[Closed] Cycle to work scheme - big swizz?

By "hiring" it for a further 36 mths (at no cost) the bike will then be so old it will be deemed worthless and as such you wont get taxed on any value by keeping it.

So, just keep riding it till the tax man reckons its worthless, then you keep it.

Or find out the market value and then counter it with a claim that its worthless because you didn't look after it, knackered the drive chain, brakes and never serviced the forks etc. They may give it to you 🙂

You read the T&C's before you signed up, so you should know. Oh, you didn't... 🙄

And tbh, why exactly did you think you'd get something (of value) tax-free?

You read the T&C's before you signed up, so you should know. Oh, you didn't...

I guess I believed the statements made on their web page, as quoted above.

And tbh, why exactly did you think you'd get something (of value) tax-free?

I had the naive idea that the purpose of the scheme was to give people a financial incentive to cycle to work, to improve traffic congestion, the environment, and my impact on the NHS. My bad.

I believe since HMRC got more interested the usual thing is to refer to "market value" while it belongs to the employer. But the employer can (and I've never heard of anyone doing otherwise) depreciate the value to nothing over 3 years much like a computer or similar, hence no value or charge at the end.

They can get a bit funny about making this explicitly clear though, I imagine to cover themselves in case HMRC change their minds.

HMRC got their sticky mitts involved a few years back.This lead to some confusion and properly kicked the arse out the the scheme until the providers thought up a workaround.
At the end of 12 months when you take ownership the bike is still worth x amount and HMRC see this as a benefit in kind.And so want you to pay tax on it.
By 'hiring' it (from cycle to work) for a further 3 years it depreciates to nothing and hence no tax to pay.Some providers charge a fee for this service.

And tbh, why exactly did you think you'd get something (of value) tax-free?

I had the naive idea that the purpose of the scheme was to give people a financial incentive to cycle to work, to improve traffic congestion, the environment, and my impact on the NHS. My bad.

Wait till your employer IS those interfering barstewards at HMRC! 🙄

You're expecting sympathy for being a tax inspector, MCTD?

[i]I believe since HMRC got more interested[/i]

Yep. You'd have thought that anyone coming up with a tax-free scheme would at least discuss it with HMRC. I believe that HMRC were one of the last central Govt Depts to adopt the policy.

And tbh, why exactly did you think you'd get something (of value) tax-free?

Well. Because that's basically the whole (and only) point of the bike to work scheme 🙄

If it wasn't tax free, people would just go to a shop and buy a bike.

But they don't, because it is.

[i]Well. Because that's basically the whole (and only) point of the bike to work scheme [/i]

I was talking about the 'retained' value, at the end of the hire period - as the bike actually belongs to the employer.

It's all basically HMRC trying to get some money out of you as you've had a tax-free bike

I notice with interest that they didn't consult STW classifieds for 'real-world' valuations of bikes sold at full RRP with mediocre specs.

Basically it is dishonest, and a major pain in the balls. In hindsight I should have just looked around for a discount, or other deal, and bought a bike.

We just let our staff continue to "hire" it for nothing, after the first year, until we depreciate it to zero, then there is no value to be taxed on. Simple.

Just extend you're agreement for the further 3 years and you've saved. Simple.
It really isn't dishonest because it's written in the t's & c's you didn't read.
They have to make it sound like they might keep it because they are technically the owners of it. They can't word it that they'll gift it to you because that could be misconstrued.
I've never known an employer wanting the bike back. Ever. They've got they're money back and as such couldn't care less about it.
The 'fair market value' is set out by hmrc and has been for some time now. Depending on the original value of the bike it goes down in set yearly increments up to 4yrs from date of purchase at which point the market value is deemed to be £0.00.

I was talking about the 'retained' value, at the end of the hire period - as the bike actually belongs to the employer

Until it gets written off at zero value and given to the employee tax free.

So. A Tax Free bike. As was the whole idea in the first place.

And the reason it is what the employees expect.

I'm not a tax inspector, thank God, different agency.

And yes, we were about the last organisation to get their heads around the scheme.

