Cycle to Work scheme, are those who can't get it losing out?

[hubner]

Are those who can't buy a new bike on the Cycle to Work scheme overpaying?

Are manufacturers/importers/retailers raising prices because they know people will get quite a big discount when they buy a bike?

[Paul H]

Depends.  The retailer isn't getting pound for pound when they accept a voucher, they lose up to 15% to the provider (Unless it's Halfords who are both retailer and provider) Margins are tight enough that they must account for that, but then a cash purchaser ought to be able to negotiate a discount knowing that even with 10% off they're likely to be putting more money in the retailer pocket than if they were paying by voucher.

[grams]

 Users of the scheme are getting at worst an interest-free loan, at best a heavily subsidised bike, depending on how rigorously the "buyout" part of the scheme is calculated, which anecdotally it isn't.

[davelodwig]

The voucher schemes are good for employers and bad for everyone else.

Delcam (who don't exist anymore, bought out by a big US firm) ran their own scheme when I worked there, I think our limit was 7.5k and providing you could get whoever you wanted to buy from to invoice you, the company would just pay them directly for the bike.  And then you'd pay the company under the standard rules and tax avoidance over up to three years.

It seemed to be a much better way to run the scheme but relied on the head of finance being a cyclist.

[Regulator]

It also doesn't help that HMRC changes the rules last year, restricting the scope of Cycle to Work (so if you work from home you are no longer eligible to use the Scheme, whereas you had been previously).

[Andy W]

My wife purchased a bike on CTW. Although she got approximately 32% off rrp, when I enquired about paying cash / back I would have got similar discount off rrp.
Flawed scheme as it does nothing for the self employed.

[barakta]

It has also been criticised for not covering disability-accessible cycles so well e.g. recumbent trikes and whatever as many employers won't let you buy from smaller (weirdo) bent dealers etc.

[Paul H]

My wife purchased a bike on CTW. Although she got approximately 32% off rrp, when I enquired about paying cash / back I would have got similar discount off rrp.

That's a retailer rip-off rather than the scheme, if they could sell to you for 30% off RRP then there's nothing stopping them from selling to someone with a C2W voucher for 20% off.

Flawed scheme as it does nothing for the self employed.

Or the low paid, those who might benefit most.  Plus a company is obliged to make any scheme available for all employees (Or a comparable alternative), though they sometimes don't. If there's some in the company paid too little to take advantage, it shouldn't be available to any.

[Phil21]

Or the retired or unemployed.

[Cudzoziemiec]

There are lots of people who can't benefit from the scheme, but is it actually the case that retailers and/or importers and manufacturers are raising prices because of it? I suppose one way to test this would be to compare prices internationally, but obvs lots of different factors at play.

[Regulator]

It has also been criticised for not covering disability-accessible cycles so well e.g. recumbent trikes and whatever as many employers won't let you buy from smaller (weirdo) bent dealers etc.

That may come down to your employer rather than HMRC.  There's a limit of £1,000 for those employers without a consumer credit license.  If they have one, the limit can be up to the limit of their license.

And your employers have to allow you choice of any retailer/supplier.  Most of the companies that provide cycle schemes for employers don't publicise this (as I think they get a kickback from the suppliers on their lists) but you can ask them to get a bike from any supplier.

[Paul H]

There's a limit of £1,000 for those employers without a consumer credit license.

In 2019 the scheme changed and you now hire the bike from the scheme provider rather than your employer.  There is no legal reason for there to be a limit when using a provider, though the employer may impose one.  Those employers administering their own schemes are still bound by the same FCA restrictions. 

And your employers have to allow you choice of any retailer/supplier.  Most of the companies that provide cycle schemes for employers don't publicise this (as I think they get a kickback from the suppliers on their lists) but you can ask them to get a bike from any supplier.

I don't think that's correct either, retailers are not obliged to accept vouchers and scheme providers are not obliged to provide anything other than vouchers.

[Regulator]

There's a limit of £1,000 for those employers without a consumer credit license.

