Author Topic: CycleScheme remove £1,000 price cap  (Read 2966 times)

quixoticgeek

  • Mostly Harmless
Re: CycleScheme remove £1,000 price cap
« Reply #50 on: November 03, 2019, 09:01:21 pm »

Depends on what type of self-employed you are. I know a few friends who did consultancy (through their own personal company) that just bought a bike through their company. That way it just becomes an asset of the company that slowly depreciates, and they can use it as much as they like (and justify to their accountant its purchase for the purpose of commuting to perform the contracting role).

That a) requires you're an LTD b) doesn't take advantage of the tax efficiency of cyclescheme and c) there are tax implications if you buy one as a business vehicle, and then use it for personal use.

J
--
Beer, bikes, and backpacking
http://b.42q.eu/

Re: CycleScheme remove £1,000 price cap
« Reply #51 on: November 03, 2019, 09:29:48 pm »

Depends on what type of self-employed you are. I know a few friends who did consultancy (through their own personal company) that just bought a bike through their company. That way it just becomes an asset of the company that slowly depreciates, and they can use it as much as they like (and justify to their accountant its purchase for the purpose of commuting to perform the contracting role).

That a) requires you're an LTD b) doesn't take advantage of the tax efficiency of cyclescheme and c) there are tax implications if you buy one as a business vehicle, and then use it for personal use.

Surely if you're set up as a Ltd company, and especially if you're VAT registered, there are greater tax efficiencies available than through Cyclescheme or equivalent - the purchase will be before tax, and you can reclaim the VAT, where if you go through Cyclescheme you're at the mercy of your employer allowing you to benefit from their VAT saving. Meantime you're paying cash for the bike so may be able to negotiate a discount, and won't have to pay the option to purchase fee at the end.

Equally, HMRC guidance is explicit that there is no tax/NI/BIK liability through lending bikes to employees for commuting, and that as long as this is a substantial part of their use, then there won't be any liability for private use. https://www.gov.uk/expenses-and-benefits-bikes-for-employees

(OK, there's a bit of don't ask, don't tell, coupled with an expectation not to take the piss, but the guidance really couldn't be clearer about not asking questions you might not like the answers to, probably because, as suggested above, a few more dentists on Pinarellos is still a net benefit to the taxpayer.)

quixoticgeek

  • Mostly Harmless
Re: CycleScheme remove £1,000 price cap
« Reply #52 on: November 03, 2019, 09:36:20 pm »

Surely if you're set up as a Ltd company, and especially if you're VAT registered, there are greater tax efficiencies available than through Cyclescheme or equivalent - the purchase will be before tax, and you can reclaim the VAT, where if you go through Cyclescheme you're at the mercy of your employer allowing you to benefit from their VAT saving. Meantime you're paying cash for the bike so may be able to negotiate a discount, and won't have to pay the option to purchase fee at the end.


And if you're not a LTD?

J
--
Beer, bikes, and backpacking
http://b.42q.eu/

Re: CycleScheme remove £1,000 price cap
« Reply #53 on: November 03, 2019, 09:40:46 pm »
I've got absolutely no idea.

Probably in much the same way as a sole trader plumber deals with the BIK liabilities of using their electric drill for private use like putting up some shelves for their mum.

(I was taking at face value your assertion that you needed to be set up as a Ltd company to buy a bike as a contractor, but given your other assertions in the post are, um, differently right, maybe it's worth clarifying why you feel Ltd status would be a prerequisite.)

Re: CycleScheme remove £1,000 price cap
« Reply #54 on: November 04, 2019, 05:25:01 pm »

Surely if you're set up as a Ltd company, and especially if you're VAT registered, there are greater tax efficiencies available than through Cyclescheme or equivalent - the purchase will be before tax, and you can reclaim the VAT, where if you go through Cyclescheme you're at the mercy of your employer allowing you to benefit from their VAT saving. Meantime you're paying cash for the bike so may be able to negotiate a discount, and won't have to pay the option to purchase fee at the end.


And if you're not a LTD?

As I said:-

Depends on what type of self-employed you are.
"Yes please" said Squirrel "biscuits are our favourite things."

Re: CycleScheme remove £1,000 price cap
« Reply #55 on: November 05, 2019, 06:57:40 pm »
My understanding is that if you're a self-employed sole trader, then the bike can be claimed as a business expense, but has to be used solely for business purposes (you used to be able to claim mileage for cycles, but that apparently was removed a couple of years ago). My Brompton gets used solely for getting me to to and from clients when I'm freelancing, so I will be putting it (and any servicing bills) through as an expense.

quixoticgeek

  • Mostly Harmless
Re: CycleScheme remove £1,000 price cap
« Reply #56 on: November 05, 2019, 06:59:30 pm »
My understanding is that if you're a self-employed sole trader, then the bike can be claimed as a business expense, but has to be used solely for business purposes (you used to be able to claim mileage for cycles, but that apparently was removed a couple of years ago). My Brompton gets used solely for getting me to to and from clients when I'm freelancing, so I will be putting it (and any servicing bills) through as an expense.

