Cycle to Work scheme guidance to allow accessories-only packages

As someone who's about to take the plunge on buying a bike on C2W (3rd time), here's my observations:

(1) yes, its not as good as it used to be...my scott sportster i bought in 2008 was subject to a 5% nominal fee at the end of year 1, which was something like 17quid. now-a-days, after year 1 its nearer 25% (but you wouldn't do that, you'd agree to defer this for year, and pay ~7% which is still pretty good really)

(2) yes, higher-rate tax payers benefit more - i'm fortunate to be in this bracket (just). this does seem wrong - should be a flat rate for all.

(3) based on higher rate payer, i've worked out that i can get ~35% saving (including market value depreciated to 7% over the years) on the trek crossrip elite i want to get (to replace my hybrid, but with dropbars). that's pretty good to me, and i can spread the cost over 12months, so my wife won't kill me ! - i can't imagine that you'll find any bike shop that will give you anywhere near 35% off a new bike, let alone pay over 12months. yes, i won't "own" it after a year, but to all intents and purposes it will be mine (it aint going back, cos i'll have signed a long-term loan agreement: this is with cyclescheme)

(4) i think for lower-rate taxpayer, the same bike, including market value payment of 7% after 4 years (cyclescheme.co.uk) works out at around 25% saving. again, i think i'd struggle to find a bike shop do that discount. however, online retailers might offer sale bikes nearer that discount (although Evanscycles allow you to use cyclescheme on sale price of bikes, which can mean a bigger bargain!)

(5) but what if you don't want to wait for years to own the bike? i believe its possible to treat the purchase as a benefit in kind (see this month's "cycling active" mag) and thus you pay tax only on the market value (250quid based on 1000quid max); this would mean the saving for higher rate tax payer would go down to ~32%, but a lower rate tax payer it could go up to ~30%; again, this is dependent on the bike being offered to you at market value as a benefit in kind...not a tax expert, but the magazine implies this is ok, as does someone else above. in this way, you'd own the bike after 1 year. note: the market value calcs from HMRC include VAT so you don't have to add that back on as well (my company believed you do)

(6) you can run schemes in following years, once the initial year's loan/payments are out the way. in this way the 4 year agreement 'tail' to lower the market value price to pay isn't an issue if you want to do the scheme again.

(7) if the scheme helps a few more people buy bikes, and get into cycling, then its ok in my book. i certainly wouldn't have got a road bike without (2010 - trek 1.5c), and cycling has genuinely changed my life for the better - feel fitter, more positive etc...but we all know that here, right?!?

as always, take the above numbers with a pinch of salt, no tax expert, etc etc, but i've looked into this over last few weeks and seems ok. i'm not linked in anyway to cyclescheme, cycle to work, whatever, just portraying my experience, and the opinion that despite a lot of people complaining, this still seems to be a good route to a cheaper bike.

(an as an aside - can road.cc please review the trek crossrip! i see little reviews anywhere, and it's down to this or the pinnacle arkose two)

I agree that this is not the most water tight of tax breaks, but it is a tax break. Given the number that respective governments have given employees don't knock it too hard.

Tax legislation is all down to interpretation (like all law). As someone else has pointed out, the tax break becomes greater the more you earn. And another contributor pointed out, the break is sort of a tax free loan (deduction of the loan comes out your gross income, not your net - which is where the discount comes in), with tax payable on the residual value of the asset (and so it depends on whether your company want to make you pay for the outstanding amount).

Not that I advocate tax evasion, but just who is keeping records of people riding to work and whether the amount is made good or the bike is returned to the retailer? Take advantage of this as much as you can.

This scheme is just dead. Our company won't touch it. It's too uncertain and the rules have changed too many times. The legal advice given out by some of the C2W companies is just wrong and potentially exposes large companies to legal action if the taxman were to really take a good hard look at it.

It could be really simple.

Why can't I buy a bike, get my company to sign a letter saying I cycle to work regularly and then send this to the taxman and get a VAT refund.

One form. No hassle. 20% discount.

