Cycle To Work Scheme operators respond to HMRC VAT ruling

Cyclescheme and Halfords Cycle2Work say its still worth using government rent-to-buy bike system

by nick_rearden   July 30, 2011  

London Cyclist.JPG

Cyclescheme, the largest of the Cycle To Work Scheme operators that administer transactions on behalf of cyclists, employers and Independent Bike Dealers (IBDs), has issued a statement following the announcement this week that VAT will now be payable on salary sacrifice payments made by users of the scheme. Halfords, the UK's largest bike retailer, which administers transactions under its own Cycle2Work system, has also come back arguing that all parties might end up better off.

On Thursday we reported that following an EU ruling on company voucher schemes, Her Majesty's Revenue & Customs will need to consider that provision of a benefit to employees via salary sacrifice constitutes a supply of services and is therefore subject to VAT. The new rule comes into effect from January 1st 2012.

Two of the main operators, however, appear to agree that, far from offering a disincentive to buyers and employers, the new ruling offers a clarification meaning everyone can now move on after months of uncertainty, the Halfords press release even headed "VAT ruling now makes Halfords Cycle2Work scheme an even better option."

Daniel Gillborn, Head of Commercial Operations for Cyclesheme said yesterday, "As the market leader using our unique web based platform and dynamic savings calculator we have ensured that Cyclescheme is supporting our employers and their employees with the correct business logic to account for these changes - keeping the process simple and straight forward for all parties. The IBD network will also be kept informed, although no additional work on the part of the bike shop is required at all."

Daniel goes on, "Cyclescheme believes that this is the clarification we have been waiting for and will now allow employers to plan with certainty how to apply the benefits of the Cycle to Work Scheme for their employees, allowing them access to savings of up to 42%."

Charles Ashwell, Halfords Cycle2work Corporate Sales Manager said, “The new ruling removes the final element of uncertainty about exactly how schemes should operate going forward, and in so doing, strengthens it further.

“Halfords is the leading authority on the scheme, and we continue to invest in its development and future. We are uniquely placed to maximise savings by working with clients to design schemes which provide superior savings for employees and employers than those available from other scheme providers.”

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 lump sum and without having to get into a credit transaction.

3 user comments

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I work for Royal MAil and all they allow on the cycle2work scheme is £500.Anyone know any good bikes for that price?I don't.

booswain

posted by booswain [11 posts]
30th July 2011 - 22:38

7 Likes

i work for Royal Mail also, got myself a Boardman Team Comp single speed for £500, great bike. although that was nearly 2 years ago and the Boardman bike prices have gone up.. Mind you a friend a work got the Carrera 'Virtuoso' for £350 and it aint too bad really, kinda depends what you gonna use the bike for..connuting?, racing? etc etc.
Lesiure Lakes will also redeem RM cycletowork vouchers so you can have a shop around there also..

Fringe's picture

posted by Fringe [1085 posts]
31st July 2011 - 6:55

9 Likes

2 years ago I got my Ridgeback Element for just under £500 on the CTW scheme (although my firm allow up to £1k) - 12,000 miles later it's still going strong

Guess it depends on your definition of a "good" bike

Buddha said:

Believe nothing, No matter where you read it,
Or who has said it, Not even if I have said it,
Unless it agrees with your own reason
And your own common sense.

mad_scot_rider's picture

posted by mad_scot_rider [567 posts]
1st August 2011 - 9:34

11 Likes