Exactly. Take one ride to the shops on it, or stop off at the pub on the way home from a client, and it becomes tax liable again. The rules for sole traders are pretty annoying.

J
--
Beer, bikes, and backpacking
http://b.42q.eu/

Re: CycleScheme remove £1,000 price cap
« Reply #57 on: November 05, 2019, 08:55:21 pm »

Exactly. Take one ride to the shops on it, or stop off at the pub on the way home from a client, and it becomes tax liable again. The rules for sole traders are pretty annoying.

J

I agree with you on the annoyance, but in practical terms HMRC have no way of knowing if you occasionally nip down the shops or detour home via the pub. Certainly a Brompton or other commuter folder is 'obviously' (to normal folk - as ever, Audaxers are the exception) a work-type rather than leisure-type bike in the way that a carbon wonder-steed might not be.

fd3

Re: CycleScheme remove £1,000 price cap
« Reply #58 on: November 10, 2019, 11:52:30 pm »
I'm sort of surprised (or not) that employers, especially in London where transport costs bite, generally don't seem to offer a 'free' commuting bike as a perk, it's a couple of hundred quid and the employee just pays the tax. Possibly some do, it sounds pretty E5. The cycle scheme does sound excessively complex (and that we periodically debate it is evidence of that).

Ultimately though, if want people to view bicycles as a meaningful transport option, then change is required at a more fundamental level.
I suspect it's a liability and perceived risk thing.  If the company loans you a bike they are responsible for maintaining it, the hassle when it gets stolen by newb employee with a poor lock and for said employee being hit by a car (at least that's the worry, hence better off not bothering).
[/I could be wrong]

Re: CycleScheme remove £1,000 price cap
« Reply #59 on: November 11, 2019, 09:07:54 am »
Many of  the above comments are not correct.

Any company can buy a bike and give it to an employee to use to travel to work.  The law does not require that records are kept regarding usage by that employee - essentially you can do what you want with the bike.  That employee could be the Director of a one-person company.   There is also no requirement that the employee pays the company anything back for the bike. 

The other big confusion right through the thread is between Cycle to Work scheme and Cyclescheme

The first is the law under which companies can buy bikes for their employees, subject to certain conditions.
The second is the name of a private company set up to exploit that law, and which has made a lot of money from doing the trivial amount of admin necessary for bikes purchased under the Cycle to Work scheme.  There is no requirement for companies wishing to use the scheme to do so via Cyclescheme, Halfords or any such 'administrator', and saving their 10-15 % commission.

A final confusion is around the £1,000 limit.  There never was  a limit under the Cycle to Work scheme.  The limit was on how much the employer could claim back under salary sacrifice.  There never has been anything to stop your employer buying a £10k Colnago and giving it to you, just they couldn't get you to pay them back for it!

The point that QG makes above about Cycle to Work schemes involving salary sacrifice not being accessible to those on low wages is a very good one.  IMHO, while being favourable to cycling, the way it has been implemented has produced a horrendous scheme which mainly subsidises middle class people to buy bikes they would have bought anyway while doing nothing to help those on low incomes who may well cycle if they could get the same assistance.

Re: CycleScheme remove £1,000 price cap
« Reply #60 on: November 11, 2019, 09:48:24 am »
A final confusion is around the £1,000 limit.  There never was  a limit under the Cycle to Work scheme.  The limit was on how much the employer could claim back under salary sacrifice.  There never has been anything to stop your employer buying a £10k Colnago and giving it to you, just they couldn't get you to pay them back for it!
And that limit was only in place because officially the employer was lending the money to the employee. If the employer had a consumer credit license, then the limit didn't apply.
The recent change actually means that Cyclescheme (or others) can add (some) value is that they are the ones who have to have a consumer credit license, and the employer doesn't need one.

I completely agree with the rest of your post...

ian

  • fatuously disingenuous
    • The Suburban Survival Guide
Re: CycleScheme remove £1,000 price cap
« Reply #61 on: November 11, 2019, 12:00:57 pm »
I'm sort of surprised (or not) that employers, especially in London where transport costs bite, generally don't seem to offer a 'free' commuting bike as a perk, it's a couple of hundred quid and the employee just pays the tax. Possibly some do, it sounds pretty E5. The cycle scheme does sound excessively complex (and that we periodically debate it is evidence of that).

