doesn't offer it all year round).
It may encourage some people to cycle, of course, in which case I suppose it's incrementally beneficial. I've no idea how effective it is or the cost of the scheme. I suspect there's probably better ways to get people cycling, but given the governments we have, and the fact the blinds are always drawn down on their imaginations, often it's best to accept something rather than the usual nothing.
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Indeed, apart from spreading the cost over a year with 0% finance, it only really makes financial sense for those paying a higher rate of tax, so you've already excluded
>60% >85%[1] of the working population.
Removing (or vastly reducing) VAT from bikes and cycle related things (even exercise related things) would be considerably easier, less hassle overall, but doesn't help line the pockets of various companies/schemes that take their ~10% vig.
(as really it's just tax avoidance, I could afford the bike)
Quite. The £2.5k Wilier I bought on the scheme was not a commuting bike, although I did use it for commuting for more than 50% of its rides in the first year to keep within the spirit of the scheme.
1. I checked the numbers: https://www.bbc.co.uk/news/business-40117521 is from 2017 but says only 15% of taxpayers pay at the 40% or 45% rate.
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Yes. Removing VAT on bikes and exercise equipment would be a good start. Looking at ways for employers to make bikes freely available, a basic bike isn't expensive. Using the scheme to get a Brompton basically handed me £400. I do use the Brompton for commuting though (or did). But I would have bought one anyway.
Everyone I know who's used the scheme has been an established cyclist. I'm sure there are newbies out there, of course, but I've no idea how many people use such a scheme as a springboard to start commuting or cycling in general, rather than fund an established practice or hobby.
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Indeed, apart from spreading the cost over a year with 0% finance, it only really makes financial sense for those paying a higher rate of tax, so you've already excluded >60% >85%[1] of the working population.
Why is it only a benefit to higher rate tax payers ? Avoiding national insurance contributions (for both employer and employee) and basic rate tax is a benefit to anyone.
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Indeed, apart from spreading the cost over a year with 0% finance, it only really makes financial sense for those paying a higher rate of tax, so you've already excluded >60% >85%[1] of the working population.
Why is it only a benefit to higher rate tax payers ? Avoiding national insurance contributions (for both employer and employee) and basic rate tax is a benefit to anyone.
Yes, but those gains are then pretty much eaten up by the final fees (or the deposit you pay up front to avoid those). And most of the time you can pay even less than a basic rate taxpayer would save by paying cash (or sticking it on a 0% credit card) and buying a bike in a sale or a previous years model. (Most of which aren't available via the scheme.)
Higher rate taxpayers save more and so it's often a better deal for them to buy a current model bike at full RRP through the scheme.
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Indeed, apart from spreading the cost over a year with 0% finance, it only really makes financial sense for those paying a higher rate of tax, so you've already excluded >60% >85%[1] of the working population.
Why is it only a benefit to higher rate tax payers ? Avoiding national insurance contributions (for both employer and employee) and basic rate tax is a benefit to anyone.
Yes, but those gains are then pretty much eaten up by the final fees (or the deposit you pay up front to avoid those).
Most of the scheme providers have worked round that, it's pretty simple, just delay the transfer of ownership till the asset value has reduced to nothing. This is being done with HMCE approval.
Also, the point about 0% finance, it isn't something available to all, those for whom it might make the biggest difference are least likely to be offered it.
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And most of the time you can pay even less than a basic rate taxpayer would save by paying cash (or sticking it on a 0% credit card) and buying a bike in a sale or a previous years model. (Most of which aren't available via the scheme.)
Unless it's a Brompton you're after!
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Most of the scheme providers have worked round that, it's pretty simple, just delay the transfer of ownership till the asset value has reduced to nothing. This is being done with HMCE approval.
I vaguely recall something about my company writing off the bike, based on the principle that a second hand bike is of no value to them as an asset. This was a few years ago, though, and I don't know if they could get away with that under current rules.
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But then cycling (even cycle-commuting) is a very middle-class affair.
