Cycle Scheme - cycle to work?
Discussion
Hi folks
Hope you can explain the cycle to work scheme (tax benefit system) or whatever it is to me in simple English please.
First of all do you buy the bike or your employers? (In this case the NHS)
Do you have to use it for a certain amount of work time? (Fairly impractical for me who works in the community and carried alot of gear and has seven hills to get up and down (Sheffield)). However I could vary my work pattern and perhaps make it more viable.
I have been on various websites which seem to contradict each other. Or should I be asking our human resources department?
TIA
David
Hope you can explain the cycle to work scheme (tax benefit system) or whatever it is to me in simple English please.
First of all do you buy the bike or your employers? (In this case the NHS)
Do you have to use it for a certain amount of work time? (Fairly impractical for me who works in the community and carried alot of gear and has seven hills to get up and down (Sheffield)). However I could vary my work pattern and perhaps make it more viable.
I have been on various websites which seem to contradict each other. Or should I be asking our human resources department?
TIA
David
It depends on the specific scheme (there are a couple of different ones) and your company.
For example, my company uses Cycle Scheme and the general gist is that you find the bike you want, send the details to the scheme, you get a voucher via the personnel department and you use this to go buy your bike.
For example, my company uses Cycle Scheme and the general gist is that you find the bike you want, send the details to the scheme, you get a voucher via the personnel department and you use this to go buy your bike.
Edited by Frik on Wednesday 7th May 21:21
With the above mantioned cycle scheme there is no need to use your bike for work or to commute at all. My shop is in rural devon and much that it's gorgeous countryside for cycling, due to the hills and scattered villages it not realistic for most to ride to work but we've still done loads with the scheme. As far as I can tell its not policed at all, having said that its still getting people out on bikes and thats what its all about!
medicineman said:
Thanks for the replies so far. Seems that needing to use the bike for at least 50% work time could be a big problem.
Theres absolutely no need to use your bike for work at all.Having been involved with the scheme for a while, you'll find the majority of people are already keen cyclists, who are using it to get a healthy discount off a shiny new high spec bike, which will nevergo anywhere near there office bike sheds.
I think you'll find that officially there is always a requirement to cycle for a certain percentage of commuting, as that's the whole point of the government offering the tax incentive to do so.
Unofficially it is entirely impossible to police, so you'll never get caught out.
These schemes in a nutshell:
Unofficially it is entirely impossible to police, so you'll never get caught out.
These schemes in a nutshell:
- Employer buys bike (of your choice)
- Employee rents it from the employer over a fixed period
- Rental is paid tax free by salary sacrifice (so be careful if other benefits you have depend on your max salary)
- At the end of the rental period the bike still belongs to the employer but they are allowed to sell it to the employee for a nominal sum (I think HMRC allow this to be as low as 5% of the purchase price).
drewcole81 said:
I only pay 3% at the end of my hire to own it.
I changed jobs part way through the sceheme (7 months in on the 12 month term), and all that happened on leaving was the remaining 5 payments (around £40 each) were deducted. Did't have to pay off any other excess at the end.clonmult said:
Did't have to pay off any other excess at the end.
In which case either (a) you don't own the bike or (b) you owe the tax man a wedge as a hire/purchase scheme doesn't qualify for the tax savings that the cycle to work schemes are set up to take advantage of.See:
http://www.dft.gov.uk/pgr/sustainable/cycling/cycl...
dft said:
Can the employee keep the cycle at the end of the loan period?
There should be no automatic entitlement for the employee to take ownership of the cycle and cyclists' safety equipment at the end of the loan period. If the loan agreement (technically a hire agreement under the Consumer Credit Act 1974 (CCA)) allows for ownership of the cycle and cyclists' safety equipment to pass to the employee upon the exercise of an option, the doing of any other specified act by either party to the agreement, or the happening of any other specified event, the resulting agreement is likely to be hire purchase in which case the tax exemption available for a loaned cycle may not be available.
However, at the end of the loan period, the employer may choose to give the employee the option to purchase the equipment. Typically this would be offered at substantially less than the original value of the equipment, but to prevent a taxable benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the fair market value of the equipment. No tax relief is available to the employee for the purchase so, where the price is recovered from salary, it must be deducted from their net salary. VAT will also be payable on the purchase price by the employee on the supply by the leasing company or the employer as owner of the equipment.
Alternatively, the employer may wish to allow their employees to continue to use the cycles and cyclists' safety equipment you have supplied after the initial loan period has ended, without transferring ownership. As long as the employee continues to meet the conditions of the tax exemption (see section 4 above) no tax charge will arise.
For fuller guidance on transfer of ownership, you may wish to refer to the HMRC website http://www.hmrc.gov.uk/news/comps-and-bikes.htm
There should be no automatic entitlement for the employee to take ownership of the cycle and cyclists' safety equipment at the end of the loan period. If the loan agreement (technically a hire agreement under the Consumer Credit Act 1974 (CCA)) allows for ownership of the cycle and cyclists' safety equipment to pass to the employee upon the exercise of an option, the doing of any other specified act by either party to the agreement, or the happening of any other specified event, the resulting agreement is likely to be hire purchase in which case the tax exemption available for a loaned cycle may not be available.
