Author Topic: Cycle to Work scheme, are those who can't get it losing out?  (Read 5846 times)

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #25 on: 13 December, 2023, 08:08:13 pm »
The commuting bit was never inspected where I worked!  One of those rules that is impossible to assess. 

Mr Larrington

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Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #26 on: 13 December, 2023, 08:40:38 pm »
Mate of mine's commute was 60 miles each way across rural Co. Durham and Northumbria.  Certainly no-one ever checked whether he was using the downhill MTB he bought via the scheme for commuting.
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Flâneur

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Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #27 on: 14 December, 2023, 03:59:33 pm »
That was the case for about a year, before the ink was dry on the memo the schemes had found a way around it.  There was plenty of warning it was coming and it'd always been dodgy, HMRC made a clarification, no rules were changed. What happens most often now is the hire is extended for a further three years, for a 7% deposit.  That's then the value of the bike (Agreed with HMRC) and ownership can be transferred, or theoretically you can return it for your deposit back. 
There never were massive savings, all in probably 10 - 15% for a standard rate tax payer compared to a cash buyer.  We shouldn't underestimate the value of being able to spread the cost, it isn't an insignificant sum for a lot of people, even more so if it's an E-bike. I know several people who've obtained decent E-bikes on C2W who wouldn't have been able to afford to otherwise. 
Lots of faults with it, it's purpose might be viewed as greenwashing, at little cost to anyone.  It doesn't provide much incentive not to drive, but it does no harm.

I've had 1 C2W bike that the provider never followed up on at the end of the hire period, to extend or return (no laughing at the back). I only ever paid/salary sacrificed the retail price of the bike (no 7% deposit). Not sure if it was an oversight or commonplace.

My other C2W bike progressed as Paul H lays out above.

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #28 on: 14 December, 2023, 05:26:37 pm »
I used the scheme twice, both with Cyclescheme. First time the limit was 1k and I got my Brompton within the limit. Paid in instalments for 12 months, saved tax as the instalment comes from your pre tax salary. After 4 years they asked me if I wanted to purchase the bike, I agreed and they were supposed to charge me 70 pounds or so, but that never came out of pay slip, so probably waived.
I used it again last February, limit 2k, this time I bought a race bike, which was 2150 discounted. The shop issued a 2k voucher and the rest came as accessories (a very expensive bottle cage to you and me). We also agreed to split the cost of the scheme for the shop, which normally they absorb, but it becomes difficult if the item is already reduced price. Basically that came to another 50 pounds… considering I am paying 1.3k for 2k worth of bicycle it doesn’t seem too much.
Annoyingly, they have just increased the scheme to 3k, so I wish I waited.
I am supposed to use the bike for commuting 50% of the time.. obviously that cannot be policed and it is not clear if that means mileage or number of trips. I have used it a handful of times to commute, but the Brompton pretty much only does commutes, so overall I don’t think I am abusing the scheme.
It’s a great scheme and you should try to use it if you can. The way it is designed, you can’t lose and as someone said above, at worst it is an interest free loan.

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #29 on: 14 December, 2023, 08:47:47 pm »
I was under the impression that after 12 months you can buy the bike from your employer for a token sum like £1. Then I checked, you're suppose to pay 25% of the cost of the bike! Which would wipe out most of the discount from the salary sacrifice.

I've been looking at various new bikes from retailers and brands and they all say 30-40% discounts are available under the scheme. I would guess to get the maximum discount you have to be in the high income tax bands and keep the bike for several years, which means working for the same employer during that time.

Anyhow my two main complaints are low income workers are not eligible and you have to rely on your employer to use the scheme.

The more you earn the more the discount, so the ones who need it the least get the biggest discounts.

Adam

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Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #30 on: 14 December, 2023, 09:07:48 pm »
HMRC clamped down on the C2W scheme quite a few years ago to stop the scam of the bike being sold for a nominal amount after 1 year. 

If the original purchase price was at least £500, then you'd be required to pay the following percentage of the purchase price:
1 year 25%
18 months 21%
2 years 17%
3 years 12%
4 years 7%
5 years 2%
6 years & over Negligible

https://assets.publishing.service.gov.uk/media/5dc9475440f0b64251080457/cycle-to-work-guidance.pdf
“Life is like riding a bicycle. To keep your balance you must keep moving.” -Albert Einstein

rogerzilla

  • When n+1 gets out of hand
Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #31 on: 14 December, 2023, 09:09:50 pm »
The more you earn the more the discount, so the ones who need it the least get the biggest discounts.
That's not actually unfair, though.

A 40% taxpayer taking a £1000 gross pay cut loses £580/year.

A 20% taxpayer taking a £1000 gross pay cut loses £680/year.

That's all it is - a pay cut.
Hard work sometimes pays off in the end, but laziness ALWAYS pays off NOW.

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #32 on: 15 December, 2023, 12:09:19 am »
The exchequer will forgo £420 in tax if a high-rate taxpayer wants to buy a bike, but is only willing to forgo £320 if a standard-rate taxpayer wants to buy a bike.

(And a low wage worker wanting to buy a BSO can pay for it them bloody selves)

Jaded

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Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #33 on: 15 December, 2023, 12:41:43 am »
"Four wheels good, two wheels bad!"
It is simpler than it looks.

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #34 on: 15 December, 2023, 07:22:05 am »
I think the scheme is designed so that everybody is a winner. The shop sells a bike, the customer saves some tax, the employer saves having to buy or rent more land for car parks and they get a small slice, if they so wish and the exchequer recoups the unpaid tax with VAT on a bike that might not have sold otherwise, as well as other long term benefits, like NHS savings.
The alternative would be to waive VAT on the bike, so everybody would save the same amount, regardless of the salary.
I find the main drawback is the opt-in for employers, whereas it should be an opt-out or not at all, since there is really no reason not to support the scheme.

rogerzilla

  • When n+1 gets out of hand
Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #35 on: 15 December, 2023, 07:36:32 am »
The exchequer will forgo £420 in tax if a high-rate taxpayer wants to buy a bike, but is only willing to forgo £320 if a standard-rate taxpayer wants to buy a bike.

