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

[citoyen]

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.

[Cudzoziemiec]

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! 

[The French Tandem]

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...

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

[ian]

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).

[grams]

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.

[Davef]

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.

[robgul]

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.

[telstarbox]

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.

[Paul H]

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?

[Kim]

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! 

Forumite spotted!

[Pickled Onion]

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.

[Davef]

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...

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.

[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.

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.

[Greenbank]

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.

[Davef]

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.

[Paul H]

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?

[Davef]

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.

[Greenbank]

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.)

[Davef]

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.

[quixoticgeek]

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

[rr]

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

[hubner]

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.

[quixoticgeek]

https://twitter.com/allpartycycling/status/1310603610326269956

Change in charges from cycle scheme...

J

[robgul]

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     

Be interesting to know the % of bikes in the >£3,000 bracket and thus in the cap . . . not many would be my guess.

[hubner]

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.