Cycle schemes

[tillson]

Are cycle schemes such as Cycle to Work, Cycle Scheme etc worth getting involved in these days? I used Cycle Scheme to buy a bike a bike 5 years ago and it saved me a worthwhile sum. These days, I understand that the tax rules have been, "clarified" with the net result that these schemes don't deliver the same level of saving, if any. I think it's to do with the final, buy-back price of the bike at the end of the hire term. If I remember correctly, I paid something like 7.5% of the purchase price for the bike after one year.

So, does anyone have any numbers to hand for the initial purchase price, rental cost and buy-back amount for a scheme purchase made in the last couple of years? I can then determine if its worth bothering with.

Thanks.

 

[Martin@e-bikeshop]

Are cycle schemes such as Cycle to Work, Cycle Scheme etc worth getting involved in these days? I used Cycle Scheme to buy a bike a bike 5 years ago and it saved me a worthwhile sum. These days, I understand that the tax rules have been, "clarified" with the net result that these schemes don't deliver the same level of saving, if any. I think it's to do with the final, buy-back price of the bike at the end of the hire term. If I remember correctly, I paid something like 7.5% of the purchase price for the bike after one year.

So, does anyone have any numbers to hand for the initial purchase price, rental cost and buy-back amount for a scheme purchase made in the last couple of years? I can then determine if its worth bothering with.

Thanks.

Tillson,

You are right the scheme has changed slightly where you have to the buy-back at the end of the period.
Although not as good a saving as before its still a decent saving when using the scheme to its full potential.

Why not use the savings calculator here - How much can I save? - Cyclescheme

As everyone is on different wages / tax brackets / employers etc its difficult to compare savings with others.
The savings calculator will be able to work out the savings that YOU could make.
Although now with the changes the cyclescheme still proves very popular in my stores.

Regards
Martin

 

[GT3]

I've questioned it in the past, but it remains good value, although not as good. The twp changes are than the initial VAT cannot be claimed back and the employer has to charge a final value payment upon transfer to the employee. HMRCs recommendations are here EIM21667a - Particular benefits: bicycles: simplified approach to valuing cycles sold to employees after end of loan period

The final value charge can be avoided if you remain with the employer (and they will defer transfer).

 

[tillson]

Thank you for the responses, particularly the link to the calculator. On paper, the scheme still looks attractive.

I have done a bit more research and have spoken to people who have used the scheme and they tell me that success or failure to make a saving hinges on the buy-back price of the bike. Apparently, you have to take it back to the shop at the end of the term and they will asses the condition as either Good, fair or Poor. If you have abused the bike and it is deemed to be in poor condition, you will be rewarded by being charged a small amount to buy it and will make a saving. If you have taken pride in owning of the bike and looked after and maintained it well, you will be punished by being charged a higher price to buy it back. In some cases, very responsible owners can end up paying more for it, (Rental + Buy-back) than it would have cost to just buy it outright at the beginning. This seems to sort of fit in with the way that things are in general. Unless anyone knows differently, I'll probably just buy a bike and not bother with these schemes.

 

[Woosh]

Hi everyone,

Sorry not to join in recently, have been busy.

I'm not going to touch on points about value and actual savings but would just like to fill readers in on how these schemes work and why we, and I suspect some other companies, can't always work with them.

Cycle schemes are not usually dealt with by companies or organisations themselves, especially if the companies/organisations are very large. The admin for the scheme is farmed out to third party companies who take a fee - a percentage of the bike's price' - for their work and push the company/organisation into a contract. The fee is taken not from the employee or the employer but from the supplier - ie us.
The problem is that the lowest fees we have seen are 10% and they can go up to 15%. We, like some other suppliers, simply can't afford to discount our prices by this much - we can really only offer 1% off if a customer pays by debit card as our prices are already very low. 10 to 15% can mean a whacking £60 to £90 and our profit on a bike really isn't a great deal more! When we explain this to customers, many offer to pay the 'fee' themselves because they would still make some savings (less admittedly) and have the benefit of being able to pay monthly rather than entirely 'up front'. But whilst some of the companies that administer these schemes will allow this - Salary Share and Bikes for Staff, for example - others, such as Cyclescheme, won't.
This last case is extremely annoying and I have had many customers working for companies who use Cyclescheme feeling very peeved that they are not 'allowed' to be able to pay this themselves when surely it should be their prerogative after all. I have tried talking to Cyclescheme but they don't want to know - in fact they were very unhelpful.

So Woosh actually work with Salaryshare and Bikes for Staff, plus offer our own scheme (free of charge of course), but can't work with Cyclescheme.

Sorry to digress - just thought this might be useful info for some of you.

Hatti

 

[amigafan2003]

Thank you for the responses, particularly the link to the calculator. On paper, the scheme still looks attractive.