It's a common myth
https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
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Indeed, apart from spreading the cost over a year with 0% finance, it only really makes financial sense for those paying a higher rate of tax, so you've already excluded >60% >85%[1] of the working population.
Why is it only a benefit to higher rate tax payers ? Avoiding national insurance contributions (for both employer and employee) and basic rate tax is a benefit to anyone.
Yes, but those gains are then pretty much eaten up by the final fees (or the deposit you pay up front to avoid those). And most of the time you can pay even less than a basic rate taxpayer would save by paying cash (or sticking it on a 0% credit card) and buying a bike in a sale or a previous years model. (Most of which aren't available via the scheme.)
Higher rate taxpayers save more and so it's often a better deal for them to buy a current model bike at full RRP through the scheme.
The requirement to pay full RRP is not a necessary feature of schemes per say, it is the scheme providers maximising their profits. If the requirement for schemes to be regulated by the FCA was removed then perhaps there would be more competition and more self administered schemes. If you run your own scheme then you can haggle when purchasing, but there is the hurdle of the £1000 limit.
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Most of the scheme providers have worked round that, it's pretty simple, just delay the transfer of ownership till the asset value has reduced to nothing. This is being done with HMCE approval.
I vaguely recall something about my company writing off the bike, based on the principle that a second hand bike is of no value to them as an asset. This was a few years ago, though, and I don't know if they could get away with that under current rules.
Yes, that used to be common practice, but was always dodgy as it's the transfer of an asset at less than market value with rightly should be taxed as a perk. It has now been clarified, if you transfer ownership of a £500+ bike at he end of the first year you will pay 25% of the purchase price (Your company can still give you the bike for free, but you'll get taxed on the value of that gift) Alternatively, most scheme's offer to take ownership of the bike for a 7% deposit, the after a further 36 months you give the bike back to the scheme and get your deposit back, or you simply keep the bike.
https://www.cyclescheme.co.uk/files/hmrc/endofhire_faqs.pdf
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Thanks, I'm obviously well out of date on this!
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The requirement to pay full RRP is not a necessary feature of schemes per say, it is the scheme providers maximising their profits. If the requirement for schemes to be regulated by the FCA was removed then perhaps there would be more competition and more self administered schemes. If you run your own scheme then you can haggle when purchasing, but there is the hurdle of the £1000 limit.
I gave examples in an earlier post that many of the major suppliers are taking the vouchers against discounted bikes, independent shops don't have the margins to do this and are also probably being hammered by loosing a larger proportion of the vouchers face value. That's a bit tough on the independents, but as a hard nosed consumer, there's not many bikes you can't buy at the best price on a C2W scheme.
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My previous employer didn't offer cycle to work (despite being the sort of place with lots of sports cyclists). My current one is signed up to the Evans scheme, but when I was last looking to use it you could get a much better bike for the equivalent total cost by buying a discounted bike elsewhere. That was just down to the bikes that Evans had on sale though. I'm not convinced that the scheme offers all that much benefit for the average person buying an average bike to ride a couple of miles to work. For that purpose you can buy a functional new bike from a shop for £200. Half that if you buy a secondhand one. Add an extra £30 for a basic lock and lights and you are done. If £130 is too significant an outlay, I doubt your employer is on the scheme.
Maybe the C2W scheme really comes into it's own for specialist bikes like e-bikes, folders, recumbents etc, but I reckon you'd get far more people on bikes for similar outlay if you just took VAT off the £200 bike and the locks/lights that are needed.
Evans offer a free extended hire system where you get to keep the bike while not owning it for an additional period until they consider the market value is negligible and they transfer the bike to you (no deposit, unlike cyclescheme).
https://www.evanscycles.com/b2b/ride-to-work-faqs
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But then cycling (even cycle-commuting) is a very middle-class affair.
It's a common myth
https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
Hmm, I'm not convinced that disproves it – a quick count of the bars on that occupation graph stacks it towards my conjecture. But it's such a low baseline – outside a few population clusters, very very few people cycle.
