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Cycle to work scheme
- Thread starter Tonybhoy
- Start date
MeRlIn HaTeR
SAC
- 156
- 0
- 0
Right,
1. A common misconception is that the C2W scheme permits employees to purchase the bicycle tax free, this is not the case. The C2W scheme is a Tax-efficient bicycle loan arrangement which allows the employer to purchase cycling equipment which is then hired to the employees through Salary Sacrifice.
2. Salary sacrifice schemes require an employee to contractually reduce the amount of their Gross salary in exchange for a non-cash benefit. Non-cash benefits may still be taxable unless there is a specific HMRC exemption. For the C2W Scheme this tax exemption has been granted, but only applies if all the following HM Revenue and Customs conditions are met:
a. Employees use the equipment mainly for qualifying journeys (i.e. for journeys made between the employee’s home and workplace, or for journeys between one workplace and another) - that means it cannot be used for your own enjoyment/racing/training it is service equipment.
b. Ownership of the equipment is not transferred to the employee during the loan period.
3. In addition to these specific conditions for the C2WScheme, it is a HMRC stipulation for all Salary Sacrifice schemes that, in order to comply with Tax Legislation, the employee’s contractual right to cash pay must reduce. Therefore salary sacrifice may have an impact on other pay-related benefits such as Maternity Pay, Working Tax Credits or Final Salary-linked pensions. Additionally HMRC states that the employer must not simply meet the employee’s own financial commitments or apply cash remuneration on their behalf.
4. In addition to the HMRC conditions which are central to the implementation of the C2W scheme, there are a number of other impacts which must be considered.
a. Capital Expenditure. As it is the employer and not the employee who purchases and owns the cycling equipment, it is MOD who would fund the initial outlay of Capital Expenditure (although this will be recovered from individuals over the duration of hire period). These costs are dependent on uptake of the scheme. However it is possible that each individual could procure equipment up to £1,000 in value . On this basis, an annual take up of 2,000 people would involve in year outlay of £2million.
b. Contract Tender and competition process. The total value of the business would exceed the EU threshold for advertising of the contract (circa £100K). This would require a full Contract Tender process with associated manpower and expertise requirements and costs. The duration of the process from writing of business requirement to signing contract could be in excess of 18 months.
c. Management and Audit. To operate a purchase, hire and disposal system will have a sustained requirement for management, audit and HR/pay action. This creates additional management overhead costs and headcount.
d. Consumer Credit Act (CCA) 1974. There should be no automatic entitlement for the employee to take ownership of the cycle equipment at the end of the loan period . If after the end of the loan agreement the bike is offered for sale, the employee must pay a “fair market value. ” If this is recovered from pay it must be from Net Salary. VAT must also be paid on the purchase price. This specific restrictions in the CCA complicates the issues surrounding the sale/disposal of bikes (eg what is the mechanism for valuation, should this be conducted by Disposals Services Agency).
e. Impact on existing allowances. Non-taxable benefits cannot be double paid for the same purpose. MOD currently enjoys a specific tax exemption from HMRC allowing the payment of a tax free allowance for commuting journeys. This takes the form of the Home to Duty Travel Allowance (HDT) which includes Motor Vehicle and Cycle rates or payment. HDT travel (Cycle Rate) contributes to the cost of owning, running and maintaining a bike. HDT travel could not be paid in conjunction with the Cycle Scheme as the scheme requires that at least 50% of the journeys on the bike must be qualifying journeys for work purposes.
There are more details, but by now you are probably bored, but this should give some idea as to why the MOD is not taking part in the scheme.
1. A common misconception is that the C2W scheme permits employees to purchase the bicycle tax free, this is not the case. The C2W scheme is a Tax-efficient bicycle loan arrangement which allows the employer to purchase cycling equipment which is then hired to the employees through Salary Sacrifice.
