[Closed] Cycle to work schemes

we've found cyclescheme.co.uk to be the most straight forward and the Halfords one the most awkward. Halfords also charge the shop a lot more % so going for one of the others might be adventagious when negotiating a discount

Pro's:

Quick access to a bike
Salary sacrifice saves you a little on tax
Normally a digestable little chunk of your income that you won't miss too much, similar in principle to a 0% loan.
Sometimes you get included accesories/discounts from certain retailers?

Con's:

You don't own the bike straight away (and most likely won't for ~3 years).
Unknown fee for scheme extension/transfer of ownership at the end of the initial period.
What is the buy out/exit cost if you leave the employer before the scheme ends? and would you then be on the hook for VAT?
You may be tied to the vendors that accept the particular scheme's vouchers (although many shops do now TBF).
(Annacdotally) Certain shops tie the scheme to current year models only and/or try not to apply any other discounts on C2W transactions to keep the value at or close to RRP...

See if you can find out what the final transfer of ownership/extension fee is likely to be.
I've known people (and found it myself when I did the scheme some years ago) who reckon the final transfer of ownership bit wiped out all the "Savings" up to that point.

These days I do find myself looking at bikes around the C2W price points (say £800-1500) both new and previous year models and then go looking to see what 0% credit card deals I could score for 12-18 months... the difference in terms of final and monthly costs generally work out about the same and you have a wider choice of where to shop (IMO).

But if you're in a stable job, unlikely to move on and the scheme/shop/bike all align with what you want then why not, the point of C2W was always to try and make it easier for people to get hold of decent bikes to ride to work on...

Do you need a scheme or can you set up your own?

My employer is small enough and I'm 'senior' enough that I can ask the account to set-up one for me and avoid some fees (we did the same with Childcare vouchers).

I'm trying to get past the 1k upper limit, I know it can be increased to £3k 'somehow'.

See if you can find out what the final transfer of ownership/extension fee is likely to be.
I’ve known people (and found it myself when I did the scheme some years ago) who reckon the final transfer of ownership bit wiped out all the “Savings” up to that point.

From : https://www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance

Age of cycle Acceptable disposal value as a percentage of original price (including VAT)
Original price of the cycle less than £500 Original price £500+
1 year 18% 25%
18 months 16% 21%
2 years 13% 17%
3 years 8% 12%
4 years 3% 7%
5 years Negligible 2%
6 years & over Negligible Negligible

(The formatting may be all over the place..)

If your C2W bike is 1 year old when ownership is transferred to you, then you will be charged 18% or 25% of the original value of the order. This makes the C2W scheme almost pointless so most of the companies run a free-lease period of a few years. For instance, Cycle Solutions run a scheme where ownership of the bike transfers from your company to them (Cycle Solutions) once the monthly salary sacrifice ends. They (CS) own the bike for four years before ownership passes to the employee. The employee makes no more payments during this period. This allows the value of the goods to depreciate to a point where there is no tax outstanding, and therefore the employee makes no further payment allowing full savings. A paperwork exercise to get around the taxable benefit bit.

Standard savings are tax and NI, so 32% for a basic rate tax payer, 42% for higher rate. Some large companies will negotiate a discount, some will finance the scheme using a third party, so the actual saving can vary from 24% - 48% depending on those factors. I don't for a minute believe that a 24% discount is 'a little'!

cookeaa lays it out well. I like it and have used it several times, the saving from the higher tax band and the spreading out of payments over a year makes sense for a bike that costs a grand. But the lack of ownership for 4 years is a bit convoluted - I've paid roughly the cost of one month's payment as the final transfer fee I think, 70 quid or so in each case.

Not a good scheme for those who like to chop and change their bikes - great for a workhorse commuter or something you know you like. Probably not a good idea to take a flyer on the latest geometry fad through CtW (although I think there's a reasonable cooling-off facility).

I’m trying to get past the 1k upper limit, I know it can be increased to £3k ‘somehow’.

You'll need a consumer credit licence. If your company has one then you can put any upper limit in place. Or no limit at all.

My employer is small enough and I’m ‘senior’ enough that I can ask the account to set-up one for me and avoid some fees (we did the same with Childcare vouchers).