I suspect (and more conjecture) that's there's a significant difference between the groups. I don't think one group is cycling on a £1,000 bike or likely to net a significant benefit from the current C2W scheme (or work for an employer that offers it). I could be wrong, of course. But the savings from someone in a lower tax band buying a £250 bike would be minimal, the only real benefit would be spreading the cost interest free.
It also seems a bit complicated. I confess, I didn't realise you could use the Evans voucher elsewhere (that's my mothership's scheme), I just assumed it had to be used at Evans.
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It also seems a bit complicated. I confess, I didn't realise you could use the Evans voucher elsewhere (that's my mothership's scheme), I just assumed it had to be used at Evans.
I can't find anywhere that says that - if I implied it I didn't mean to. I ended up paying cash elsewhere rather than using the Evans scheme as they didn't have bikes I wanted inside the £1k limit (in place at the time).
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The requirement to pay full RRP is not a necessary feature of schemes per say, it is the scheme providers maximising their profits. If the requirement for schemes to be regulated by the FCA was removed then perhaps there would be more competition and more self administered schemes. If you run your own scheme then you can haggle when purchasing, but there is the hurdle of the £1000 limit.
You don't need to run your own scheme to be able to haggle. You just need to find the right person at the bike shop to talk to. The scheme doesn't care.
A voucher for £x is worth ~90% of that to the shop. If you want to buy anything other than a RRP bike then it's probably going to be some form of a negotiation with the bike shop.
When I bought my Wilier in 2009 it was a previous year's model that was in a sale. When I asked about buying it through the scheme the initial person on the floor said they couldn't do it as the bike was already discounted and their margins were already thin given they won't get the full voucher price. I spoke to the manager and said I'd cover the money they'd "lose" from only getting 90% of the voucher price by paying an extra £150 (my voucher[1] was for £1500). That cured that problem and they had no problem selling the bike on the scheme, it was still a bargain.
(I also broke a different rule by paying the balance by credit card, which you weren't supposed to be able to do. It should have been cash or debit card only.)
1. Our company had an existing CCL with a £1500 limit so they weren't bound by the default £1000 limit for companies without their own CCL.
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https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
Thanks for the link, some interesting data.
I'm pleased to see that I am not the only one who has realised that the Cycle to Work scheme is highly inefficient tax avoidance scheme which mainly benefits a few companies who have successfully gamed it to accrue most of the benefits, and wealthier people who most likely would have bought the bike anyway, while doing nothing at all for those on low incomes who could really use the help to buy a bike.
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https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
Thanks for the link, some interesting data.
I'm pleased to see that I am not the only one who has realised that the Cycle to Work scheme is highly inefficient tax avoidance scheme which mainly benefits a few companies who have successfully gamed it to accrue most of the benefits, and wealthier people who most likely would have bought the bike anyway, while doing nothing at all for those on low incomes who could really use the help to buy a bike.
Yeah, i reached this conclusion many years ago.
The question is, if you wanted to make a scheme to encourage bike uptake, get people cycling, and that benefits everyone from the poorest min wage worker up. How would you design it ?
J
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I probably wouldn't spend it on the actual bikes. The money would be better spent on a combination of infrastructure** and confidence training, particularly for underrepresented groups (along the lines of the Breeze scheme).
Most non-cycling people will already be paying something for their everyday transport* - whether car, bus or train - so the relatively low cost of a bike is unlikely to be the barrier.
*If they're able to walk to work etc that's even better.
**In the broader sense, so it could mean funding workplace cycle parking, on-street bike hangars, etc rather than just road-related stuff.
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It's easy to underestimate the appeal of 0% finance that you don't even notice you're paying out.
My former employer had people spending £250 on Halfords bikes to ride to work. Admittedly, only four, but the two employees who spent much more than that on their bikes didn't use the (Halfords) scheme.
There's a snowball effect of people riding bikes, and that works at a company level as well as a national one.
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I'm pleased to see that I am not the only one who has realised that the Cycle to Work scheme is highly inefficient tax avoidance scheme which mainly benefits a few companies who have successfully gamed it to accrue most of the benefits, and wealthier people who most likely would have bought the bike anyway, while doing nothing at all for those on low incomes who could really use the help to buy a bike.