If we go down the route of making cycling kit VAT free, then in a year's time it will all be just as expensive as it was before. Look at kids clothes. They're supposedly VAT free, but you wouldn't think so from the price of it!

One of the downsides to the CycletoWork scheme is that those who get paid more, ie in the 40% bracket, save more. This is a little counter intuitive I guess. If you are at the 40% bracket the savings do make sense, although the changes made over the last year which meant that you don't get relief for VAT don't help, especially if you pay tax at 20%.

Also it is worth noting that the scheme run by Evans doesn't require payment at the end if you sign up a rental agreement with them for about 7 years. I was happy to do that as I am not expecting Evans to come looking for their bike any time soon.

Finally with the risk of sounding like I am giving tax advice, if you are on the threshold of loosing child benefit, it is worth looking into buying a bike on this scheme as the salary sacrifice may be judged to bring you under the threshold, so big savings all round...seek some proper tax advice before you take my word for it.

The Cycle to work scheme encouraged me to buy a bike a few years ago with no intention to use it for commuting, before that I hardly ever went out on my old Hybid bike. Last year of my 3300 miles on the bike about 1400 were commuting miles.

The cycle to work scheme is a token gesture. It is claimed to be a scheme which promotes cycling to work, but it is designed to be limited in uptake by requiring the commitment of an employer. Leaving those whose employer won't take it up, to pay tax on the earnings and then VAT on the cycling goods at the checkout. HMRC need to remove or reduce VAT on all cycling equipment. Obviously cycling is one of the key things that we can look to for combined sustainable transport and health benefits, which in turn reduces spending to treat the effects of inactivite/unhealthy lifestyles. Join the dots please number 10/11.

I've gone through 2 cycles of C2W over the last 3 years and got only accessories. I've got lights, jackets, gloves, a saddle and shorts among other things. Strangely, I was told at the time I couldn't get tyres, but I was allowed a lezyne caddy sack and a yellow selle Italia gel flow saddle.

Whats the residual value on a puncture repair kit after 12 months then HMRC?

Do Rapha do a Ride to Work scheme?

'The reason cyclescheme found that 80% of people only do this once, is that after doing it once, 80% of people find out that the advantages are only minimal.'

Aye. Particularly if you work for someone who is VAT registered but has some funny loophole which means that they're not VAT registered for this side of things, so the employee doesn't make that saving either.

It's just an interest-free loan really, rather than any 'saving' for a lot of people.

Why do they want to encourage repeat business? This is meant to be a Government backed scheme to encourage the use of cycles to get to work by people who would not ordinarily consider it. It's not like a hotel trying to get customers to come back year on year and spend more money.

If they want people to buy essential safety gear why not raise the limit by £200 stipulating that it must be spent on safety products? That way they would not cycle around for a year without a helmet, hi-viz etc. before being able to buy it.

Also why not add cycle training schemes to the list of what can be bought, Lord knows I see enough bike users who need it.

The reason cyclescheme found that 80% of people only do this once, is that after doing it once, 80% of people find out that the advantages are only minimal.

For a start cyclescheme takes 10% of the value of the voucher. While you still think you have a £1000 voucher for your bike, the shop will only get £900, so they will not negociate on price.

Then, you don't actually own the bike for 4 years (unless you're willing to pay the higher residual value fee), so you're at the mercy of HMRC, who might change the rules of the game part way through AGAIN.

Anyone tried this as a contractor through your own ltd company? Any experience of this would be appreciated.

Damn, I doubt a new groupset or wheels count as "safety equipment". Like DazCr said though, it's not really worth it anymore now that HMRC wipe out any tax savings with the residual value calculation. 0% deals from bike shops can work out to cost pretty much the same.

What would have really encouraged repeat business would be HMRC not revising their guidelines for assessing the residual value of the bike at the end of the term. This has negated many of the tax savings achieved.

I went from paying a £20 nominal fee at the end of one agreement to paying nearer £250 at the end of the following year's agreement.

mmm...Zip 808s rweally are crucial for my safety.