Cycle to work scheme

Discussion in 'Health & Fitness' started by johnnyexile, Mar 14, 2011.

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  1. Does anyone know if the RN is involved in the 'Cycle to Work Scheme'. I have just come back from LFS and my brother in law mentioned it to me. Apparently if your employer has signed up for it applicants can save up to 50% on a new bicycle. Seems like a good idea to me...
    Last edited: Mar 14, 2011
  2. Found this as I was looking for a new bike. I think the answer is no the RN is not part of the cycle to work 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.
  3. I recently saw a letter regarding this in Soldier Magazine, which included a response that I would imagine applies equally to the RN as the Army:

    Time to take brakes off delay in cycle scheme

    IN light of the significant and wholly justified reaction to the reduction of Home to Duty Travel fuel allowance, please allow me to raise a perennial request and indeed one I have previously posed to Soldier.

    Why is the MoD not engaged in the Government’s Cycle to Work scheme?

    The obvious benefit being that during this time of austerity, the savings made by the department in National Insurance contributions (up to 12 per cent) for those enrolled in the initiative would be significant.

    This obvious advantage, coupled with improvements to the soldier’s own fitness and personal finances, identifies the current policy makers as ludicrous and lacking foresight.

    Surely established financial incentives such as these, that benefit both the employee and employer, should be the first item on a post pay-freeze agenda. – Name and address supplied.

    Brig Mike Griffiths, DPS(A), responds: Thank you for your continued – and passionate – engagement in the Cycle to Work (C2W) debate.
    The current policy makers have studied this issue in considerable depth and recognise that there are potential savings to be made in respect of National Insurance contributions.
    However, there are valid reasons why C2W is not appropriate for the MoD. The initiative is a salary sacrifice scheme which would require the department to either oversee and operate the system internally or utilise a contractor to provide and manage a fleet of bicycles.
    The individual would then hire the bicycle via salary sacrifice.
    At the end of this hire period, the employee would still not own the bike and provision would need to be made for its purchase or disposal.
    In the current environment, with the requirement to manage and deliver a redundancy programme as well as implement Strategic Defence and Security Review measures, there is little appetite among the three Services to introduce a resource-intensive scheme such as C2W.
    There is also no evidence to suggest that such an initiative encourages additional people to cycle to work; rather it is those individuals who already opt for that form of transport who tend to make use of the opportunity.
    The prospect of interest-free loans of up to £1,000 for individuals to purchase bicycles has also been discussed. This would be viewed by Her Majesty’s Revenue and Customs as a “benefit in kind” and individuals would probably be subject to tax; hence it is extremely unlikely to be considered further in the current financial climate.
  4. sgtpepperband

    sgtpepperband War Hero Moderator Book Reviewer

    Put your 'and in your pocket and buy your own one, lardy! All that wonga you saved on LFS should cover a decent set of wheels... :shock: :wink:
  5. wave_dodger

    wave_dodger War Hero Book Reviewer

    Brig Griffiths reply isn't quite on the mark, but his latter point is almost there.

    The issue is related to a "benefit in kind" which attracts a different level of taxation, in this Brig Griffith's is correct. The reality is that MoD could proceed with this scheme (and the similar laptop scheme) BUT they would have to make significant changes to JPA in order for that to happen, and these costs would cost such a sum which is (a) unaffordable, in that we have not made budgetary provision for it and budgetary enhancements (under this planning round or the next one) are likely to fail and (b) an order of magnitude to implement such that SPVA would have to repriortise existing work.

    So whilst it may look simple, there is more underneath. I looked into this exhaustively whilst I was in NCHQ and banged on a lot of doors. What I will add is that a lot of Senior people agree this is something we should do, its just that we are in difficult times.

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