2. Salary sacrifice schemes require an employee to contractually reduce the amount of their Gross salary in exchange for a non-cash benefit. Non-cash benefits may still be taxable unless there is a specific HMRC exemption. For the C2W Scheme this tax exemption has been granted, but only applies if all the following HM Revenue and Customs conditions are met:
a. Employees use the equipment mainly for qualifying journeys (i.e. for journeys made between the employee’s home and workplace, or for journeys between one workplace and another) - that means it cannot be used for your own enjoyment/racing/training it is service equipment.
b. Ownership of the equipment is not transferred to the employee during the loan period.
3. In addition to these specific conditions for the C2WScheme, it is a HMRC stipulation for all Salary Sacrifice schemes that, in order to comply with Tax Legislation, the employee’s contractual right to cash pay must reduce. Therefore salary sacrifice may have an impact on other pay-related benefits such as Maternity Pay, Working Tax Credits or Final Salary-linked pensions. Additionally HMRC states that the employer must not simply meet the employee’s own financial commitments or apply cash remuneration on their behalf.
4. In addition to the HMRC conditions which are central to the implementation of the C2W scheme, there are a number of other impacts which must be considered.
a. Capital Expenditure. As it is the employer and not the employee who purchases and owns the cycling equipment, it is MOD who would fund the initial outlay of Capital Expenditure (although this will be recovered from individuals over the duration of hire period). These costs are dependent on uptake of the scheme. However it is possible that each individual could procure equipment up to £1,000 in value . On this basis, an annual take up of 2,000 people would involve in year outlay of £2million.
b. Contract Tender and competition process. The total value of the business would exceed the EU threshold for advertising of the contract (circa £100K). This would require a full Contract Tender process with associated manpower and expertise requirements and costs. The duration of the process from writing of business requirement to signing contract could be in excess of 18 months.
c. Management and Audit. To operate a purchase, hire and disposal system will have a sustained requirement for management, audit and HR/pay action. This creates additional management overhead costs and headcount.
d. Consumer Credit Act (CCA) 1974. There should be no automatic entitlement for the employee to take ownership of the cycle equipment at the end of the loan period . If after the end of the loan agreement the bike is offered for sale, the employee must pay a “fair market value. ” If this is recovered from pay it must be from Net Salary. VAT must also be paid on the purchase price. This specific restrictions in the CCA complicates the issues surrounding the sale/disposal of bikes (eg what is the mechanism for valuation, should this be conducted by Disposals Services Agency).
e. Impact on existing allowances. Non-taxable benefits cannot be double paid for the same purpose. MOD currently enjoys a specific tax exemption from HMRC allowing the payment of a tax free allowance for commuting journeys. This takes the form of the Home to Duty Travel Allowance (HDT) which includes Motor Vehicle and Cycle rates or payment. HDT travel (Cycle Rate) contributes to the cost of owning, running and maintaining a bike. HDT travel could not be paid in conjunction with the Cycle Scheme as the scheme requires that at least 50% of the journeys on the bike must be qualifying journeys for work purposes.
There are more details, but by now you are probably bored, but this should give some idea as to why the MOD is not taking part in the scheme.
- 6,825
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Reference the above post.
This illustrates the REAL cost of the Green initiatives.
It won't achieve anything because there is nothing to achieve in the first place.
The green con is all about the shifting of money and economies, nothing more. Merlin Haters post illustrates this perfectly.
TW
This illustrates the REAL cost of the Green initiatives.
It won't achieve anything because there is nothing to achieve in the first place.
The green con is all about the shifting of money and economies, nothing more. Merlin Haters post illustrates this perfectly.
TW
Another incentive for cycling to work would be to lower the required distance travelled before you can claim HTD. I looked into it earlier in the year as I cycle about 9 miles a day (round trip) and I'm pretty sure that the qualifying mileage for cycling is the same for using your car, which is just plain ridiculous.
M
monobrow
Guest
I do hope thats a Rhetorical question!