However, at the end of the loan period, the employer may choose to give the employee the option to purchase the equipment. Typically this would be offered at substantially less than the original value of the equipment, but to prevent a taxable benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the fair market value of the equipment. No tax relief is available to the employee for the purchase so, where the price is recovered from salary, it must be deducted from their net salary. VAT will also be payable on the purchase price by the employee on the supply by the leasing company or the employer as owner of the equipment.
Alternatively, the employer may wish to allow their employees to continue to use the cycles and cyclists' safety equipment you have supplied after the initial loan period has ended, without transferring ownership. As long as the employee continues to meet the conditions of the tax exemption (see section 4 above) no tax charge will arise.
For fuller guidance on transfer of ownership, you may wish to refer to the HMRC website http://www.hmrc.gov.uk/news/comps-and-bikes.htm
clonmult said:
drewcole81 said:
I only pay 3% at the end of my hire to own it.
I changed jobs part way through the sceheme (7 months in on the 12 month term), and all that happened on leaving was the remaining 5 payments (around £40 each) were deducted. Did't have to pay off any other excess at the end.If not then your last company have done it wrong if you haven't paid anything and you dont own your bike!
drewcole81 said:
clonmult said:
drewcole81 said:
I only pay 3% at the end of my hire to own it.
I changed jobs part way through the sceheme (7 months in on the 12 month term), and all that happened on leaving was the remaining 5 payments (around £40 each) were deducted. Did't have to pay off any other excess at the end.If not then your last company have done it wrong if you haven't paid anything and you dont own your bike!
The deductions were about £40 per month, and had 5 remaining on leaving the company - checked with the HR manager, he said that all that needed to be done was for the remaining 5 payments to be taken in one and the bike would be mine. No other payment was made.
clonmult said:
I did check the last pay slip ...
The deductions were about £40 per month, and had 5 remaining on leaving the company - checked with the HR manager, he said that all that needed to be done was for the remaining 5 payments to be taken in one and the bike would be mine. No other payment was made.
In which case they've not read the rules properly and technically either you don't own the bike or you owe the taxman a fair old pound of flesh.The deductions were about £40 per month, and had 5 remaining on leaving the company - checked with the HR manager, he said that all that needed to be done was for the remaining 5 payments to be taken in one and the bike would be mine. No other payment was made.
chris_w666 said:
Dont know if anyone can answer this but would the employer pay the lump sum then take it back from the employee or does the employer pay as the salary is deducted?
That question doesn't make sense.The basis of the scheme is that the employer buys the bike and then loans it to the employee for a fixed period at a fixed monthly rental (which is paid in a tax-efficient manner as specifically allowed by legislation).
At the end of the loan period, the employer still owns the bike but may sell it to the employee for a "fair market value". What constitutes a "fair" value is open to interpretation but clearly is greater than £0.00.
If the employer simply gives the bike to the employee, then there's a benefit in kind going on that would attract tax. If nothing happens then the employer still owns the bike. If the employer treats the payments as hire/purchase then under the terms of the legislation the tax advantages do not apply so the 'missing' tax & NI would need to be paid.
I think i understand most of this, but is there any obligation to go through any scheme?
I work for a small company, and the Financial Director reckons I can just buy the bike from any shop on my company credit card.
He would then deduct every month from the salary 'top end'
No scheme involved, and no restriction to any one shop or supplier?
Is this true, or has he missed the point?
I work for a small company, and the Financial Director reckons I can just buy the bike from any shop on my company credit card.
He would then deduct every month from the salary 'top end'
No scheme involved, and no restriction to any one shop or supplier?
Is this true, or has he missed the point?
For big organisations, they usually have an agreed supplier (I'm doing Leeds council at the moment).
But for a small operation, you basically let your boss know what you want, by providing him with a list/receipt/transaction etc, if he's happy with it, then the company pays the bike shop and he then takes the chunk out your gross pay. Easy.
The big schemes have various limits on pricing and what is an acceptable accesorie, but if your boss is easily swayed you could get yourself a very helathy saving on something real nice.
But for a small operation, you basically let your boss know what you want, by providing him with a list/receipt/transaction etc, if he's happy with it, then the company pays the bike shop and he then takes the chunk out your gross pay. Easy.
The big schemes have various limits on pricing and what is an acceptable accesorie, but if your boss is easily swayed you could get yourself a very helathy saving on something real nice.
pdV6 said:
clonmult said:
I did check the last pay slip ...
The deductions were about £40 per month, and had 5 remaining on leaving the company - checked with the HR manager, he said that all that needed to be done was for the remaining 5 payments to be taken in one and the bike would be mine. No other payment was made.
In which case they've not read the rules properly and technically either you don't own the bike or you owe the taxman a fair old pound of flesh.The deductions were about £40 per month, and had 5 remaining on leaving the company - checked with the HR manager, he said that all that needed to be done was for the remaining 5 payments to be taken in one and the bike would be mine. No other payment was made.
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