But the terms are usually easily fairly easy to find and read. As a basic rate tax payer I got a brand new, newly released model for 20% less than rrp after the final payment. Anyone expecting anything more is probably naive.

Basically it is dishones

No more than pretending that you ride the bike to work regularly (if at all)

The irony of the scheme is that if you are a higher tax rate earner.....you save more money buying a bike on the scheme (the oft quoted up to 42% saving).

I got a brand new, newly released model for 20% less than rrp after the final payment. Anyone expecting anything more is probably naive.

I'm not expecting more, but I am getting less - paying an extra "fee" for the extended hire and then potentially a "market value" at the end.

No more than pretending that you ride the bike to work regularly (if at all)

Are you stalking me ? 🙂

The market value at the end is 0. So if they're charging you the admin fee then that's it. 7% is the usual admin fee.

By "hiring" it for a further 36 mths (at no cost) the bike will then be so old it will be deemed worthless and as such you wont get taxed on any value by keeping it.

This, plus it's worth remembering that nobody else involved is unlikely to want the bother or cost of anything other than an extension of the hire period...

If you turn down 36 month continuation or refuse to buy it at "market value" they have to take back the asset, and do something with it, incurring cost and effort.

The three year hire extension works for everyone, assuming it's at zero further cost to you, and a FOC transfer of ownership at the end is guaranteed?... Is it?

There should be no extra fee, or if there is it will be bugger all, and you have saved a shed load of money thanks to the tax man.

You hire it for zero for the extended period till its worth zero.

So stop being upset by it.

For once the tax man does something good by allowing people to get fit, save congestion and ride bikes and boost the trade LBS get - so stop moaning.

(It was sunny today, did you not get out for a ride then ?)

I had one of the early bike to work schemes which meant that you got it for a final payment at the end of 12months. HMRC then changed it to 12 months, plus one payment on month 13. The employer still technically owns the bike as everyone above says until the end of a further 35/6 months when it is worthless and they gift it to you.

Of note is again hidden in the small print that you must take care of it and this includes the bike must NOT be used for racing.... oops.

I had a good deal on a genesis latitude 853 3 yrs ago. I work for the govt and paid up for 12 months then haven't heard anything else since, no end of hire costs after 3 yrs. worked out as a good deal. Basically a good reduction on the price (-tax and national insurance means approx 30%) and interest free credit for 12 months. What's not to like?

This was direct with Cyclescheme...

In hindsight I should have just looked around for a discount, or other deal, and bought a bike.

In hindsight you should have researched properly before going ahead.

I know it's a technicality, but what I don't like about the scheme is that you only get to officially own the discounted bike after 4 years! I know you can basically get away with treating it as if it is your own, but I don't want to pay money out of my wages for a year, and then not own that item for a further 3 years: a kind of pay now own later scheme! The initial discount, along with the potential extra hassle/cost if you change jobs, means it has never made it worth it for me though I know many people have been happy with it. This is compounded by the fact that I would want to upgrade and modify the bike whenever I want (including painting), and i wouldn't feel able to do that unless it was mine (though know people who have).

Blimey, some people are way too hard to please.

What I always say to customers is that at worst it works out as a 12month interest free loan. At best you'll make a saving. So if you have cash in the bank then by all means use that. But if you do t or would use an interest baring (?) credit card then use the scheme if it's available to you.

My office used to do it, and several people took it up. I didn't because apparently I cycle already, and it wouldn't be fair or something.
As far as I can see the main outcomes for B2W are:
Allowing IT consultants to buy a bike every year for the last 5 years, and not ever use them to cycle to work
Double the size of cycle clubs
Make cyclocross mainstream
Double the value of Evans Cycles

I don't see the problem, I've had my email through offering me the 3yr hire for £67 where at the end I can either keep the bike or return it and get the £67 back, buy now for £240 or simply return it.
I plan on ignoring the email in the hope they will forget me and not ask for anything! 😉

what happens if after you've paid off the yearly cost it gets nicker=d, or broken....?