I've benefited from the cycle to work scheme and I went to a grammar school. I don't approve of either in principle.
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But then cycling (even cycle-commuting) is a very middle-class affair.
It's a common myth
https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
p17! ;D
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A bit extreme, just because of a bike. :P
It's symptomatic of wider issues. Suggests they don't take the needs of their employeescitizens seriously, not willing to make efforts to reduce environmental impact of their business country, not willing to listen to what their employees citizens are saying.
It may not be a red flag, but it's certainly a waved yellow.
J
Sounds about right for the move country option, too...
Do other countries offer free bicycles to their citizens? In France, the best you can get is a 50€ voucher for having an old bike fixed, so the British c2w scheme doesn't sound that bad!
A
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I'm pleased to see that I am not the only one who has realised that the Cycle to Work scheme is highly inefficient tax avoidance scheme which mainly benefits a few companies who have successfully gamed it to accrue most of the benefits, and wealthier people who most likely would have bought the bike anyway, while doing nothing at all for those on low incomes who could really use the help to buy a bike.
I've benefited from the cycle to work scheme and I went to a grammar school. I don't approve of either in principle.
To be fair, I felt bad about taking £400 from HRMC, and I'm sure it's a feeling that's not reciprocated when HRMC decide I've not paid enough tax. I don't think they're lachrymose when they send me that letter. Tax computer sad. Tax computer has no reason to live. Tax computer take pills and jump off bridge.
I'm not really convinced that the cost of a bike is really the hurdle when it comes to cycling – it's negligable compared to running a car or paying for public transport. My first bike in this latter stage of my cycling career cost £130 (and it's still in the garage, though is now the proud owner of a wobbly bottom bracket – I suppose this is the fate of us all in the end).
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What proportion of the average shops’ adult bike sales are C2W or similar?
I have a theory that C2W encourages bike shops to stock more thousand-poundish bikes at the expense of cheaper models, thus putting off lower income riders and having a net negative effect on cycling numbers.
I have absolutely nothing to back this up.
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said I'd cover the money they'd "lose" from only getting 90% of the voucher price by paying an extra £150 (my voucher[1] was for £1500). That cured that problem and they had no problem selling the bike on the scheme, it was still a bargain.
I refer you to “frequently asked questions” on page 16 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/845725/cycle-to-work-guidance.pdf
Contributing to the cost by the employee takes it outside the tax exemption and you have unwittingly slid from avoidance to evasion.
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What proportion of the average shops’ adult bike sales are C2W or similar?
I have a theory that C2W encourages bike shops to stock more thousand-poundish bikes at the expense of cheaper models, thus putting off lower income riders and having a net negative effect on cycling numbers.
I have absolutely nothing to back this up.
3 years managing an LBS (one of a small chain of 3) and the % was bugger all - and had no influence on what we bought for stock by type or value.
Having a couple of very large local employers that encouraged cycling to work (despite being in the automotive sector) with secure bike parking, showers etc + C2W AND for one of them a staff discount on a brand of bike that reflected their name (and was exclusive to us) - there was still bugger all interest or take up.
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My (equally unfounded) hunch, based on what I see people riding locally, is that first time riders tend to buy from Halfords or Decathlon because they're already familiar with their car stuff or gym stuff respectively. (Also Evans who do lots of online advertising.)
LBS tend to deal with people buying their second/nth bike and know a bit more about what they want.
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What proportion of the average shops’ adult bike sales are C2W or similar?
Depends on the shop.
I had an interview for a position at Cycle Republic a couple of years ago and was told C2W accounted for around a third of their sales. A friend who works in the purchasing dept for a well known brand tells me that bikes used to be specified to sell for £1,000 and would either be upgraded or downgraded to meet that. A quick look at the range from Ribble or Planet X over the last ten years ought to make it obvious they've been aiming at this price point, coincidence?
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But then cycling (even cycle-commuting) is a very middle-class affair.
It's a common myth
https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
p17! ;D
Forumite spotted!
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https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
Thanks for the link, some interesting data.
