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The company I work for are happy to set up a cycle to work scheme 🙂 And have asked me to provide them with the relevant information.
Cyclescheme was my first thought but after reading there information and calling them to confirm the company buy the bike and then after 12 months the ownership moves from the company to cyclescheme automatically then you either pay a large chunk and keep the bike or a smaller payment and the bike belongs to cyclescheme for 36 months before ownership transfers to you.
Our MD has run the scheme at another company before and he said it seemed strange compared to what they had in place before but couldnt recall who, so who else is worth considering other than cyclescheme?
It won't be for a huge number of bikes maybe 4 or 5 this year, and most will be sub £300 I'd guess it would also be good if we can top it up to go over the £1000 as the company are happy for me to go over the £1000 limit.
You can do it yourself, you don't have to go via a provider
Your employer buys bikes
Employees lease bikes via a salary sacrifice, which is applied against a specific tax code
AT the end of the lease period, the employee owes the tax man the value of the tax on the residual value of the bike. Whether the employer charges for the bike is up to the employer
Cyclescheme don't charge you or your company for their services - they make their money by taking a cut (10% of the purchase price) from the bike shop. Since they insist on a final value payment, they also make it more expensive for you
The reason Cyclescheme do it that way is that the Inland Revenue started clamping down on people using the scheme to get a new bike every 18 months tax-free. I think most or all schemes do something similar now.
Edit: that "residual value" is where the problem was - a £1000 bike is not worth £50 after 18 months 😉
I think the £1000 limit is due to needing a consumer credit license or something to 'lend' more than that. I'm not quite sure but there's some info on the different schemes on the on-one site.
Infact on-one require you to pay top up payment to cover the cyclescheme fees (10%) i keep meaning to ask if i can top up the value of the bike as there's a few at ~£1200 i really fancy :/
HMRC tightened the rules regarding residual value (and the taxable benefit therein) a couple of years ago.This is the final payment after a year.By transferring ownership to cyclescheme and extending the period to 3 years (and paying a small fee) the residual value is much less and hence you pay less.
If it goes over £1000 then your company will need a consumer credit license (not cheap).
The benefit from the scheme is less than it used to be (at worst it's 12 months interest free) but death and taxes-you can't escape either.
The £1000 limit is indeed due to the fact that a credit license is needed should you wish to offer the opportunity to spend more
However you need to think about the "residual value". The tax man NEVER says that you have to pay the residual value. What the tax man wants is the TAX on that amount. Your company can actually say "the bike is really worth nothing to us" and [i]*GIVE YOU THE BIKE FREE*[/i] - [b]as long as you pay the tax on the "residual value"[/b]
Your company can actually say "the bike is really worth nothing to us" and *GIVE YOU THE BIKE FREE* - as long as you pay the tax on the "residual value"
Well, no - the company is supposed to sell the bike on the open market for "fair market value".
Sorry bencooper, but nbt is correct. I run the scheme in our company.
The company can give you the bike absolutely free, but this is a benefit in kind and the tax is then calculated on the market value of the bike.
If you don't wish to have this tax deducted from you, then the company sells you the bike at the market value (remembering to charge VAT on the value).
OP - definitely run it in house, not difficult and nothing to do with tax codes either. Just deduct the monthly amount from monthly gross salary and then tax/NI as normal.
£1,000 is an issue as the company needs a consumer credit license over this amount, unless you pay the difference. i.e. £1,500 bike - you pay £500 and the company leases you the £1,000 value.
On, they can, but you then lose the tax-free benefit is the point I was making 😉
Topping up the scheme is problematic as then who owns the bike? The company owns £1000 of it (and in theory can sell it on eBay at the end of the scheme period), so you could lose the top-up you put in.
[quote=bencooper ]Well, no - the company is supposed to sell the bike on the open market for "fair market value".
no they don't. the tax man wants the tax on the "fair market value". He couldn;t care less if the company sell it or not.
Thanks guys, I'm creating a presentation for a meeting tomorrow will suggest the do it in house route, but the intial response I got from my boss just now when I suggested it, would point towards them wanting a company to do arrange it for them.
The ownership change makes sense now, especially as I have read some information on the HRMC website about suggested values.