In 2019 the scheme changed and you now hire the bike from the scheme provider rather than your employer.  There is no legal reason for there to be a limit when using a provider, though the employer may impose one.  Those employers administering their own schemes are still bound by the same FCA restrictions. 

And your employers have to allow you choice of any retailer/supplier.  Most of the companies that provide cycle schemes for employers don't publicise this (as I think they get a kickback from the suppliers on their lists) but you can ask them to get a bike from any supplier.

I don't think that's correct either, retailers are not obliged to accept vouchers and scheme providers are not obliged to provide anything other than vouchers.

I apologise - I forgot they changed in 2019.

However, the bit about choice is correct I know, as it was an example given at a seminar on competition law and anti-competitive practice.  Those operating the schemes have to give choice of supplier (although the supplier themselves may decline to accept the voucher) - so for example, Halford operate the scheme for many employers but they cannot limit it to bikes they sell.  So my Mr R's new bike was got through the his trust's scheme provider, but was from a supplier not on their normal list as I he had a specific machine in mind.

[Paul H]

Those operating the schemes have to give choice of supplier (although the supplier themselves may decline to accept the voucher)

I think that's pretty much what I said, which isn't the same as saying "your employers have to allow you choice of any retailer/supplier."  For example you can't buy a Spa Cycles bike from anywhere else and they don't participate in any Cycle to Work schemes.

[Pickled Onion]

Flawed scheme as it does nothing for the self employed.

The scheme was never designed, it came out of some clever combining of some existing rules. This meant that HMRC could sanction it as a legitimate tax avoidance without any changes to the law. IIRC the existing rules include the Green Travel Plan (which allowed companies to provide employee buses and/or a bank of bikes for employees to borrow) and the salary sacrifice rules, plus the rules on write-down of capital expenditure.

Pure self-employed can't get it as they don't fit the employer/employee model for those rules, but self-employed as a one-person company can, and arguably they are a more pure fit to the rules than the finance schemes that have sprung up.

It also doesn't help that HMRC changes the rules last year, restricting the scope of Cycle to Work (so if you work from home you are no longer eligible to use the Scheme, whereas you had been previously).

Well that's hardly surprising as the point is to allow you to cycle to work. Unless you want to argue at an HMRC tribunal that you really are using the bike to get from your kitchen to your study.

Or the retired or unemployed.

Or this for the same reason. Its tax avoidance allowed for the purpose of greening travel to work.

The point about the low-paid is a valid one. There's a gap between not paying any tax to avoid, and earning enough to pay tax but not enough to be able to salary sacrifice. This is for the reason given above, without the will to create actual law and devise a scheme from the ground up, it's simply a mangling of existing rules that were never originally intended for this.

And the point about specialist bikes is also very valid. But that's an issue with employers who are unwilling to accommodate and will only allow employees to use a specific finance provider (aka scheme). There may be scope for action on that point by arguing the scheme they offer is not equal for all employees, but I imagine the result of that would likely be withdrawal of the scheme entirely by that employer.

[Kim]

It would seem a lot simpler if the government could just zero-rate the VAT on bikes and have done with it.

[Regulator]

Well that's hardly surprising as the point is to allow you to cycle to work. Unless you want to argue at an HMRC tribunal that you really are using the bike to get from your kitchen to your study.

Prior to Covid, relatively few people worked full time from home.  The rules were that the benefit had to be offered to all staff that met the income threshold.  The rules were silent on those working from home so it was generally accepted they were covered as they weren’t specifically excluded.

When Covid struck and so many people were working from home, and after questions from employers, HMRC changed the wording of the guidance on the rules to specifically include those working from home.  They indicated that the bikes  could be used for the outdoor exercise that was being encouraged. 

However, it appears the Treasury didn’t like this and, when Covid was declared over (like feck it is) the rules were changed again to specifically exclude those working from home - which remains a sizeable part of the working population.

[rogerzilla]

The savings used to be significant but are less so since HMRC stopped unrealistically low final values being agreed; sometimes savings are non-existent for basic rate taxpayers.  It depends on the scheme.  The best schemes pass on the VAT saving and allow an extended hire period to get the final value down to nothing (or almost nothing).