I have done a bit more research and have spoken to people who have used the scheme and they tell me that success or failure to make a saving hinges on the buy-back price of the bike. Apparently, you have to take it back to the shop at the end of the term and they will asses the condition as either Good, fair or Poor. If you have abused the bike and it is deemed to be in poor condition, you will be rewarded by being charged a small amount to buy it and will make a saving. If you have taken pride in owning of the bike and looked after and maintained it well, you will be punished by being charged a higher price to buy it back. In some cases, very responsible owners can end up paying more for it, (Rental + Buy-back) than it would have cost to just buy it outright at the beginning. This seems to sort of fit in with the way that things are in general. Unless anyone knows differently, I'll probably just buy a bike and not bother with these schemes.

I didn't have to take the bike to the shop at the end of the 12 months - they just gave me an "Extended Use Agreement" deposit figure (£55) that I was happy with and job was a good 'un. At the end of those 3 years "extended use", if I want to keep the bike they keep the deposit. If I don't I get the deposit back.

I suppose it can vary with the company that adminsters the scheme you are on - my employer (Hewlett Packard) uses Tax free bikes for work through the Government's Green Transport Initiative - Cyclescheme, provider of Cycle to Work schemes for UK employers - Cyclescheme

 

[tillson]

I didn't have to take the bike to the shop at the end of the 12 months - they just gave me an "Extended Use Agreement" deposit figure (£55) that I was happy with and job was a good 'un. At the end of those 3 years "extended use", if I want to keep the bike they keep the deposit. If I don't I get the deposit back.

I suppose it can vary with the company that adminsters the scheme you are on - my employer (Hewlett Packard) uses Tax free bikes for work through the Government's Green Transport Initiative - Cyclescheme, provider of Cycle to Work schemes for UK employers - Cyclescheme

I bought a bike through work via Cycle Scheme 5 years ago and had to pay 10% above list price to cover the dealer's Cycle Scheme charge. He said that there wasn't enough profit margin in the bike otherwise. I still saved quite a bit doing it that way. From what Hatti, says, it looks like Cycle Scheme don't allow that now.

How long ago did you buy your bike? It sounds like a good deal that you got for yourself, but I'm wondering if it was before the "clarification" of the rules by HMRC and not possible now.

 

[amigafan2003]

I bought a bike through work via Cycle Scheme 5 years ago and had to pay 10% above list price to cover the dealer's Cycle Scheme charge. He said that there wasn't enough profit margin in the bike otherwise. I still saved quite a bit doing it that way. From what Hatti, says, it looks like Cycle Scheme don't allow that now.

How long ago did you buy your bike? It sounds like a good deal that you got for yourself, but I'm wondering if it was before the "clarification" of the rules by HMRC and not possible now.

They aren't supposed to do that - anyone caught doing it gets removed from the list of approved vendors on the cyclescheme website.

I bought my bike August 2011 - the "clarified" rules were in effect by the "end value" point. Technically, I still don't own the bike (and wont until the 3 year extended use ends - August 2015) - but what actual difference does it make?

I agree with hatti though - dealing with cyclescheme isn't a great deal for the vendors - but as my bike shop said, "we'd rather sell you a bike with £1 profit than no bike at all, in the hope that you'll come back and keep using us for spares, upgrades, clothing etc" - and I certainly have done. They may have made ****** all on the bike, but they've made a fair chunk with the "after sales" ;-)

 

[tillson]

They aren't supposed to do that - anyone caught doing it gets removed from the list of approved vendors on the cyclescheme website.

I bought my bike August 2011 - the "clarified" rules were in effect by the "end value" point. Technically, I still don't own the bike (and wont until the 3 year extended use ends - August 2015) - but what actual difference does it make?

I agree with hatti though - dealing with cyclescheme isn't a great deal for the vendors - but as my bike shop said, "we'd rather sell you a bike with £1 profit than no bike at all, in the hope that you'll come back and keep using us for spares, upgrades, clothing etc" - and I certainly have done. They may have made ****** all on the bike, but they've made a fair chunk with the "after sales" ;-)

That sounds like you have a good deal you have and I'd be happy with it.

I'm not going to say which Loughborough based dealer it was that loaded the price of my Kalkhoff Pro-Connect with an extra 10% to cover the Cycle Scheme costs. Suffice to say that it looks like they had my trousers down.

 

[Woosh]

Valid point Amiga fan, but 90% of our sales are by mail order, so we get very little post sales revenue.
But many bikes shops would, I grant you.

Hatti

 

[amigafan2003]

Yes I agree - makes no sense for mail order companies to participate in most of the schemes.

As it happens the bike I bought - a Trek - couldn't be ordered mail order anyway (I think Trek have banned mail order for their bikes).

 

[Sacko]

Trek have banned any mail ordering of their bikes, they must be bought in-store.

I presumed this was so that the are all 'professionally built' and setup.

 

[crankyhorse]

They aren't supposed to do that - anyone caught doing it gets removed from the list of approved vendors on the cyclescheme website.

I bought my bike August 2011 - the "clarified" rules were in effect by the "end value" point. Technically, I still don't own the bike (and wont until the 3 year extended use ends - August 2015) - but what actual difference does it make?