I know it's been said before but for a standard rate tax payer you'll probably get a better deal buying it up front or on Interest Free. You get a better selection (including discounted stock), no potential administration fees, the bike is yours and the shop will likely give you a discount rather than paying scheme administrators 10-15% of the cost (and therefore a huge part of their margin).

It's a flawed policy when taken at face value.

The idea was to encourage cycling to work. It does no such thing for the vast majority; all it does is encourage existing cyclists to purchase a bike close to £1000 which they might not have bothered with if the scheme hadn't been in place.

The whole thing needs reorganising as either "every tax payer can buy a bike from their pre-tax earnings because its good for the overall health of the nation" (i.e. no bureaucratic rules about ownership etc) or "we'll let you buy a bike tax free if you actually use it to travel to work on for a decent proportion of your working week" (which will never happen because of the bureaucracy involved and the workplace disputes).

As it stands its just a mess; yes, of course, it can work very well for some people and organisations, but it has grown into something unnecessarily complex.

at worst it works out as a 12month interest free loan. At best you'll make a saving.

[i]As it stands its just a mess; yes, of course, it can work very well for some people and organisations, but it has grown into something unnecessarily complex. [/i]

Pretty much like most 'policy' things proposed by Politicians with little outside experience.

#soundbitepolicies

It's not a con just because you don't understand it or read what you're signing for. At the end of the extended hire period the value of the bike is 0 so you pay nothing for it, but could technically choose to give it back at the end of that hire period.

It used to be better value as you got it VAT free. HMRC and Astra Zeneca went to Court over them giving retail vouchers tax free as part of a deferred salary scheme, and the cycle scheme was caught in the collateral damage.

The "extended hire" process is basically a loop hole sanctioned by HMRC to get around the final value untaxed benefit issue. No scheme manager actually wants bikes handed back, its an admin exercise.

If you're a basic rate taxpayer you can probably get a bigger discount in the sales but as others have said its an interest free loan.

I've just signed up for it again, as a 40% tax payer it works for me.
If nothing else it is an interest free loan for a year, with a handy 40% off a bike.
At the end of the scheme our company gives us the bike as a BIK which we then pay the tax on - works out something like <£4 per month.
A £1k of salary sacrifice is also good for other tax reasons.

When my Evans voucher arrived last week it also had a code for an extra £60 to be spend on clothes/accessories.

If I wasn't a 40% tax payer, I'm not sure i'd bother.

With Evans, you can still use cycle to work on a discounted bike, so the point about getting a better deal in the sales is irrelevant*.

http://www.evanscycles.com/ride-to-work/faqs

*I realise this means you have to buy a bike from Evans and may not apply to your particular vendor / scheme.

I think people are being a bit harsh on the OP here.

When you reach the end of the first year you can:
1- Hand the bike back

2a- Pay a final 'market value' fee to buy the bike outright

2b- Your employer gives you the bike and you pay tax on the Benefit in Kind. E.g. rather than paying £500 to buy the bike, you get it for free and then you pay tax on the £500 BIK at the same rate as you'd pay tax on £500 of income. This might not be available any more but it used to be an option. It's no good for the OP because his employer doesn't own the bike and Cyclescheme aren't going to give it away for free.

3- Pay a small (possibly £0) fee to extend the hire period for a few more years. When that second hire period ends the bike is deemed worthless and so you can keep it without any 'benefit' in the eyes of the taxman and so no tax implications.

So when the OP signed up to the scheme he was told about option 3, and now he's been offered option 2a. It's probably better for Cyclescheme if you buy the bike outright as it's more cash in their account rather than keeping a depreciating asset on the books for the next three years. I don't know if the HAVE to offer all the options or if it's their choice. The OP should though, as others have said, Cyclescheme probably won't want the bike back.

isitafox I don't see the problem, I've had my email through offering me the 3yr hire for £67 where at the end I can either keep the bike or return it and get the £67 back, buy now for £240 or simply return it.

I got a Boardman CX team on sale for £590 - 40% tax plus they gave me £140 quids worth of accessories for free.