I'm pleased to see that I am not the only one who has realised that the Cycle to Work scheme is highly inefficient tax avoidance scheme which mainly benefits a few companies who have successfully gamed it to accrue most of the benefits, and wealthier people who most likely would have bought the bike anyway, while doing nothing at all for those on low incomes who could really use the help to buy a bike.
Yeah, i reached this conclusion many years ago.
The question is, if you wanted to make a scheme to encourage bike uptake, get people cycling, and that benefits everyone from the poorest min wage worker up. How would you design it ?
J
Well, yes. But all that other stuff was outside the control of the designers of the scheme. They (HMRC) designed this so that it used existing rules and codified it. That way they didn’t need to get any law changes or budget, just write down how the current law could be used.
It’s not an either/or. The existence of c2w doesn’t affect whether a council spends money on infrastructure, or if an employer provides showers.
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A bit extreme, just because of a bike. :P
It's symptomatic of wider issues. Suggests they don't take the needs of their employeescitizens seriously, not willing to make efforts to reduce environmental impact of their business country, not willing to listen to what their employees citizens are saying.
It may not be a red flag, but it's certainly a waved yellow.
J
Sounds about right for the move country option, too...
Do other countries offer free bicycles to their citizens? In France, the best you can get is a 50€ voucher for having an old bike fixed, so the British c2w scheme doesn't sound that bad!
A
The country is not providing free bicycles. It is saying that if your employer provides you with the use of a bicycle which you mainly use for cycling to work it is not a taxable as a benefit.
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https://labourcycles.org/wp-content/uploads/2018/02/aldred_labour_cycles.pdf
Thanks for the link, some interesting data.
I'm pleased to see that I am not the only one who has realised that the Cycle to Work scheme is highly inefficient tax avoidance scheme which mainly benefits a few companies who have successfully gamed it to accrue most of the benefits, and wealthier people who most likely would have bought the bike anyway, while doing nothing at all for those on low incomes who could really use the help to buy a bike.
Yeah, i reached this conclusion many years ago.
The question is, if you wanted to make a scheme to encourage bike uptake, get people cycling, and that benefits everyone from the poorest min wage worker up. How would you design it ?
J
An idea up thread is removing vat from bikes.
Or something like student loans, where you get the money to buy one with repayment linked to earnings.
Or, better still, forget repayment, given that there are externalities: anyone with earnings below a certain level can receive a bike free of charge. Value of bike and frequency of replacement TBD.
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said I'd cover the money they'd "lose" from only getting 90% of the voucher price by paying an extra £150 (my voucher[1] was for £1500). That cured that problem and they had no problem selling the bike on the scheme, it was still a bargain.
I refer you to “frequently asked questions” on page 16 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/845725/cycle-to-work-guidance.pdf
Contributing to the cost by the employee takes it outside the tax exemption and you have unwittingly slid from avoidance to evasion.
Yes, it would be now, but not in 2009 it wasn't.
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said I'd cover the money they'd "lose" from only getting 90% of the voucher price by paying an extra £150 (my voucher[1] was for £1500). That cured that problem and they had no problem selling the bike on the scheme, it was still a bargain.
I refer you to “frequently asked questions” on page 16 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/845725/cycle-to-work-guidance.pdf
Contributing to the cost by the employee takes it outside the tax exemption and you have unwittingly slid from avoidance to evasion.
Yes, it would be now, but not in 2009 it wasn't.
ITEPA 2003 section 244 has been there since 2003. Can’t see any changes between 2003, 2009 and now.
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Or, better still, forget repayment, given that there are externalities: anyone with earnings below a certain level can receive a bike free of charge. Value of bike and frequency of replacement TBD.
For a start they could treat all perks the same - What's the value of free parking for 40 hours a week? It isn't free for the employer, yet it's accepted they can give that away tax free. If 20% of the workforce no longer needed a car parking space, how many bikes would that buy?
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Or, better still, forget repayment, given that there are externalities: anyone with earnings below a certain level can receive a bike free of charge. Value of bike and frequency of replacement TBD.
