Cycle to Work scheme guidance to allow accessories-only packages

From March 1 you won't need to get a new bike every time to take advantage of the C2W discount

by Dave Atkinson   February 26, 2013  

Altura Urban 17 briefcase pannier

Good news for those of you that like to get cheap cycling kit – that's all of you, right? HMRC have changed the rules of Cycle to Work so that it's now possible to get just bike accessories on your agreement. That means that if you got a bike last year through the scheme, from 1 March you can use any subsequent contract to buy other stuff to go with it.

By 'other stuff' we specifically mean 'safety equipment', which HMRC doesn't exactly go out of its way to clarify. Generally you're okay if you go for helmets, lights, locks, bells, pumps, dynamo systems, mirrors, mudguards, cycle clips, bags, puncture repair kits, multi-tools, reflective clothing and reflectors for your bike. Child seats are premitted too, but tagalongs and buggies are not.

You can get a new Cycle to Work agreement every year, and assuming your employer doesn't have their own consumer credit licence you'll be limited to a spend of £1,000. You pay for the bike or equipment through salary sacrifice, generally over 12 months, and you save on income tax and National Insurance on the payments. At the end of the scheme the bike is yours for a Market Value payment, although many providers extend the hire through a separate agreement for a further couple of years to take advantage of the much lower Market Value rates for older bikes (3% for bikes under £500 and 7% for more expensive bikes). The £1,000 limit applies to equipment-only agreements too, with a £100 minimum. The Market Value of safety equipment follows the same rules as for bicycles.

Cyclescheme have found that 80% of people who take out an agreement only do it once; that's not surprising, as most people wouldn't want a new bike every year, but they're hoping that the new guidelines will see a big increase in repeat business. "Offering participants the chance to obtain safety equipment only allows those 80% to re-enter the scheme to obtain all the essential kit they need – or perhaps missed off on their original application – for their commute," said Cyclescheme director Daniel Gillborn. "Giving participants the tools to be able to cycle more frequently and confidently is an important message and one that safety equipment only packages will help reinforce. In turn, this will help to ensure participants have a safe, comfortable and enjoyable commute."

29 user comments

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

posted by andyp [915 posts]
26th February 2013 - 12:20

8 Likes

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. Surprise

posted by DazCr [12 posts]
26th February 2013 - 12:44

10 Likes

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.

CraigS's picture

posted by CraigS [135 posts]
26th February 2013 - 12:51

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CraigS wrote:
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.

The 'residual value' drops quite a lot if you continue the agreement for a few years (assuming your company runs it and dosnt farm it out to some money grabbing management firm).

STATO's picture

posted by STATO [416 posts]
26th February 2013 - 13:17

5 Likes

DazCr wrote:

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. Surprise

You sure it's not just the tax on £250? I can't see how to make the FMV = £250.

posted by mbrads72 [124 posts]
26th February 2013 - 13:28

7 Likes

mbrads72 wrote:
DazCr wrote:

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. Surprise

You sure it's not just the tax on £250? I can't see how to make the FMV = £250.

I was half way through my payments in 2010 when I was told my final payment to own the bike outright would increase from around £40 to £280.

I extended the loan period for £40 and still don't own the bike.

posted by bike_food [93 posts]
26th February 2013 - 13:52

5 Likes

mbrads72 wrote:
DazCr wrote:

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. Surprise

You sure it's not just the tax on £250? I can't see how to make the FMV = £250.

I am certain having done four Cycle to Work schemes over the years and having looked into it in a fair amount of detail prior to writing to HMRC to complain.

It's fairly simple - at the end of a 12 month period a £1000 bike would still have a sizeable residual value, why could you not see it being £250?

posted by DazCr [12 posts]
26th February 2013 - 13:56

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

Last night I would have considered trading a very loud baby for a really nice bike.

posted by notfastenough [3234 posts]
26th February 2013 - 14:20

8 Likes

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.

posted by AleT [51 posts]
26th February 2013 - 14:29

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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.

posted by Minty [26 posts]
26th February 2013 - 14:32

9 Likes

'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.

posted by andyp [915 posts]
26th February 2013 - 14:48

7 Likes

update: what with HMRC 'clarifying' its guidelines every other we missed the one that says child seats are okay now. you can't have a buggy or a tagalong though, as they're completely different. what? oh.

anyway, article amended.

Dave Atkinson's picture

posted by Dave Atkinson [7402 posts]
26th February 2013 - 14:55

7 Likes

Do Rapha do a Ride to Work scheme?

posted by Colin Peyresourde [1154 posts]
26th February 2013 - 16:14

7 Likes

Colin Peyresourde wrote:
Do Rapha do a Ride to Work scheme?