Many retailers load the price by 10% for these schemes, wiping out any savings.

It has certainly allowed manufacturers like Brompton to push prices up very quickly.  The bubble has probably burst now, but a basic Brompton M3L/C-line has increased in price from £500 to £1600 in 15 years, when it would be £780 if it had followed general inflation.  There are some specification improvements but that's still gouging.

TL;DR - you're probably not missing much if you can't access a scheme, but everyone has suffered from higher prices.

[grams]

the point is to allow you to cycle to work

If we apply POSIWID then the purpose of the scheme is to subsidise the purchase of nice new bikes by already well-paid white collar workers. The existence of any cycling-to-work is not a consideration.

People who WFH or are self-employed can rightly be miffed about being excluded from that action.

[davelodwig]

The savings used to be significant but are less so since HMRC stopped unrealistically low final values being agreed; sometimes savings are non-existent for basic rate taxpayers.  It depends on the scheme.  The best schemes pass on the VAT saving and allow an extended hire period to get the final value down to nothing (or almost nothing).

Many retailers load the price by 10% for these schemes, wiping out any savings.

It has certainly allowed manufacturers like Brompton to push prices up very quickly.  The bubble has probably burst now, but a basic Brompton M3L/C-line has increased in price from £500 to £1600 in 15 years, when it would be £780 if it had followed general inflation.  There are some specification improvements but that's still gouging.

TL;DR - you're probably not missing much if you can't access a scheme, but everyone has suffered from higher prices.

When I bought my first bike on the scheme an Orange M6L Brompton* with every option ticked back in 2008 it cost me about £1600 and that included the bag on the front as well as shipping and loads of folks thought I'd gone mad buying this little folding clown bike.  The same bike now would certainly cost a whole lot more.

the point is to allow you to cycle to work

If we apply POSIWID then the purpose of the scheme is to subsidise the purchase of nice new bikes by already well-paid white collar workers. The existence of any cycling-to-work is not a consideration.

People who WFH or are self-employed can rightly be miffed about being excluded from that action.

I'm not able to write a whole host of expenses against my tax like a self employed person can so it's horses for courses.

[Paul H]

The savings used to be significant but are less so since HMRC stopped unrealistically low final values being agreed;

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. 

[Cudzoziemiec]

It would seem a lot simpler if the government could just zero-rate the VAT on bikes and have done with it.

Don't be silly. That would make it about bikes rather than tax.

[grams]

Anecdotally, some companies appeared to allow minimal payments and waive the buyout fee, allowing people to treat as a free bike. I've seen at least one guy online bragging about getting a new Brompton every year for flipping it for a significant profit when the new one arrived.

They may have been talking shite of course, or not done their sums correctly.

it does no harm

Literally any other scheme would be fairer, but as long as this one exists and keeps the uppity middle class people who write to MPs happy, we’ll never have one.

[rogerzilla]

The savings used to be significant but are less so since HMRC stopped unrealistically low final values being agreed;

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. 

Yes, I went on to say that.

For our scheme, assuming a £1000 bike, you can pay 25% of the cost as a final value OR hang onto it for another five years and get it for nothing.  The latter can be an issue because 1. a six year-old commuter bike is likely to be very ropey indeed and 2. I would guess that a large percentage of people change employer more often than that.

[Pickled Onion]

Well that's hardly surprising as the point is to allow you to cycle to work. Unless you want to argue at an HMRC tribunal that you really are using the bike to get from your kitchen to your study.

Prior to Covid, relatively few people worked full time from home.  The rules were that the benefit had to be offered to all staff that met the income threshold.  The rules were silent on those working from home so it was generally accepted they were covered as they weren’t specifically excluded.

Yes, all that is true. But there were other rules in addition, one of which was that the majority of journeys on the bike had to be commuting. So technically, yes, there was nothing stopping you using the scheme if 100% WFH, but (also technically*) you wouldn't be able to ride it!

* The HMRC inspection guidance was not to bother digging into this except in exceptional circumstances.

I'm sure you're right on the other stuff, I've not read the manuals lately