When your employer isn't on a cycle to work scheme...

[Paul H]

A bit extreme, just because of a bike.

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.

[quixoticgeek]

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

[fuaran]

Or they are planning on sacking everyone in a few months. So not much point signing up for a 1 year agreement...

[L CC]

A bit extreme, just because of a bike.

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...

[ian]

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.

[Greenbank]

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.

[ian]

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.

[Davef]

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.

[Greenbank]

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.

[Paul H]

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.

[citoyen]

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!

[citoyen]

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.

[Paul H]

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

[Davef]

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.

[Paul H]

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

[citoyen]

Thanks, I'm obviously well out of date on this!

[Paul H]

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.

[DuncanM]

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

[ian]

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.

[DuncanM]

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).

[Greenbank]

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.

[Frank9755]

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. 

[quixoticgeek]

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

[telstarbox]

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.

[L CC]

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.