Ride To Work Scheme Skews The Market

[vectra]

Hi
I've spent some considerable time researching the market for a kit or bike. One conclusion I've arrived at is that the current Ride To Work Scheme is skewing the market in terms of prices particularly at the upper end.

I've retired hence have no RTWS to utilise however over the past 6 months I've seen 6 used bikes for sale all priced around £900 and all under 9 months old. Each time I've made enquiries I've been told that the bike was purchased via the RTWS and is now unwanted for some reason or other.

Now, my point is this. These bikes were subsidised by you and me for a purpose. I'm not certain that the bike is actually able to be sold in the circumstances described...a bit like selling your car when it's still on finance.

The original purchase of these machines was enabled via subsidies of up to 60%. I have to pay 100%...fair? Hence I pay not only the top price for my machine. I also hand over some cash to help others "buy" theirs.

In terms of dealers. They, in my opinion, are at present able to ignore those people like me in order to put more resources into providing kit for the RTWS.

The market is, as a consquence, skewed and one consequence is that people like me are charged far too much at the higher end of the market.

Regards
vectra

 

[tillson]

Hi
I've spent some considerable time researching the market for a kit or bike. One conclusion I've arrived at is that the current Ride To Work Scheme is skewing the market in terms of prices particularly at the upper end.

I've retired hence have no RTWS to utilise however over the past 6 months I've seen 6 used bikes for sale all priced around £900 and all under 9 months old. Each time I've made enquiries I've been told that the bike was purchased via the RTWS and is now unwanted for some reason or other.

Now, my point is this. These bikes were subsidised by you and me for a purpose. I'm not certain that the bike is actually able to be sold in the circumstances described...a bit like selling your car when it's still on finance.

The original purchase of these machines was enabled via subsidies of up to 60%. I have to pay 100%...fair? Hence I pay not only the top price for my machine. I also hand over some cash to help others "buy" theirs.

In terms of dealers. They, in my opinion, are at present able to ignore those people like me in order to put more resources into providing kit for the RTWS.

The market is, as a consquence, skewed and one consequence is that people like me are charged far too much at the higher end of the market.

Regards
vectra

I agree and I'd be a bit cautious about a bike that is claimed to be 9 months old and is the subject of some sort of employer's cycle purchase scheme. My understanding is that the bike belongs to the employer or scheme operator for the first 12 months and it is leased / hired to the employee. Only after 12 months is the employee invited to buy the bike.

Therefore if it is 9 months old, it probably isn't the the person's or dealers to sell.

 

[Streethawk]

I agree and I'd be a bit cautious about a bike that is claimed to be 9 months old and is the subject of some sort of employer's cycle purchase scheme. My understanding is that the bike belongs to the employer or scheme operator for the first 12 months and it is leased / hired to the employee. Only after 12 months is the employee invited to buy the bike.

Therefore if it is 9 months old, it probably isn't the the person's or dealers to sell.

Correct, the bikes are leased for 12 months, then bought for a final one-off fee after that. Technically, they belong to the company so the user cannot sell them. In reality, the companies dont seem to care what you do with them and that's the problem. I work for the Co-op and they, depsite their green commitments, dont use the scheme. This is because they feel they could not police that the bikes werre being used for the recommended amount in the scheme guidelines. They feel it's too open to abuse and therefore its not an option for those of us like me, who could make genuine use of it.

 

[jerrysimon]

My Brompton is on a cycle to work scheme. It was over 18 months free credit and finishes in April. I probably saved around £150 on the original cost plus interest free.

At the time I purchased it the scheme would have allowed me to pay a nominal fee of around £20-£30 to own it at the end of the 18 month period.

The scheme was changed nationally following some abuse so that the final payment is higher. I don't recall the actual numbers but its been posted here before. It starts at say 50% the original cost after the first year and then decends down to almost nothing after 5 or 6 years.

Even though I purchased it before the scheme changed/was clarified I am now bound by the new rates.

A bit like me being a public servant for over 32 years and yet having my terms and conditions changed re redundancy and pension rights

Regards

Jerry

 

[JuicyBike]

The recent changes to the scheme, ie the increased value placed on the bike after one year, allows the government to claim 20% VAT from the final sale price.

So the saving a purchaser under the scheme now makes has become only half of the VAT they would have otherwise paid, after one year.

On one of our bikes this is now £79 saved, rather than around £150 saved under the original scheme.

All other savings made by purchasing using money not yet taxed in any way, including National Insurance, remain the same and are still substantial.