For a start they could treat all perks the same - What's the value of free parking for 40 hours a week? It isn't free for the employer, yet it's accepted they can give that away tax free. If 20% of the workforce no longer needed a car parking space, how many bikes would that buy?
The provision of a bicycle is tax free as long as the employer retains ownership, 50% of usage is commuting and such an offer is made to all employees not just an exclusive subset.
Furthermore the employer can sell the bike to the employee with 82% discount (75% for bikes over £500) after one year without a taxable benefit arising.
It is pretty generous. The schemes set up to utilise this tax benefit dull it quite a bit.
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said I'd cover the money they'd "lose" from only getting 90% of the voucher price by paying an extra £150 (my voucher[1] was for £1500). That cured that problem and they had no problem selling the bike on the scheme, it was still a bargain.
I refer you to “frequently asked questions” on page 16 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/845725/cycle-to-work-guidance.pdf
Contributing to the cost by the employee takes it outside the tax exemption and you have unwittingly slid from avoidance to evasion.
Yes, it would be now, but not in 2009 it wasn't.
ITEPA 2003 section 244 has been there since 2003. Can’t see any changes between 2003, 2009 and now.
https://help.cyclescheme.co.uk/article/58-can-i-add-my-own-funds-towards-the-value-of-my-package
Can I add funds (top-up)?
The Government (by way of the Department for Transport) have recently (13/06/19) updated their guidance on this matter and clarified that adding funds is not allowable.
If you wish to spend more than your Certificate value, you will need to cancel it and reapply.
So before then there was no published guidance to say it wasn't allowed. Sure it may not have been allowed in the finer details but the whole scheme was a bunch of unknowns for many years and (impossible to prove) I'm sure "you can buy a bike for more than the voucher cost by paying the difference yourself" was on the old cyclescheme website, however that will be lost in the mists of time.
(Also I fail to see how it is evasion since I didn't avoid/evade paying any extra tax. HRMC would have received exactly the same amount of tax had I bought one bike that was the price of the voucher and then spent the remaining cash top-up in the shop as normal.)
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said I'd cover the money they'd "lose" from only getting 90% of the voucher price by paying an extra £150 (my voucher[1] was for £1500). That cured that problem and they had no problem selling the bike on the scheme, it was still a bargain.
I refer you to “frequently asked questions” on page 16 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/845725/cycle-to-work-guidance.pdf
Contributing to the cost by the employee takes it outside the tax exemption and you have unwittingly slid from avoidance to evasion.
Yes, it would be now, but not in 2009 it wasn't.
ITEPA 2003 section 244 has been there since 2003. Can’t see any changes between 2003, 2009 and now.
https://help.cyclescheme.co.uk/article/58-can-i-add-my-own-funds-towards-the-value-of-my-package
Can I add funds (top-up)?
The Government (by way of the Department for Transport) have recently (13/06/19) updated their guidance on this matter and clarified that adding funds is not allowable.
If you wish to spend more than your Certificate value, you will need to cancel it and reapply.
So before then there was no published guidance to say it wasn't allowed. Sure it may not have been allowed in the finer details but the whole scheme was a bunch of unknowns for many years and (impossible to prove) I'm sure "you can buy a bike for more than the voucher cost by paying the difference yourself" was on the old cyclescheme website, however that will be lost in the mists of time.
(Also I fail to see how it is evasion since I didn't avoid/evade paying any extra tax. HRMC would have received exactly the same amount of tax had I bought one bike that was the price of the voucher and then spent the remaining cash top-up in the shop as normal.)
By not complying with the conditions of section 244 of ITEPA 2003 the provision of the bicycle was outside the tax exemption and should have been declared as a bik on a P11D submitted by the employer and would have been taxed. I am not sure whether unclear guidance by the department of transport holds much sway with HMRC. I am sure it would be mitigating and you are unlikely to get a custodial sentence.
Edit: I think the fault is the scheme providers failing to understand or being misleading. Cyclescheme website says “Tax is complicated; the cycle to work scheme is not. You choose a bike, hire it for an agreed length of time, then snap it up for a fraction of its original value.” but the HMRC (correctly in my opinion) state that any explicit or implied agreement to sell the bike to the employee at the end of the scheme removes the tax exempt status.