So basically I got a helmet, 2 sets of lights, new pump, pedals, and a boardman cx team for £340 quid...

result!!

@kinda666 was an email direct from cyclesheme

I've just arrived at the end of my term, so in same boat as OP. I was aware of the final payment to hire for an extra 3 years though, but as someone else mentioned - I'm in the process of ignoring it...see what happens!

One thing though - I'm really struggling to work out the actual cost of the bike. The full value including accessories was £1150. My pre-tax repayments have been £95 over the course of the year and they want £85 off me for the extended hire period.

I get that the savings are incurred through reduced NI & PAYE contributions, but for me these differ each month due to other pre-tax stuff such as holiday purchase schemes, expenses etc.

So is there a simple way I can figure out exactly how much I have paid for the thing?

I got a Boardman CX team on sale for £590 - 40% tax plus they gave me £140 quids worth of accessories for free.

So basically I got a helmet, 2 sets of lights, new pump, pedals, and a boardman cx team for £340 quid...

result!!

This just goes to show that if you work it to your advantage, C2W is still well worth it for some people.

I've got a 2016 Arkose 3 on order (£1000) which comes with £60 worth of free stuff via the C2W deal.
So, my £1060 purchase from Evans is going to cost me £580ish + a small BIK payment at the end of the scheme.

Still feels like a no-brainer to me..

No more than pretending that you ride the bike to work regularly (if at all)

Are you stalking me ?

No, but @MoreCashThanDash might be 😉

So is there a simple way I can figure out exactly how much I have paid for the thing?

Yes. Add up all the payments you have made, and that's how much you've paid. 😐

[quote=nealglover ]Yes. Add up all the payments you have made, and that's how much you've paid.

I presume you're deliberately ignoring the payments coming out of untaxed salary and peachos being interested in how much it's costing him in taxed salary. Which isn't the same.

The answer is that it should be possible to see how the amount of tax and NI you pay is calculated (your pay slip should break things down well enough to be able to do that in combination with your tax code - it's not generally that complicated). So simply add the payment back into your taxed pay and redo the calculation.

I blame cycle to work for the hike in bike prices and rounding off of many builds to suit it's maximum price.

In hindsight you should have researched properly before going ahead.

Remember that salary sacrifice may well reduce your pension contributions

It's not a con just because you don't understand it or read what you're signing for. At the end of the extended hire period the value of the bike is 0 so you pay nothing for

Well, according to what they tell me now, that ain't necessarily the case. Which is sort of the point.

I presume you're deliberately ignoring the payments coming out of untaxed salary and peachos being interested in how much it's costing him in taxed salary.

Well not really no.

The question was "how much has it cost me"

That's just a case of adding up all the payments that have been made. As I said.

If the question had been "how much Income Tax and NI have I saved myself from paying" then that would be a different answer obviously. But that wasn't the question.

But still not that complicated. Just add up all the payments you have made, and use an online PAYE calculator to work out the Tax and NI that would have been due on that amount.

OP: Have they explicitly said that your can't do the extended hire thing? Or are they just encouraging you to do the "buy now" option because that's best for them?

OP: Have they explicitly said that your can't do the extended hire thing?

I can do the extended hire thing but they don't say what I will have to pay at the end of it.

Right, I don't think they can. When HMRC tightened up on it they decided that telling you what you would pay at the end somehow made it 'wrong' and so you have to be surprised with it after a year or after the three extension years.
Nobody is going to come out and value your bike though. It will be a small fee, if anything at all. They're just not allowed to tell you that now (which is stupid, but it's based on the market value and they don't know what your bike will be worth in three years time).

Just extend it.

My approach to this was entirely optimistic:
- the money for this bike doesn't even go to my bank account, therefore I am getting a free bike
- now I've finished the 1 year scheme I get more money in my bank account than before therefore I am getting free money

I will gladly give both of my kidneys to anyone who can find a single flaw in that logic.

its an interest free loan.

Is it? I thought it was a hire scheme with various ill defined options at the end...

