Cyclescheme now claimed to be "unviable" for retailers following change in threshold

Cyclescheme, the UK’s biggest provider of bikes under the Cycle to Work initiative, says it is looking at altering its commission structure following complaints by retailers that changes in the price threshold allowing people to obtain more expensive bikes while enjoying tax breaks are making it “unviable” for them.

Last year, the Department for Transport amended its guidance to highlight that any Cycle to Work scheme provider registered with the Financial Conduct Authority (FCA) could provide a bike of any value.

> You will now be able to get bikes worth over £1,000 on the Cycle to Work scheme

Previously, there had been a general ceiling of £1,000 for bikes supplied under the salary sacrifice scheme, although larger employers registered with the FCA were exempt from that.

> How to save money on a bike with the Cycle to Work scheme

According to a report in the Financial Times this weekend, the scrapping of the limit has had a knock-on effect for bike shops participating in the scheme, because while the profit margins for more expensive bikes are lower, the commission rates of the businesses providing access to the scheme remain unaltered, irrespective of the value of the bike.

The newspaper says that Cyclescheme takes 10 per cent commission on the retail value of bikes and 15 per cent on accessories purchased through it, while a similar scheme run by Halfords charges independent bike shops 15 per cent of the value of bicycles procured through it.

It cited the case of London-based Pearson Performance, with owner Will Pearson saying that one recent transaction conducted through Cyclescheme for a customer taking delivery of a £2,200 bike and accessories worth £300 saw the Cycle to Work scheme provider take £265 in commission.

Describing his company’s return on that sale only as “acceptable,” Pearson went on to say: “If somebody comes along and buys a £7,000 bike and then produces a cycle scheme voucher, it’s great for the customer, it’s great for the cycle scheme provider, but it’s not so great for us.

“Typically, as prices go up, the margins come down.”

As a result, he and other bike dealers – including London-based Velorution and Cotswold Cycles in Moreton-in-Marsh, Gloucestershire –  have been lobbying Cyclescheme to revise its commission structure.

“If we are having to give up to 15 per cent of that £7,000 away, it doesn’t make it a legitimate proposition for us,” he explained.

Adrian Warren, senior product director at Cyclescheme, confirmed to the Financial Times that the company was rethinking its commission scheme, acknowledging that the current flat rate may not be “the best way forward.”

He said: “The last thing we want to do is treat bike shops unfairly. Talks are ongoing but we are confident we will have a new commission structure in place in the coming weeks that benefits everyone.”

Cyclescheme was founded in Bath in 2005 and in 2009 was named the UK’s fastest growing private company by turnover by The Sunday Times. It was sold in 2010 to the Grass Roots Group, which was itself acquired by US-based Blackhawk Network in 2016.

In June, it said that in the three months since 31 March, employer registrations had risen by “a staggering” 310 per cent due to employers “heavily investing in cycling as a benefit for their workforce” during lockdown.

It added that in June alone, sales of bikes using its certificates had risen by 59.7 per cent.

> Employers rush to sign up with Cyclescheme and give commuting workers access to bikes at a discount