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https://www.ft.com/content/a884b2b9-abdd-49ae-a325-c945bf0a1fe5
Timely article from the FT.
Looks like the LBS no like the cycle scheme providers taking such a big chunk
J
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Also the "to work" part gas been grossly abused, the most extreme version being someone I know irl and very occasionally OTP got a bike despite being a home based regional sales representative. Business use =0. See also some expensive downhill mountain bikes.
Sent from my moto x4 using Tapatalk
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10 - 15% commission for the scheme providers!
https://www.ft.com/content/a884b2b9-abdd-49ae-a325-c945bf0a1fe5
Bike retailers saddled with lower margins in state cycle scheme
September 19, 2020
Will Pearson looked proudly at the bicycle waiting for collection at Pearson Performance, his store in East Sheen, south-west London. The black machine, with curled racing handlebars and extra-tough tyres, was the company’s own design, and bore the name “Irons in the Fire” in tribute to Pearson Cycles’ heritage as an offshoot of a blacksmith’s forge.
But although the customer was due to pay £2,200 for the bike and a further £300 for accessories, Mr Pearson’s return on the transaction was only “acceptable” due to the £265 commission taken by Cyclescheme, the company that handled the paperwork for the purchase under the government’s Cycle to Work scheme, which allows customers to pay for the bike over a year out of their pre-tax income. Higher-rate taxpayers can save as much as 42 per cent compared with paying up front for their bike.
“If somebody comes along and buys a £7,000 bike and then produces a cycle scheme voucher, it’s great for the customer, it’s great for the cycle scheme provider — but it’s not so great for us,” Mr Pearson said. “Typically, as prices go up, the margins come down.”
For collecting the price of purchases from employers and issuing a voucher employees can hand to bike retailers, Cyclescheme currently takes 10% of the cost of bikes and 15% for accessories
Frustration at the high levels of commission levied under the widely-used scheme — up to 15 per cent on some bike purchases with some providers — has prompted Mr Pearson to join forces with a group of other independent bike retailers to call for reforms of Cycle to Work, a flagship government programme to boost cycling.
“If we’re having to give up to 15 per cent of that £7,000 away, it doesn’t make it a legitimate proposition for us.”
The group wants a review of provisions that allow providers to charge unlimited commissions, eroding margins in a business that is already intensely competitive and where margins on most bike sales are only around 30 per cent.
There is particular discontent with Cyclescheme — owned by Silver Lake Partners and P2 Capital Partners, two US private-equity firms — which earns unusually high profits. The company, the biggest provider of Cycle to Work schemes, last year reported pre-tax profits of £3.93m on a turnover of £7.2m — a margin of 55 per cent.
Cyclescheme currently takes 10 per cent of the cost of bikes and 15 per cent for accessories for collecting the price of purchases from employers and issuing a voucher employees can hand to bike retailers. Independent retailers that are signed up to another scheme operated by Halfords, the car parts and cycling retail chain, pay 15 per cent commission on bike sales.
Mr Pearson said the government’s programme had become a “different proposition” for retailers since a £1,000 price cap was removed last year to accommodate customers buying e-bikes, which tend to cost more than £1,000. It has also enabled customers to fund high-end machines that entail expensive, time-consuming fitting and other services from bike shops.
Pearson Cycles is one of seven prominent independent bike retailers, including London’s Velorution chain and Cotswold Cycles, based in Gloucestershire, which are calling for changes to the programme.
Before this year’s coronavirus-driven spike in sales, many UK cycle retailers had been struggling to survive in the face of fierce online competition. Two large cycle shop chains — Cycle Republic and Cycle Surgery — have closed over the past eight months, while a third, Evans Cycles, had to be rescued in 2018 via a pre-packaged administration by Frasers Group, which is controlled by Mike Ashley, founder of Sports Direct.