(And a low wage worker wanting to buy a BSO can pay for it them bloody selves)
That's unavoidable as it uses existing tax reliefs.  The higher rate of tax you pay, the more tax relief is worth.

To make it a more progressive benefit, you'd have to do it as a means-tested grant, probably from the government and not from the employer.  The administration of such a scheme would not be simple.  What if income increases or decreases during a hire period?
Hard work sometimes pays off in the end, but laziness ALWAYS pays off NOW.

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #36 on: 15 December, 2023, 08:56:19 am »
The employer also saves some money as they don’t have to pay employers NI contribution on the part of the salary that is sacrificed.
I bought my C2W Brompton when the  scheme just started and got the full 40% discount and after a year of payments just kept the bike, no questions asked. But those days are gone.
I am often asked, what does YOAV stand for? It stands for Yoav On A Velo

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #37 on: 15 December, 2023, 10:28:46 am »
What if income increases or decreases during a hire period?

Same as if someone used the scheme to buy a "race bike" they have no intention of using for commuting?

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #38 on: 15 December, 2023, 10:57:34 am »
What if income increases or decreases during a hire period?

Same as if someone used the scheme to buy a "race bike" they have no intention of using for commuting?
Like many, I am culpable here. The way I see it is that as long as I cycle to work, it is nobody’s business which bicycle I use. I happen to be on top of the maintenance, so the first c2w purchase in 2019 is still a viable option and the 2023 purchase can be the leisure bike.
I suspect the scheme leans towards selling more bikes, otherwise I wouldn’t be allowed a voucher every calendar year.

Afasoas

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #39 on: 01 February, 2024, 04:32:01 pm »
It would seem a lot simpler if the government could just zero-rate the VAT on bikes and have done with it.

I think they should go further than this. I think UK based cycle manufacturers[1] that sell direct to the public should enjoy some tax breaks. I think import tariffs on assembled bicycles and components should be reduced for UK based suppliers/retailers too, although this should be balanced as to not put UK based manufacturers at a disadvantage.

There should be some qualifying rules for manufacturers, suppliers and retailers. At least N% of the bikes they manufacture/distribute/sell should be suitable for commuting and utility cycling. I know this is hard to quantify, but what I'm guessing is, they should have clearances and eyelets/lugs for mounting the extra hardware that makes a bike useful. And a proportion of these, should perhaps come equipped with hub gears, dyno hub, lights that meet recognised standards.

This is to both:
a) encourage the UK cycle industry to provide practical bikes for commuting and urban transport
b) avoid creating loopholes for manufacturers/uppliers/retailers that cater solely to cycle sport.

The only problem with this, is that manufacturers/suppliers/retailers may not pass the savings onto the consumer.

1: Head office registered in UK; at least 20-30% of turnover in the UK

Adam

  • It'll soon be summer
    • Charity ride Durness to Dover 18-25th June 2011
Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #40 on: 01 February, 2024, 08:10:26 pm »
I think the scheme is designed so that everybody is a winner. The shop sells a bike, the customer saves some tax, the employer saves having to buy or rent more land for car parks and they get a small slice, if they so wish and the exchequer recoups the unpaid tax with VAT on a bike that might not have sold otherwise, as well as other long term benefits, like NHS savings.
The alternative would be to waive VAT on the bike, so everybody would save the same amount, regardless of the salary.
I find the main drawback is the opt-in for employers, whereas it should be an opt-out or not at all, since there is really no reason not to support the scheme.

Bike shops lose out as up to 15% of the sales price goes as commission to the Cycle scheme providers.  Which can often be almost all of any profit margin the bike shop gets.  The actual scheme providers are however the most profitable business going, as around 50% of their total income is profit.

Cyclescheme Ltd - £13.2 million turnover, £6.8 million profit
https://find-and-update.company-information.service.gov.uk/company/05363678/filing-history
“Life is like riding a bicycle. To keep your balance you must keep moving.” -Albert Einstein

Cudzoziemiec

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Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #41 on: 02 February, 2024, 04:02:25 pm »
It would seem a lot simpler if the government could just zero-rate the VAT on bikes and have done with it.

I think they should go further than this. I think UK based cycle manufacturers[1] that sell direct to the public should enjoy some tax breaks.
[...]
1: Head office registered in UK; at least 20-30% of turnover in the UK
Surely that would just result in Trek UK, Giant UK, etc, as supposedly separate entities.
Riding a concrete path through the nebulous and chaotic future.

Afasoas

Re: Cycle to Work scheme, are those who can't get it losing out?
« Reply #42 on: 03 February, 2024, 10:30:13 pm »
It would seem a lot simpler if the government could just zero-rate the VAT on bikes and have done with it.

I think they should go further than this. I think UK based cycle manufacturers[1] that sell direct to the public should enjoy some tax breaks.
[...]
1: Head office registered in UK; at least 20-30% of turnover in the UK
Surely that would just result in Trek UK, Giant UK, etc, as supposedly separate entities.

If the tax advantages are greater for cycles manufactured in UK (at least the frames) and profits for UK sales are declared in the UK so what little tax they pay is paid in the UK, that means in the least they would have to operate as independant subsiduries, to get the full tax advantage. And there's no reason, if the rules are drafted sensibly, those types of entity couldn't be excluded, if it was felt that would still leave the home grown cycle industry at a disadvantage.

As I said, I think the real danger is that the tax savings are not passed onto customers.