The cost of repairing my £120 Halfords bike is £60. It is just not worth repairing it. I could just go back to Halfords and buy another cheap bike. I want something better. This is my pride and joy now.
I have seen some Cycle To Work scheme banners around. I do not know anything about it. I did google, the explanation is not very clear and the process seems cumbersome. Further, I am not clear what are the tax benefits.
The bike I am going for is £250. I and one other (she will not get on a bike) are the only employees of my ltd company practice. Would it be possible to go for the scheme?
Does anyone know what are tha tax benefits for Cycle to Work Scheme for a 20% tax payer? Is it a hassle to go for this? Would it cover repair bills?
Have you/your practice gone for the scheme? Good for staff?
Thanks
Replies (14)
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Read this
http://www.cyclescheme.co.uk/employers
Let us have some feedback - if you want to that is (on this and all the other questions) - it's always useful.
How did you get on with the double monitors? Things have gone a bit quiet on that front.
I have a client just embarking on this ...
... I will report back in due course.
Not sure how he will get on with his company van though, I suppose he will have to keep it at the office and use it if he needs to go on site during the day!
From the employers point of view it seems quite straight forward, effectively it is just a salary sacrifice.
I don't think it recovers repair bills, it is just a tax efficient way of buying a bike and the accessories (safety wear etc).
Personally, I wouldn't use it as a tax saving vehicle (no pun intended ;o) ) but would use it if I was buying a bike anyway.
Agreed
Personally, I wouldn't use it as a tax saving vehicle (no pun intended ;o) ) but would use it if I was buying a bike anyway.
I've only signed one person up to it and that was a good while ago, so I'm far from an expert, but that was how we 'sold' the scheme to them: if you're buying a bike anyway it is a solid and tax efficient way to do it.
You may save on the VAT as well
The company I used to work for operated this scheme and it was very popluar.
Not only is their savings on Tax and NI but the company claims the VAT back as well. If you're a higher rate tax payer you're effectivley getting a bike at almost half price and spreading the cost over the year.
Do it bespoke
The cycle to work scheme is a DfT initiative to make use of an exemption within ITEPA to permit employees to effectively purchase a bike at a reduced cost via their employer.
There are essentially 3 elements to the scheme:
the employer buys a bike (claims VAT) and provides it to the employee. There is a specific exemption in ITEPA to cover the benefit arising.in exchange for the benefit, the employee sacrifices an amount of salary.at the end of a period (12 moths, 24 months, whatever), the employer sells the bike for a nominal sum (plus VAT).
With respect to the VAT aspects, if input VAT is recovered on the purchase, then it is essential that a nominal monetary sum is charged on the transfer to the employee, on which VAT can be charged. Otherwised the deemed supply rules kick in and you have to charge VAT based on original cost (=no saving made).
Following the AstraZeneca vouchers decision, the ECJ have said that a salary sacrifice is consideration for a supply. If HMRC implement that ruling in relation to bike schemes, VAT will be chargeable on the monthly payments as well, such that no overall VAT saving would be made, where the employer is looking to fully recover cost. That may very well kill the schemes.
In your situation though, it seems to me that there's no need for a salary sacrifice or to ever transfer ownership of a bike to you personally. The company can just keep buying your bikes as and when you need/want them, provided the terms of the exemption are met:
cycles are available generally to the employer's employees.the cycles are used by the employees mainly for 'qualifying journeys'.
'Qualifying journeys' are any business travel plus personal commuting. A home to work journey involving bike and train, by way of an example, would be a qualifying journey.
The exemption covers not only cycles, but also cyclist safety equipment. Helmets, flurorescent vests, child seats, etc.
You can satisfy the available generally requirement by writing to your other employee to tell her that she can have a bike if she wishes (which you indicate she won't) under a salary sacrifice arrangement. There's no requirement that all cycles be made to employees on exactly the same terms.
As for repairs, HMRC may accept that these are not be a benefit in kind on the basis that they are trivial if the cost of each repair (including VAT) is less than £20 on average. See http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm about halfway down.
HMRC guidance on the cycles exemption generally can be found near the bottom of this page: http://www.hmrc.gov.uk/manuals/eimanual/EIM21601.htm.
Ive done it
I needed a new bike and I live in decent cycling distance from work. My company bought one under C2W, claimed back the VAT :) None of my employees are interested, though of course the option is open to them as well.
It's a good scheme, just do it!
Edited to add, after seeing Ernest's comprehensive post: I don't believe the employee purchasing the cycle at the end of the 12 months period is compulsory. Presumably the company can continue to own the bike indefinitely. Furthermore the company can have 'pool' bikes, it doesn't have to provide one per employee, so a C2W bike can be shared between employees. There are various permutations.
Yes, and...
... you can also claim capital allowances of course!
The important point is that that is exactly what the exemption is for. The schemes are essentially just an add on whereby the employees can end up owning the bike. As shareholder/employee you don't care if you end up owning the bike personally.
RCB 28/11
HMRC confirmed last week that VAT will be added to the rent and payment for the bike made through salary sacrifice. This will reduce the benefit from the scheme although some providers (e.g. Halfords) are still bullish about these.
A cycling web site is quoted as saying:
"On the face of it and based on road.cc's own back-of-an-envelope sums and Cyclescheme's own website calculator, the additional VAT payments will reduce the savings for top-rate tax payers from 52% to 42% and for lower rate tax payers from 43% to 33%. When the final payment of 7% of the initial price to eventually own the bike is factored in, the saving should still be about 25% which may or may not be a real saving considering that we're moving into the 'sale' season.
What is an undoubted saving, however, is paying for a potentially £1,000 bike over several years without coming up with a credit charge"
RCB
Is here http://www.hmrc.gov.uk/briefs/vat/brief2811.htm
Thank you Longboat for pointing it out. The guidance is very clear.
FirstTab, I was just as excited as you when I bought my new Specialized (having not had a new one since I was 17!). Partly because of the bike, and partly because of the tax relief. Haha. Enjoy!
Erm, you need to sort by price lowest to highest :p
It was under £300, and from Evans. I do have expensive taste though, you're right. In shoes. :)
Confused at the entries!
Just looking to get a road bike via my business where i am sole director earnings just at the NI limit.
The more I look at the scheme the more confused I get!
In my mind I had the actual entries as:
Bike bought:
Debit loan to employed £450
Credit bank £450
I was then to repay this over 12 months so £37.50 a month goes credit the loan and debit to salary?? thereby the salary is showing in my accounts as higher than actually paid and the bike does not show as an asset?
Or is it Debit equipment £450 and claim 100% capital allowances?
And then £37.50 is reflected as a reduction in my salary going through??
I assume as a director there is no reason (I could not see anything anyway) why I could not increase my salary by £37.50 a month which means I would end up with what I started with in the first place plus the bike.
At the end of the loan period either pay a % and keep hiring the bike from the Company or sell off.....