Mark wrote:
> Hi,
>
> I work for a small company and I would really like to get a tax free
> bike. I can't afford to buy anything decent at full price and I
> haven't managed to find a suitable secondhand bike. My current bike
> is too small and old, so spares are a problem.
>
> My employer is reluctant to provide tax free bikes due to fear of
> extra admin work.
>
> Does anyone have any ideas how I could convince them? (Already a
> large proportion of employees cycle to work - so I can't use this
> one).
Two strategies, and depends "how small" and "how flexible", and how many
employees would like the scheme as well (and thus join the asking).
a) Give them the info for the various outsourcing firms who do all the
paperwork for them, and don't charge the employer (they appear to take a cut
from the profit on the bike which is "sold" at full price). Appropriate for
moderately small employer, but may not be suited for tiny firms; companies
such as Halfords, CycleScheme, etc..
b) Have a sensible conversation about the "admin work" for a DIY solution.
There isn't much to administer. The biggest issue for DIY is the finance;
the bikes are bought up front, but chances are the employees only contribute
through salary sacrifice over a year or more. Very Bad from a cash-flow
point of view.
However... assuming you (and others) get bonus payments now and again, one
could ask to swap a bonus payment for a company bicycle instead of a bonus.
As the bonus would be cash out of the firm, the cash-flow issue for
purchasing bicycles disappears.
Financial approach:
i) Employee selects bicycle at local shop, and makes arrangement for company
to actually buy bicycle (by paying an invoice issued before delivery of
bike). Company claims back VAT.
ii) Company gives you access to company bicycle instead of bonus in pay
packet. Company saves employer NI contributions (12.8%).
iii) Employee saves employee NI contributions on bonus (11% or 1% depending
on your pay). Employee saves income tax (22% or 40%, depending on your
pay).
iv) Only decision to make on such an approach is to decide who pockets which
bits of the tax savings; should all of the savings go to you, or will the
firm only give you a proportion of the bicycle value ?
Apart from recording that the company owns a bicycle as a depreciating asset
on its books, there is no other admin; the revenue is specific about not
requiring records to be kept about the mileage/use of the cycle.
At this point, the company owns a bicycle which you can use. After some
years, you might decide to buy the used bicycle from the employer at its
x-year-old-trade-in value (perhaps 5-10% of its new price?), many salary
sacrifice schemes do this final step.
Example, £1000 bonus.
As cash - costs employer £1128.00 (with employer NI).
Employee (basic rate tax) sees approx 33% disappearing in NI and tax, so net
sees £666 in pocket. Alternatively, a 40% taxpayer sees approx 41% disappear
in NI+tax, so gets £590 in pocket.
As bicycle - employer buys bicycle costing £1325.40, and claims back the
VAT, net cost is £1128. Gives to employee.
Some years later you give firm a small payment for the residual value of an
old bicycle (so in time they make £50-£100!, though would need to write off
bicycle from assets and pay VAT on the s/hand price).
Its a lot of bicycle for a moderate take-home bonus sacrifice, plus a small
final payment !
My reading of the Government tax-free bike rules would be that your employer
must offer any cycle scheme equally to all employees, so the "bonus swap"
would need to be offered to all employees. The employer can add rules (such
as bikes only from certain shop, particular time when the offer is open,
particular values of bike, etc.). The employees can choose to not take the
"bonus swap" option. It neatly avoid all the cash-flow issues from salary
sacrifice, the need to involve a scheme company (Halfords, Cyclescheme,
etc), the £1000 consumer credit limits (there is no credit agreement!),
etc...
- Nigel (not a tax advisor or lawyer, so double check my suggestion for
legality).
--
Nigel Cliffe,
Webmaster at
http://www.2mm.org.uk/