John Hamlen, managing director of Flag Bikes in Battersea, south London, said Cycle to Work schemes currently accounted for around 10 per cent of his sales. “You’re still making some money at the end of the day that you might not have had before,” he said. “If someone has a Cyclescheme voucher, they’re going to go to another bike shop that does accept it. That’s why I do it.”
Phil Cavell, director of CycleFit in central London, is a member of the group calling for changes to the programme. He said the retailers were not only concerned about Cyclescheme but about the “governance and oversight” of Cycle to Work more generally.
“I don’t think this is what the government had in mind when they set the scheme up,” Mr Cavell said.
The Department for Transport, insists the fees are an issue for providers, not the government.
But there are signs that retailers’ complaints may be prompting a rethink. One cycle industry figure indicated manufacturers were talking to scheme providers about potential changes.
Cyclescheme confirmed it was involved in talks and accepted that the current arrangement might have to change. Adrian Warren, the company’s senior product director, said its current flat commission rate on all bike sales might not be “the best way forward”.
“The last thing we want to do is to treat bike shops unfairly,” he said, adding that he hoped a new commission structure would ensure all parties received value from sales.
“Talks are ongoing, but we are confident we will have a new commission structure in place in the coming weeks that benefits everyone,” Mr Warren said.
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https://twitter.com/allpartycycling/status/1310603610326269956
Change in charges from cycle scheme...
J
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https://twitter.com/allpartycycling/status/1310603610326269956
Change in charges from cycle scheme...
J
That's not exactly much of a change in % terms - just a reduction on the accessory percentage levy and a cap on the charges. Lots of "bikes" at the 10% rate were sold as packages with accessories "free" ;) added to the bike cost in the total bundle :thumbsup:
Be interesting to know the % of bikes in the >£3,000 bracket and thus in the cap . . . not many would be my guess.
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https://road.cc/content/news/cyclescheme-slashes-retailer-commission-rates-277589
Cyclescheme slashes retailer commission rates after industry pressure
UK's largest Cycle to Work scheme provider will also cap value commission charged on at £3,000 from November...
by Simon_MacMichael
Mon, Sep 28, 2020 18:41
Cyclescheme, the UK’s largest provider of access to the government’s tax-friendly Cycle to Work scheme which enables people to buy a bike and accessories through salary sacrifice, has reduced its commission rates following industry pressure.
With effect from today, Cyclescheme’s commission on unredeemed e-certificates has been reduced to 8.33 per cent excluding VAT on all bikes, accessories and helmets.
It is also capping the amount on which commission is payable at £3,000, meaning that where certificates are issued for higher values, no commission will apply above that amount. That change takes effect from November to give Cyclescheme time to make the necessary changes to its platforms.
The changes to the commission structure come little more than a week after a Financial Times report highlighted how some retailers believed the Cycle to Work scheme had become “unviable” following a change implemented last year to the maximum value of bike that could be purchased under the scheme.
Previously, other than employers regulated by the Financial Conduct Authority – banks and other financial institutions, for example – the maximum value was set at £1,000, but there is now no limit.
A number of independent retailers last week launched the Bike Dealers Association, outlining that their first target would be the Cycle to Work Scheme, describing the current model as “financially unsustainable.”
Snip
I had thought Cyclescheme was some sort of official quasi govt body but in fact they're just a private company.
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Yes, a lot of people do think that. I think there is an element of passing off in their name.
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Yes they're basically a finance company. With 10% "interest" paid up-front* on a loan that amortises over a year, with virtually zero risk, plus an additional payment at the end, it's a good little earner.
* ignore the 8.33% quoted in the article, they are only lending the VAT-free amount.
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Do they provide the finance to buy the bike nowadays? I thought that came from the employer. And that all they did was the (trivial amount of) admin required
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Do they provide the finance to buy the bike nowadays? I thought that came from the employer. And that all they did was the (trivial amount of) admin required
Green Commute has a finance option at (or when I last looked) quite keen rates for the employer to fund the purchase - and their LBS fee is lower too .... was 7% IIRC.
... and Cyclescheme is now owned, IIRC, a US finance/VC/whatever company