It is still a great saving to purchase using the scheme, even though retailers are charged 10% of the value of the bike, to pay for administration of the scheme by the many companies that provide the service. The government do not pay for the scheme to be administered.

However, we've noticed a distinct drop in the number of enquiries since the rules were changed by the new government, which is a great shame.

The cost to the NHS of maintaining a person who drives, rather than cycles, to work must exceed the paltry one-off £60 the government benefits from by changing the rules. The scheme's value is so much greater in terms of health, traffic, parking spaces, stress on public transport, etc etc, than the actual pounds saved to the public coffers.

 

[jerrysimon]

It is still a great saving to purchase using the scheme, even though retailers are charged 10% of the value of the bike, to pay for administration of the scheme by the many companies that provide the service. The government do not pay for the scheme to be administered.

However, we've noticed a distinct drop in the number of enquiries since the rules were changed by the new government, which is a great shame.

I agree it is still a good scheme and I am really glad I went for it. I still feel like I got a great deal and the bike has transformed my daily commute and got me out the car. I too found out about the 10% paid by the bike shop when I got mine which seems a little rough. Thankfully my seller certainly didn't charge extra because of it. Very nice of him

As you say less seem inclined to go with the scheme which is a shame. I think it is perhaps because the changes received such a lot of bad press. To be fair the scheme was not really changed, but rather that the final value buy out terms were clarified to prevent people from rebuying and selling on to make a profit over and over.

Regards

Jerry

 

[Streethawk]

I thought the changes were brought in by the Inland Revenue, to align the scheme more with realistic market values at the end of the lease, and had nothing to do with the government?

The reality though, is that a bike used for commuting everyday for a whole year is going to be worth next to nothing on the used market, yet because people were not making regular use of their bike the used value appeared artificially high because the bikes were in such good condition, as mentioned above.

 

[tillson]

A bit like me being a public servant for over 32 years and yet having my terms and conditions changed re redundancy and pension rights

Regards

Jerry

I didn't think they could do that. I heard the other day that a Chief Executive at a certain council couldn't have her £238000.00 pay reduced because it would mean altering her terms and conditions. According to the council involved it was impossible to do this. So much so, that they shut down the website which was calling for a reduction in her pay

 

[jerrysimon]

I didn't think they could do that.

Without wishing to hijack the thread they the Government can pretty much do as they please providing they can change the law. Initially they tried to do this through the Money Bill but that got thrown out. Now they have re-introduced the Superannuation Bill of 2010, which has been changed and now has royal assent.

This will allow the Government to make many public sector worker redundant on the cheap. Unfortunatley with the media coverage of many public sector scandals, project failures and MPs expenses debacle, we are all tarred with the same brush and seen by many as over payed, a waste of space and costing the tax payer too much as it is

Regards

Jerry

 

[Patrick]

The scheme was changed nationally following some abuse so that the final payment is higher. I don't recall the actual numbers but its been posted here before. It starts at say 50% the original cost after the first year and then decends down to almost nothing after 5 or 6 years.

The scheme wasn't changed, the HMRC just helpfully clarified an unclear point.

You explicitly cannot buy a bike under the cycle to work scheme, it only allows employers to buy bikes and lease (or lend) them to their employees. The scheme finishes at the end of the lease period with the employer owning the bike and free to do with it as they wish. If the employer just handed the bike over then it would be a taxable benefit, so the normal practice was to estimate the bike's market value as 5% of the it's original cost and then sell it to the employee for that amount.

What the HMRC did was say that 5% grossly underestimates they value of the bikes, and then kindly gave belated guidelines for bike valuations.

EIM21667a - Particular benefits: bicycles: simplified approach to valuing cycles sold to employees after end of loan period

In principle, anyone who got a bike through the scheme using the 5% guesstimate is liable to pay tax on the difference between what they paid and the bike's fair market value. So far they haven't shown any sign of going after people who have already got a bike through the scheme and have contented themselves with making life so much easier for new and existing scheme users.

 

[_g_]

The money you are 'handing over' is money not being paid to the government. If you don't like that, I REALLY suggest you don't look at child tax credits, the NHS or the whole benefits system! All the same thing; some arbitrary line is drawn and people one side of it get given money and services, while people the other get nothing. (To be fair, the NHS is usually because they've got a bone sticking out of their shin or something, but still.)