I agree with hatti though - dealing with cyclescheme isn't a great deal for the vendors - but as my bike shop said, "we'd rather sell you a bike with £1 profit than no bike at all, in the hope that you'll come back and keep using us for spares, upgrades, clothing etc" - and I certainly have done. They may have made ****** all on the bike, but they've made a fair chunk with the "after sales" ;-)

I am getting my non Halfords E bike via a very roundabout way but I still ended up spending £80 in Halfords yesterday getting all the accessories I thought at would need for the bike plus the money I spent on a saddle yesterday for it from the supplier.

I did contact Hattie for one of her bikes weeks ago and I do understand why she could not help. It would seem that big business is using the cycle to work scheme to squeeze the independents a bit more.

I was unaware of this until I came on here wanting a pedelec.

 

[Scimitar]

Apparently, you have to take it back to the shop at the end of the term and they will asses the condition as either Good, fair or Poor. If you have abused the bike and it is deemed to be in poor condition, you will be rewarded by being charged a small amount to buy it and will make a saving. If you have taken pride in owning of the bike and looked after and maintained it well, you will be punished by being charged a higher price to buy it back. In some cases, very responsible owners can end up paying more for it, (Rental + Buy-back) than it would have cost to just buy it outright at the beginning.

Crazy, isn't it?
Still, it opens the door for the more 'enterprising' individual to shove on some right doggy old crap fittings, filthy it up and present it to the dealer like that. Changes to be reversed when back home.

 

[crankyhorse]

Crazy, isn't it?
Still, it opens the door for the more 'enterprising' individual to shove on some right doggy old crap fittings, filthy it up and present it to the dealer like that. Changes to be reversed when back home.

The scheme my company uses does not do that. I wish they did. With an electric bike you could turn up with a bike and a duff battery you cobbled together and it would be worthless.

 

[tillson]

After a bit more research, it would appear that Cyclescheme still has its benefits.

Because HMRC are very diligent and have to upmost integrity, they don't wont to see the likes of Starbucks, Google, Amazon and private bicycle owners evading tax. They have started with private bicycle owners first by clamping down on schemes which encourage health and fitness through tax breaks on bicycle purchases.

These schemes work by allowing your employer, or one of the scheme operators, to buy a bike of your choosing and then renting it back to you over a one year period. At the end of the year, you used to be able to purchase the bike for about 5% of it's original value. In rough terms for a basic rate tax payer, you would end up paying about £630 for a £1000 bike. HMRC clamped down on this saying that the final purchase price was too low and it must be in the order of 25% of the original value. This all but wiped out any saving.

Now, at the end of the hire term, one year, instead of buying the bike at that point, Cyclescheme (I don't know about the other operators) let you continue the hire agreement for a further 3 years. This costs a one off, non-refundable, "deposit" of 7% of the bikes original value. There are no further hire charges, just the deposit to pay. At the end of the extended agreement, the bike will be 4 years old and deemed to have no value, so you can keep it.

Technically, the bike still belongs to the scheme operator during the 4 year agreement, but if you sell it after one year, you lose your deposit, which you wouldn't have got back anyway.

So, a £1000 bike bought through Cyclescheme will end up costing you about £650 if you a basic rate tax payer and you will own it.

New bike on order

I'm please that the HMRC have sorted out the nasty private bicycle owner, I'm now looking forward to them attacking Starbucks, Amazon and Google with the same vigour.

 

[GT3]

There are at least two issues in posts in this thread that it would benefit us all if clarified.

1, Final value.
I posted a link in my first post of HMRC's 'guidance' on the price to be paid by the employee to take title of the bike from the employer at the end of the hire period. This price can be reduced by simply not taking title - the bike remains the employers, ideally until the value has become negligable when transfer can take place.

There is nothing in the law that requires the bike to go back to the supplier - the bike belongs to the employer. Someone above was referring to a 'lease' style arrangement, that is not relevant here.

2, Third parties providing the scheme.
IMO these are nothing more than parasites. There is no magic or complexity that would prevent any shop or manufacturer providing their own scheme. Here, HR met with some suppliers and decided Halfords were best. I provided my opinion of Helfrauds bikes and we swapped to Evans.

I wanted a Thorn, not supplied by Evans, so prepared my own credit hire documentation (it's out there on the web) and the company bought me what I wanted and no middleman took a cut. OK, not everyone can do that, but you can lobby the employer not to employ the parasites.

Unfortunatley, their MO is to approach the employer and state they facilitate the scheme. They do nothing of the sort.

 

[amigafan2003]

but you can lobby the employer not to employ the parasites.

My employer, Hewlett Packard, got £20 from CycleScheme for every purchase. No way were HP willing to let us do our own leg work.

They do similar with the healthcare provided through BUPA that you can actually get cheaper if you do it yourself.

 

[banbury frank]

Hi


Just A small point for your company to run there own scheme they must hold a consumer credit license


Frank

 

[GT3]

Hi


Just A small point for your company to run there own scheme they must hold a consumer credit license


Frank

Not correct. The OFT have issued a 'group licence' for the scheme, up to a value of £1,000. That applies to employers, they issue the credit, not the parasites.

Cycle to Work licence  - The Office of Fair Trading

I am fortunate my employer does have a Consumer Credit Licence, therefore the £1,000 limit does not apply.

I did not realise the parasites give the employers kickbacks. They have us against the wall.