Orange Bikes, cycle to work with Cyclescheme?
March 09 2011
CycleScheme, Halfords cycle to work, CycleLife, or Bike-2-work; the results of a quick google search are often more confusing than insightful. Cyclescheme continues to be the most widely used path to getting a bicycle under a salary sacrifice scheme. This news article will disambiguate the process and spell out how to make the greatest possible saving. Since the latest HMRC ‘market value clarification’, there’s been some confusion how much benefit the scheme continues to be, so we looked into this route in more detail:
Cyclescheme is an administrator for the Government’s Green Transport Plan. It’s an admin-friendly solution for employees to get a tax-free bike from a partnered independent bike shop of the employee’s choosing. Most reputable bike shops will have now registered to the scheme, giving you freedom of choice on your bike and safety equipment.
First off, what’s the discount?
The first question everyone asks is what saving can be achieved through Cyclescheme? Basically, on a £1000 bike a lower rate tax payer can expect a total maximum saving of £355, with higher rate taxpayers saving up to £421. This saving estimation includes buying the bike outright at the HMRC set fair market valuation. The confusion of late is the value of the scheme with the structured final payment method that has recently been implemented. Contrary to some of the rumours, savings can still be maximised. See the official flyer below for the benefits and estimated savings for a lower rate tax payer:
What’s the deal with taking ownership?
Much of the confusion surrounding Cyclescheme is the process of taking ownership after the hire period. The question; what does the fair market value stand at and how is this payment reduced? In the past ownership has been passed to the employee for a nominal fee of around 5% +VAT, a cursory nod to the initial rules after one year. Now the scheme has become a little more black and white.
HMRC's revised valuation and disposal value percentage:
|Age of Cycle||<£500||>£500|
To reach the highest possible savings the key is reducing the ‘acceptable disposal value’ of your bike. At the end of the year, you can elect to extend the hire period by continuing to use the cycle. This option requires a refundable deposit payable to Cyclescheme, who will then take legal ownership of the bike for the remainder of the contract. There are no more monthly repayments, salary sacrifices or hire charges to pay during this period. The valuation table above shows that after the repayment period, a bike and any associated safety equipment is valued at 25% of the initial cost. At this rate, the scheme would yield little over £100 in savings, but a compelling option over typical finance solutions.
The 3% (on bikes under £500) or 7% (on bikes over £500) paid is based on the HMRC's market valuation at the end of four years and forms the market value payment at the end of four years use. This means you can take ownership of the cycle at no extra cost, or return the bike and receive a refund of the deposit.
Communication detailing your options will be sent at each stage, but if ownership is accepted after the three year extended hire period, savings are maximised and you have retained use of the cycle throughout the duration.
Can I get another bike through the extended use period?
Yes, the extended user agreement isn’t a salary sacrifice scheme and isn’t administrated by your employer. The employee is subsequently free to participate in another scheme.
And if I change jobs?
During the extended hire period, the contract is between Cyclescheme and the employee, so the agreement remains valid without the employer needing involvement. If the change in circumstance is within the first year, the hire agreement is non-cancellable (unless within the seven day cooling off period) and bound to your employer. This is most likely to result in the employee being obliged to pay the remaining salary sacrifice amount in full, in this case without any tax exemptions. The same applies if an employee is made redundant.
What’s in it for the employer?
As well as shiny new wheels for a healthier, greener more motivated staff base, the employer makes good National Insurance savings. If they contact Cyclescheme they can receive a pack outlining the benefits, and they will receive all the help they need from a skilled set of specialists. The scheme is extremely admin friendly with little paperwork and minimal involvement after the initial contract is setup. The scheme is available only to UK taxpayers.
If there are any questions about eligibility, or to research how your company could profit from the scheme, take a look at the Department for Transport’s ‘Implementation Guidance’.
Can the self employed benefit from the scheme?
Contrary to popular belief, it is possible for the self employed to join the scheme and participate. The only restriction is that they must be a PAYE (Pay As You Earn) tax payer, not self-assessed.
If you do self assess, you can join the scheme by paying a small amount of your earnings via PAYE, usually around £8k. This also allows you to access other benefits such as Child Care Vouchers.
So, what’s the process of getting a tax-free bike?
Getting hold of a bike is easy; the main thing is good advice and making sure you get what’s right for you. Hitting the scheme square on we have the steel framed Pure7, a hard riding trail tool built to take the rough with the smooth. The Pure7 gives an obvious nod to the P7, and in a similar vein makes a good touring setup.
MTBcut rider Joe Barnes takes the long way home - Orange G2
The G4 S is our aluminium solution to all things Cyclescheme. A lightweight more XC oriented setup, it’s ready for quick local blasts or an all-day mission. Pannier ready and featuring a full lockout, it’s perfect for the commute or the ticket to your pannier laden adventures, read more about it here. The Diva hardtail is the female specific alternative, with tailored sizing and finishing kit to compliment the ride. Not wanting to spend quite the full allowance, take a look at the G2 and G3 models.
Andy Reed went for the P7 S, the model since replaced by the Pure7. We fired him a few simple questions:
Job? Skoda Roomster driving Geography teacher
Bike? Orange P7 S
What was the process to getting your bike?
Find a friendly shop that is prepared to do the deal, simply filled in the voucher for the value of the bike and away it went to CycleScheme in Bath. They then have a site which you can log in to and it allows you to simply check the progress of your voucher.
How long did it take?
No more than a month from start to finish, which I thought was good.
Any difficulties with your employer or encouragement needed for them to register with the scheme?
Kirklees are really quite bike friendly and the scheme is well established, staff at the council to contact with any of my questions and most pleasing they replied promptly by phone and e-mail. I presume it helps them look more climate change friendly in the competative world of local politics and obviously once I hit a higher gear ratio I can out run the Roomster over the first 60 metres!! I also produce less methane (unless I have had a Balti Rajastani from Al Nawab).
When your repayments are finished, would you consider doing it again?
Yes, if I can justify the need (which means I need you lot to convince my wife why I would need another bike in the garage!!).
Enjoying the bike?
Yes!! Excellent, I have been pleased with my steel framed beauty. A bike for life!! (Sustainable use of planets resources etc). Also fits purrfectly into the Roomster without removing wheels etc. A match made in heaven.
So go have a chat with your local Orange Bikes dealer and see how you could benefit from the scheme. Here's a brief run down of the the eight easy steps:
- Check your employer has entered into a contract with Cyclescheme; give them the incentives mentioned above, it’s extremely admin friendly.
- Get your CycleScheme Employer Code and visit an Orange Bikes dealer, you can check their Partner status with the scheme here.
- Choose your bike and any equipment you want, the shop will then fill out a paper quotation form, the Hire Agreement form can then be signed off on-line.
- The employer will be prompted to countersign the Hire Agreement and pay CycleScheme for the full retail price of the bike and equipment quoted.
- Cyclescheme issue your unique voucher to the employer or employee as requested.
- The secure certification can then be taken to the store and exchanged for the package arranged.
- Salary sacrifice then commences over the 12 month hire period.
- At the end of the twelve months, take the advice above and extend the scheme to maximise savings.
Ride away on your new Orange mountain bike.
Liam Moynihan making full use of his Orange Pure7...
All the details above reflect the current tax situation at time of writing and are subject to change, but from what the new tax simplification office report, the scheme looks set to remain unchanged throughout the government cutbacks (BikeBiz report).
Thanks to Laurence Boon at CycleScheme for his help on a few of the details. If there is anything we've missed or you can't find on the CycleScheme website, get in touch directly.