From when I was researching it a few years ago (we had first been told we could buy it back for £1 when we started), no one has ever had that difference claimed back by the tax man. If you had to pay twice for the bike, it would make a complete mockery of the scheme as you might as well get a bank loan, which'd probably be no more expensive overall.

A while ago I bought a bike on ebay that came with a receipt from Halfords for the day I collected it from then. £250 off the cash price - they'd got it on the scheme.

Remember though, these sales do help profits of the bike companies (the one my company used actually offered 20% off RRP before VAT etc, which I thought was quite reasonable, but most don't). While that may not seem amazing for us, it does mean they're going to have a bit more margin elsewhere.

The other thing of course, as above, is that often these 'savings' are passed on to in part in good quality cheap second hand bikes.

I did look into the scheme after the above bike recently got stolen. Unfortunately having just set up my own company that's not VAT registered yet, my expected earnings of £6k a year for the first year won't net much saving!

 

[Bikealot]

"A while ago I bought a bike on ebay that came with a receipt from Halfords for the day I collected it from then. £250 off the cash price - they'd got it on the scheme"

If this bike was bought from Ebay and was being sold by the person who was still leasing it from his/her employer it was not their property to sell. if this is the case the owner still has title to it and the Police could seize it from you without compensation.

The employee even without the bike would have to continue payments (taken direct from salary). if this stopped I think there would also be a fraud committed against Revenue & Customs who are giving the benefit on the basis of compliance with the scheme. Any financial benefit from the scheme is from the public purse (i.e. taxpayers). Sadly it will undermine the credibility of the CTW scheme and give evidence to those who might be calling for its abolition.

 

[_g_]

Unfortunately, if you read the end of my post, they can't because some **** with some big bolt croppers has probably taken it to a cash converters in the next town .

However, I was aware of this as I'm aware of the way the system works and had done plenty of research when I was in the scheme myself - I was confident that wouldn't happen. Ie, my company I worked for had 150 employees or so, working on IT stuff (and sales etc, of course) - they'd have had no idea what to do with a bike and wouldn't even considered it. A friend got a bike, then was made redundant; remaining payment was taken out of her salary. In fact, technically another bike I did have still belongs to my old company. No mention of it was made when I left (had stopped paying it off.)

By nature, if the cycle to work scheme works as it legally should (you have to pay it off at the end for 'market value'), it's credibility will be entirely undermined. From the way I saw it, it is merely put in that way as an easy 'loop hole', but this time being used by the government.
If you were to start afresh, it's obviously a silly way to do things, as people end up paying more and places like small tech companies end up with a stock of unwanted bilkes.

 

[vectra]

The money you are 'handing over' is money not being paid to the government. If you don't like that, I REALLY suggest you don't look at child tax credits, the NHS or the whole benefits system! All the same thing; some arbitrary line is drawn and people one side of it get given money and services, while people the other get nothing.

My statement was that the CTWS was skewing the market in favour of working people on ANY salary level. The fundamental difference between the benefits system and the CTWS is that the benefits system allegedly targets those in most need or those on lowest incomes.

The CTWS does entirely the opposite. It allows people on ANY level of income be it 10k p.a. or 100k p.a. to be subsidised by enabling low cost purchases of ebikes. I, and other tax payers, then pay for the subsidy. In many cases I believe you will find that the person subsidising this scheme may well be earning less than those subsidised. There is no arbitrary line allowed for in this scheme.

The other point I made was that this subsidy has created an artificial market particularly at the top end of the price range. Does anyone actually believe that the real market value of an ebike is around 18-20% of a new Ford or similar?
Regards
vectra

 

[_g_]

As I say, it's not ANY salary level, as it would be of no benefit at all to me. But yes, does cover most.

Tax Credits also only applies to working people too I believe.

Then there's scrapage scheme, which to my mind was so much more of a farce, as it basically subsidised the car sales industry and massively over-valued the second hand car market. Meaning loads of perfectly good cars that had many years left now can't be used, while masses of pollution etc has been created thanks to thousands of new cars being made new.

Then there's 0-rated VED cars, both new and old. These are effectively being 'subsidised' by the likes of you and me.

Even if you could create a 'fair' tax system, I don't think you would ever reach a consensus on what 'fair' was .

The lucky people earning £100k+ per year are actually paying a massive amount of tax on income and no doubt more though their generally luxurious life style. This set of people are subsidising everyone else quite significantly.

It's possible it is creating a bigger market in the circa-£1000 bikes, but then there's a lot more expensive bikes out there too. With the relative slow speed battery technology is progressing, it's no great surprise the better models are very expensive.