Ultimately though, if want people to view bicycles as a meaningful transport option, then change is required at a more fundamental level.
I suspect it's a liability and perceived risk thing.  If the company loans you a bike they are responsible for maintaining it, the hassle when it gets stolen by newb employee with a poor lock and for said employee being hit by a car (at least that's the worry, hence better off not bothering).

Not loan, just give, it's a couple of hundred of quid. I presume it's a perk for taxation purposes. I can't see that they'd have any other liabilities provided the bike was serviceable and in good order (and it would be new, so I assume so) when handed over. Back in the day the mothership had money, for instance, they gave me £500 in vouchers for turning up on a regular basis for 10 years, I could have spent it on machine guns and hard drugs.

The entire Cycle-to-Work thing seems an overcomplicated to achieve ultimately litter. Perhaps better than nothing, but it's not really going to move the bar.
!nataS pihsroW

Re: CycleScheme remove £1,000 price cap
« Reply #62 on: November 11, 2019, 03:51:58 pm »
^ Such an arrangement would be entirely compatible with the Cycle to Work scheme!

quixoticgeek

  • Mostly Harmless
Re: CycleScheme remove £1,000 price cap
« Reply #63 on: November 11, 2019, 04:17:34 pm »
Many of  the above comments are not correct.

Any company can buy a bike and give it to an employee to use to travel to work.  The law does not require that records are kept regarding usage by that employee - essentially you can do what you want with the bike.  That employee could be the Director of a one-person company.   There is also no requirement that the employee pays the company anything back for the bike. 

It's slightly more complicated than that. The taxation implications are where it gets most complicated. Else you'd have a nice little tax loophole of paying your employees in pinarellos instead of a bonus.

Where a sole trader, as opposed to a ltd, is involved, it gets even more complicated. 99 times in 100 you'd get away with what you're suggesting. But if you lose the audit lottery, it can be a problem. Your ideas of acceptable levels of risk may differ from mine.

Quote
The other big confusion right through the thread is between Cycle to Work scheme and Cyclescheme

The first is the law under which companies can buy bikes for their employees, subject to certain conditions.
The second is the name of a private company set up to exploit that law, and which has made a lot of money from doing the trivial amount of admin necessary for bikes purchased under the Cycle to Work scheme.  There is no requirement for companies wishing to use the scheme to do so via Cyclescheme, Halfords or any such 'administrator', and saving their 10-15 % commission.

A final confusion is around the £1,000 limit.  There never was  a limit under the Cycle to Work scheme.  The limit was on how much the employer could claim back under salary sacrifice.  There never has been anything to stop your employer buying a £10k Colnago and giving it to you, just they couldn't get you to pay them back for it!

As it is considered a loan, above £1000, a consumer credit license is required, fine if you already have one cos you're a bank, but a fuckton of extra admin if you are in any other form business. It gave a defacto limit, even the system has no such limit technically imposed.

Quote

The point that QG makes above about Cycle to Work schemes involving salary sacrifice not being accessible to those on low wages is a very good one.  IMHO, while being favourable to cycling, the way it has been implemented has produced a horrendous scheme which mainly subsidises middle class people to buy bikes they would have bought anyway while doing nothing to help those on low incomes who may well cycle if they could get the same assistance.

Agreed.

Makes for an interesting exercise, how would you redesign the system to make it fairer for all, especially those on limited income who could benefit the most.

Something else I saw go on twitter that was interesting, is the employer imposed limit on bike purchase, some employers have a limit of £10k, some £3k2, etc... Some had it as a percentage of your gross annual income. All fine so far. Until you remember the gender pay gap, that and in some companies it's based on your rank within the company, which given that women are massively underrepresented at the higher levels of companies...

Cycle to work scheme is demonstrably not fit for purpose.

J
--
Beer, bikes, and backpacking
http://b.42q.eu/

Re: CycleScheme remove £1,000 price cap
« Reply #64 on: November 12, 2019, 06:31:31 am »
Many of  the above comments are not correct.

Any company can buy a bike and give it to an employee to use to travel to work.  The law does not require that records are kept regarding usage by that employee - essentially you can do what you want with the bike.  That employee could be the Director of a one-person company.   There is also no requirement that the employee pays the company anything back for the bike. 

It's slightly more complicated than that. The taxation implications are where it gets most complicated. Else you'd have a nice little tax loophole of paying your employees in pinarellos instead of a bonus.


It really isn't a lot more complicated than that. It is a loophole that enables a limited company to avoid any tax when it lends a bike to an employee.  It can't give the bike to the employee but it can lend it with no intention of ever asking for it back. 

I don't think it applies to sole traders.

The law doesn't say that the employer has to charge the employee anything for the loan of the bike.  When they do, that is where the consumer credit licences and salary sacrifice payments and other complications come in.