I speak as someone who took up an earlier incarnation of the C2W scheme, and essentially saved bugger all to eventually own a bike I wasn't that enamoured with... The three year wheeze wasn't in place, but then neither was the final value rule my 12 months hire charges essentially covered the ex VAT price of the bike, the final transfer cost effectively dragged it up to the original full RRP, no discounts available, limited to buying from Halfords FFS... The tax saving was negligible at best and TBH I would have been much better off taking out a 0% credit card and heading to the Paul's cycles site to spend the same amount...

As a scheme it's completely missed it's goal now, has it gotten many lower income people cycling to work lately? Doubtful TBH the £50 supermarket BSO is probably doing a better job in that regard... No C2W has become another way for mid-higher income earner's to try and squeeze themselves down a bracket while acquiring another toy... See also childcare vouchers and gym memberships, etc, etc all available as ways to drive down your pre-tax income...

^^Yep, you're not wrong. I also buy childcare vouchers for the very same reason - trying to hang onto that child benefit as long as possible..

I presume you're deliberately ignoring the payments coming out of untaxed salary and peachos being interested in how much it's costing him in taxed salary.
Well not really no.

The question was "how much has it cost me"

That's just a case of adding up all the payments that have been made. As I said.

If the question had been "how much Income Tax and NI have I saved myself from paying" then that would be a different answer obviously. But that wasn't the question.

But still not that complicated. Just add up all the payments you have made, and use an online PAYE calculator to work out the Tax and NI that would have been due on that amount.

Yeah, thanks for the pedants - it was pretty obvious what answer I was trying to get!

Looked at http://www.thesalarycalculator.co.uk/compare.php and entered my details then compared the with/without bike deductions. Couldn't get the figures quite perfect, but there or there about. Looks like the bike has cost me around £700 over the course of a year.

Plus the £85 extended hire works out at around 70% of full value. Not bad (if my calcs are right!)

.Looked at http://www.thesalarycalculator.co.uk/compare.php and entered my details then compared the with/without bike deductions. Couldn't get the figures quite perfect, but there or there about. Looks like the bike has cost me around £700 over the course of a year

I'm not being "pedantic" here, but if that was the figure you were after, then as I said, you just add up the deductions from your wage.

That's how much the bike has cost you 😐

So you've paid 70% of the full value of the bike, but it's still not technically yours though, until the end of the hire period. Which is 4 years in total. Not bad, but not great either.

All those comparisons above, about it being an equivalent to an interest free loan: once you have made all of the payments on an interest free loan (say, over 12 months) you then own the bike outright, as you would expect. You don't with C2W, it's a worse deal than that and not comparable.

I like the C2W scheme, but as far as encouraging people to ride to work is concerned I'm not sure it has worked. No-one needs a £1000 bike to ride to work and I suggest most bikes bought on the scheme are rarely if ever ridden to work.

Worth noting as well that if your monthly payments take you below minimum wage then you can't do it either. So the scheme is denied to those who arguably would benefit most from it. The same applies to childcare vouchers.

@nealglover:

Its not though, is it. We're looking at the difference between annual salary with or without the bike deductions. The difference for me appears to be ~£700.

I was about 2 years into the extended hire period when my employment ended. I asked them to look into what I'd have to pay to keep the bike and it seems to have been forgotten about.
Must've cost me £600 in payments, £70 paid at the end of the year to do the extended period, then nothing. Then sold for £300.
Pretty good deal on a £950 bike I reckon.

but it's still not technically yours though, until the end of the hire period

Aside from the occasional friendly email from cyclescheme, its pretty much my bike.

Why oh why couldn't they just make it nice and simple and just make all bikes under £1K VAT exempt?

Currently high rate tax payers who need the help the least, gain the most. Those on minimum wage aren't even allowed to take part! You have to work for an employer who takes part and then factor in the number of purchases that have nothing to do with cycling to work anyway. Just make cheap(er) bikes VAT exempt to encourage cycling as a healthy pastime and a method of commuting and be done with it. If employers want to add interest free loans for commuter bike purchases to their list of staff benefits (like buying seasons tickets are already for a fair few companies) leave it to them.