The limit's still £1k. Once you've bought a jacket, special extra-skinny trousers, a couple of jaunty caps and some socks, that's that Laughing

Boardman CX Team '14 | Cannondale CAAD8 '12 (written off, SMIDSY) | Scott Sportster '08

Gizmo_'s picture

posted by Gizmo_ [871 posts]
26th February 2013 - 16:27

2 Likes

Dave Atkinson wrote:
update: what with HMRC 'clarifying' its guidelines every other we missed the one that says child seats are okay now. you can't have a buggy or a tagalong though, as they're completely different. what? oh.

Child seats have always been included according to both DfT and HMRC guidance.

As this is a clarification of existing rules, I'm not sure what the relevance of the 1st March date is. Surely this is something that you can already do? Perhaps that's the date that one of the commercial middleman companies is going to implement it?

I'd be interested in anything official from HMRC regarding trailers: I've certainly allowed a child trailer on our company's cycle to work scheme as without it the employee wouldn't be able to safely complete her journey to work by bike, via the nursery.

posted by pdw [33 posts]
26th February 2013 - 18:45

7 Likes

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

posted by paulmcmillan [79 posts]
26th February 2013 - 21:20

5 Likes

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

18% of its original value, according to this: http://www.cyclescheme.co.uk/employers/employer-updates/hmrc-update

Dave Atkinson's picture

posted by Dave Atkinson [7402 posts]
26th February 2013 - 22:24

6 Likes

pdw wrote:

Child seats have always been included according to both DfT and HMRC guidance.

not according to cyclescheme they haven't. The problem with the HMRC guidance is that it's pretty woolly, hence the need to 'clarify' it the whole time. they may not have been specifically excluded, just like equipment-only packages weren't specifically excluded but you weren't allowed to have them.

not sure of the relevance of the march 1 date either. seems pretty arbitrary, but then a lot of things about c2w are Thinking

Dave Atkinson's picture

posted by Dave Atkinson [7402 posts]
26th February 2013 - 22:32

5 Likes

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.

posted by adscrim [108 posts]
26th February 2013 - 22:40

5 Likes

adscrim wrote:
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.

interesting - as ever, implementation of c2w largely depends on who's implementing it Smile

Dave Atkinson's picture

posted by Dave Atkinson [7402 posts]
26th February 2013 - 22:44

7 Likes

DazCr wrote:

It's fairly simple - at the end of a 12 month period a £1000 bike would still have a sizeable residual value, why could you not see it being £250?

A £1000 bike does have a fair market value (FMV) of £250 at the end pf 12 mths but if you're allowed to keep it for nothing (which is what my employer does) it becomes a taxable benefit, so you pay tax on £250.

posted by mbrads72 [124 posts]
26th February 2013 - 22:58

5 Likes

Gizmo_ wrote:
Colin Peyresourde wrote:
Do Rapha do a Ride to Work scheme?

The limit's still £1k. Once you've bought a jacket, special extra-skinny trousers, a couple of jaunty caps and some socks, that's that Laughing

Hahahaha - that's brilliant! How did you think that one up? Comedy genius Laughing Sorry...I meant idiot.

posted by iamelectron [108 posts]
26th February 2013 - 23:19

6 Likes

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.

posted by partsandlabour [32 posts]
26th February 2013 - 23:43

4 Likes

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

Surely that depends on...

Wait for it...

Inflation! Big Grin

(I'm here all week.)

posted by merckxissimo [59 posts]
27th February 2013 - 9:33

6 Likes

merckxissimo wrote:
paulmcmillan wrote:
Whats the residual value on a puncture repair kit after 12 months then HMRC?

Surely that depends on...

Wait for it...

Inflation! Big Grin

(I'm here all week.)


Oh, that's good. Chapeau.

(And to the troll above: va t'en.

Boardman CX Team '14 | Cannondale CAAD8 '12 (written off, SMIDSY) | Scott Sportster '08

Gizmo_'s picture

posted by Gizmo_ [871 posts]
27th February 2013 - 12:08

3 Likes

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.

posted by IRISHCLIFF [39 posts]
27th February 2013 - 13:50

4 Likes

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!

posted by alexb [50 posts]
27th February 2013 - 15:52

6 Likes

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.

posted by Colin Peyresourde [1154 posts]
27th February 2013 - 16:00

4 Likes

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)

posted by neilysump [19 posts]
27th February 2013 - 16:54

6 Likes