There should be no fees at all. A small company would probably be required to pay for the bikes/orders pro-forma but that would be the only difference between yourselves and HugeCompany PLC! Drop me a PM - I can put you in touch with someone who can help.

If your employer has a suitable consumer credit licence then there is no upper limit on the value of bike defined in the legals AFAIK, other than the requirement that repayment mustn’t drop you below minimum wage.

If you dig into it and read the small print you may be able to go over £1000 without needing a consumer credit licence. Typical example is if you require a custom bike to meet your physical needs.

If you dig into it and read the small print you may be able to go over £1000 without needing a consumer credit licence. Typical example is if you require a custom bike to meet your physical needs.

Can you show me where? (Genuine question.)

quite a lot of small bike shops will let you go over and just pay the cash difference. I did this on my cargo bike

I personally found I could buy a sales bargain on 0% or save up, at a better price than the cycle to work schemes as basic rate taxpayer.

This will be different if you are a high rate payer.

Question for you then.
If you get a voucher for £1000 but don't spend all of it what happens?
Do you still get charged the whole £1k and have to pay it back or does the value of the equipment/bike override the voucher total?
If you have to pay it back what happens to the money you don't spend?

quite a lot of small bike shops will let you go over and just pay the cash difference. I did this on my cargo bike

Agree that this is common, but it’s not necessarily a good idea always. If you were to find yourself in a situation where you were dismissed and couldn’t afford to buy out the remainder of the scheme in one (which is how termination/changing job/redundancy is normally handled) you stand to lose the extra you paid on top of the £1k. Similar arguments apply to ‘upgrades’ to the original bike if you haven’t held the original parts to refit.

My current employer actually cited this as a reason for having changed provider recently (to the detriment of anyone wanting to join) as the older scheme supported by the credit license was still being topped up and there had apparently been some unfortunate cases. The new scheme we’re on apparently guaranteed my employer it couldn’t be ‘topped up’ (I have no idea how they support this statement) but also dropped the limit back to £1k - which I gather has seriously dropped takeup. Hopefully there will be a rethink next year...

If you get a voucher for £1000 but don’t spend all of it what happens?

With the voucher schemes you select the value UP TO a max of £1k. With the non-voucher schemes you just select whatever goods you need. But yes, if you don't spend the whole of the voucher, tough, you're paying for it.

Agree that this is common, but it’s not necessarily a good idea always. If you were to find yourself in a situation where you were dismissed and couldn’t afford to buy out the remainder of the scheme in one (which is how termination/changing job/redundancy is normally handled) you stand to lose the extra you paid on top of the £1k

How many people would this happen to? If you leave your employment during the period where you are making sal-sac payments then the full outstanding amount will be deducted from your final pay. You will leave with your bike, paid and in your ownership.
If you have topped as, as m-oab did, you have already paid the extra amount over £1k. This can't be charged to you again. You still own the bike at the end. Topping up - giving cash over the £1k limit - is arguably not compliant with HMRC guidelines, so some schemes won't allow it. The way around it is that the LBS will take the extra cash and bill the C2W for £1k, so the LBS gains some cash and the C2W provider remains compliant. However this is obviously rather dodgy as the shop needs to generate an invoice for something that they aren't selling for £1k.

My company lets you use the bike after 12 months and then gives it to you so there is no further charge. It just depends on your companies policy.

then gives it to you so there is no further charge.

If it does that you’d be getting a taxable benefit and HMRC would be very interested.

All of the relevant info is available online from HMRC, and has been outlined above.

Surely you can use it as soon as it is bought? Why make you wait for a year to use it?

Good point about it being a good idea for a workhorse commuter rather trying a new fad. Certainly if you are a higher rate tax payer it makes more sense. As a lower rate tax payer I got a new model bike (the original Arkrose c2014?) With roughly 25% off without having to wait and gamble that what I wanted was in the sales in my size.

The HMRC scheme is strict on the £1k RRP limit, several shops have offered to bend both and retracted it when I've said I'm on the HMRC scheme. Mi d you, it also says I must do at least 50% of the bikes mileage riding to and from work, and they've never checked.

Mi d you, it also says I must do at least 50% of the bikes mileage riding to and from work, and they’ve never checked.

It's difficult to check because it covers any part of the commute. You may be riding to a railway station and then catching the train...