I like the C2W scheme, but as far as encouraging people to ride to work is concerned I'm not sure it has worked. No-one needs a £1000 bike to ride to work and I suggest most bikes bought on the scheme are rarely if ever ridden to work.

The girl i sit next to has bought 2 C2W bikes in the last 5 years. First one was £300, lasted a few years then got nicked, stopped cycling for after that as had bought a car. Second one was £600 bought 2 month ago and has been used for commuting 3 days a week on average. Chose C2W on both occasions as has little saving and poor credit.

STW is a biased example IMO, a lot of people do get benefit out of it.

Me and the wife did the cycle scheme this year. We had to use Hafords. We did really well out of it with accessories, I ordered extra stuff of their web site (some stuff cheaper than CRC) and then got 3 for 2 when picking it up. I look I reckon we got between us well over £2500 worth of stuff for our 1k vouchers for we'll pay £1300. We both got the bikes we wanted. But I won't do it again as you can't get choice of discounted bikes and there have been some stunning end of season deals this year.

I can do the extended hire thing but they don't say what I will have to pay at the end of it.

At the end of the extended hire period the bike should be zero; they've chosen the length of the period such that the final market value at the end of it has fallen to nothing. So you pay nothing in order to keep it. However, because it was technically a hire period you can technically hand the bike back at the end of that period.

I used the scheme when it still covered VAT, but haven't used it to buy any of the 3 bikes I've bought since due to both the discounts I've found, and the cost of the bike being over the £1000 limit Cyclescheme use.

The girl i sit next to has bought 2 C2W bikes in the last 5 years. First one was £300, lasted a few years then got nicked, stopped cycling for after that as had bought a car. Second one was £600 bought 2 month ago and has been used for commuting 3 days a week on average. Chose C2W on both occasions as has little saving and poor credit.

STW is a biased example IMO, a lot of people do get benefit out of it.

OK, that's a sample of 1.

I sell around 10 C2W bikes a week and the vast majority - probably in excess of 80% are either for kids bikes, MTB's, BMX's or are totally up front about it not being used for work.

The other anomaly is with the accessories you can get. A wheel truing stand is fine but a bike rack to go on a car is not. Slightly annoying to my customer who wanted to drive the first 20 miles of his 30 mile commute and ride the rest of the way. Still doable but the bike rack would have made it much easier.

So you've paid 70% of the full value of the bike, but it's still not technically yours though, until the end of the hire period. Which is 4 years in total. Not bad, but not great either.

How is paying 70% of the value with 0% finance "not great"

What sort of finance deal would you prefer, that's available elsewhere.

I've had mixed results with C2W scheme and am in a similar position to peachos.

However, I left my employment half way through my hire period and paid the remainder of the value of the bike from last salary before I left, which I knew would happen so fair enough.

I thought this was the end of it, but as my previous employer used an 18 month hire period, 9 months after leaving my job I got the same e-mail from the C2W provider asking my to pay £67 for an extended hire period.

I decided to do some calculations. My monthly deductions were £70 so I reckon the actual cost after the tax saving was about £48. The monthly amount plus the lump I paid in my final salary payment, combined with the £67 extended hire cost means I would have paid more than the ticket value of the bike! Unless of course I've calculated incorrectly.

I think next time I'll just buy direct...

How is paying 70% of the value with 0% finance "not great"

- By still not owning it

If I worked for HMRC *cough* I'd be very concerned to see

I sell around 10 C2W bikes a week and the vast majority - probably in excess of 80% are either for kids bikes, MTB's, BMX's or are totally up front about it not being used for work

on a public internet forum!

I did famously have to explain to a very senior colleague why it would be unwise of him to get bikes for his kids at Xmas on C2W. I had to use lots of small words, very slowly. A mate who overheard the conversation seemed surprised that someone on that salary could be that dim, but he was new at the time.

0% finance "not great"
- By still not owning it

Not seeing how that technicality is holding anyone back.

Is the bike, or the way they can use it, any different if they "owned" it

(apart from being more expensive obviously)

It's not that different from not "owning" your house because you have a mortgage.