Halfords gits.

spindrift said:

So I enlist for the Bike To Work scheme and ask for £800 so I can get
the Dawes Galaxy for £750 (Halford's price, you can get it loads
cheaper here:

http://www.spacycles.co.uk/products.php?plid=m1b1s21p439

but Halford's insist of pricing at the RRP)

Is it really worth it?

Assuming you are a basic rate tax payer[1], you will save about 250GBP
on the bike. Your employer will get 112 back in VAT

[1] I think the NI threshold is lower than the high rate tax threshold
so if you fall into that pay bracket then you'll only save 165 in tax.

So the bike is going to cost you 500GBP plus whatever you have to pay
for it at the end of the term. (21GBP/month from your take home pay
assuming 2 years plus a final payment to buy the bike.)

If you borrowed 600GBP at 10% over two years it would cost you about
680GBP plus any arrangement fees. If you've got an offset mortgage so
can just borrow like that, it will cost nearer to 630GBP over two
years. (28GBP/month, 26GBP/month respectively)

Your employer OTOH, is making about 200GBP on a 750 loan (reduced NI
plus reclaimed vat) plus whatever they sell it to you for at the end of
the term. Given that they get 110 back immediately, the interest rate
they are getting on their loan to you is something like 30%

So it all boils down to that final payment to buy the bike.

Or if you are employed by your own company then your "employers"
savings can be factored into the calculations.

If you are a higher rate tax payer then you will save about 310GBP in
tax (almost no NI saved) so it will only be slightly more profitable.

Quoted message said:

They had all the forms a month ago and summer's slipping away!

They reckon they send all the forms and vouchers out together.

And you'd have the bike now.

Tim.

Quoted message said:

spindrift said:

So I enlist for the Bike To Work scheme and ask for £800 so I can get
the Dawes Galaxy for £750 (Halford's price, you can get it loads
cheaper here:

http://www.spacycles.co.uk/products.php?plid=m1b1s21p439

or buy a 2003 edition from bikesheduk.com for £539. 🙂

Oh, I really like this year's version and the extra £50 will help
equip it with panniers, water bottles, lock etc. The chap at Halford's
Mile End is really helpful, to be fair.

Quoted message said:

Your employer will get 112 back in VAT

I think it's down to the employer but mine deducted the VAT from my
repayments.

MikeF

mikef said:

Quoted message said:

Your employer will get 112 back in VAT

I think it's down to the employer but mine deducted the VAT from my
repayments.

for comparison, mine recovers the whole cost of the of the voucher in
twelve equal payments then says that the IR accept 10% as a fair market
value at the end of the lease. Halfords offer goods to the value of
110% of the voucher so it does rather come down to what your marginal
tax rate is as to how good a deal the offer represents

best wishes
james

Quoted message said:

mikef said:

Quoted message said:

Your employer will get 112 back in VAT

I think it's down to the employer but mine deducted the VAT from my
repayments.

for comparison, mine recovers the whole cost of the of the voucher in
twelve equal payments then says that the IR accept 10% as a fair market
value at the end of the lease. Halfords offer goods to the value of
110% of the voucher so it does rather come down to what your marginal
tax rate is as to how good a deal the offer represents

It seems strange that employers would be reluctant to do this.

The employer gets 14.9%[1] + 12.8%[2] + 10%[3] return on a one year
loan (38%)

[1] The VAT included in the voucher (1- 1/1.175)
[2] Employers class 1 NI
[3] The final payment to buy the bike

Alternatively, the employer is in the money after 9 months (14.9% +
9/12*1.128 ~ 1)

Of course, there is no obligation for the employee to buy the bike at
the end of the year so their return is only 28%. Yes, there is a small
risk of an employee defaulting by abandonning their job and stealing
the bike but this must be one of the safest lending schemes around.

(Not exactly sure what the legal situation would be if the bike is
stolen. Presumably as it's the employers property and the employee has
no insurable interest (?) the employee is going to have to rely on the
employer insuring the bike for them)

(?) I guess this depends on how any salary sacrifice contract is
worded.

Infact it could even make financial sense for the employee to borrow
the money and then lend it to their employer at the same rate they are
paying and then there is absolutely no risk for the employer. (I
suspect an accountant is now going to say that isn't not easy to lend
money to a company or that the interest the employee is paying cannot
be used to offset the income they receive as interest from the
employer)

I would also have thought that there was no obligation on the employer
to sell the bike to the employee, and should the firm go bust part way
through then presumably the bike would be sold by the receivers so
there's more risk for the employee than the employer, whoever funds the
initial purchase.

Tim.

Quoted message said:

Quoted message said:

mikef said:

[email hidden] wrote:
>Your employer will get 112 back in VAT

I think it's down to the employer but mine deducted the VAT from my
repayments.

for comparison, mine recovers the whole cost of the of the voucher in
twelve equal payments then says that the IR accept 10% as a fair market
value at the end of the lease. Halfords offer goods to the value of
110% of the voucher so it does rather come down to what your marginal
tax rate is as to how good a deal the offer represents

It seems strange that employers would be reluctant to do this.

The employer gets 14.9%[1] + 12.8%[2] + 10%[3] return on a one year
loan (38%)

[1] The VAT included in the voucher (1- 1/1.175)
[2] Employers class 1 NI
[3] The final payment to buy the bike

You're making the assumption that the employer syphons off the VAT for
itself.

You're making the assumption that the employer requires 10% at the
end.

You're making the assumption that the employer has no administration
costs.

All three assumptions are wrong with respect to the one scheme for
which I know the details. I have no doubt that it's possible for an
employer to so manipulate the scheme that it becomes worthless (for
example, requiring an employee to take a 1500 GBP salary sacrifice to
obtain a 500 GBP list price bike would do it), but that doesn't mean
that all (or even any) employers will do so.

regards, Ian SMith
--
|\ /| no .sig
|o o|
|/ \|

email hidden said:

spindrift said:

So I enlist for the Bike To Work scheme and ask for £800 so I can get
the Dawes Galaxy for £750 (Halford's price, you can get it loads
cheaper here:

http://www.spacycles.co.uk/products.php?plid=m1b1s21p439

but Halford's insist of pricing at the RRP)

Is it really worth it?

Assuming you are a basic rate tax payer[1], you will save about 250GBP
on the bike. Your employer will get 112 back in VAT

[1] I think the NI threshold is lower than the high rate tax threshold
so if you fall into that pay bracket then you'll only save 165 in tax.

So the bike is going to cost you 500GBP plus whatever you have to pay
for it at the end of the term. (21GBP/month from your take home pay
assuming 2 years plus a final payment to buy the bike.)

If you borrowed 600GBP at 10% over two years it would cost you about
680GBP plus any arrangement fees. If you've got an offset mortgage so
can just borrow like that, it will cost nearer to 630GBP over two
years. (28GBP/month, 26GBP/month respectively)

Your employer OTOH, is making about 200GBP on a 750 loan (reduced NI
plus reclaimed vat) plus whatever they sell it to you for at the end of
the term. Given that they get 110 back immediately, the interest rate
they are getting on their loan to you is something like 30%

So it all boils down to that final payment to buy the bike.

Or if you are employed by your own company then your "employers"
savings can be factored into the calculations.

If you are a higher rate tax payer then you will save about 310GBP in
tax (almost no NI saved) so it will only be slightly more profitable.

Quoted message said:

They had all the forms a month ago and summer's slipping away!

They reckon they send all the forms and vouchers out together.

And you'd have the bike now.

Tim.

My employers waives the buyback fee and will give me the VAT to spend
on "safety items". This is via Halfords.

Quoted message said:

spindrift said:

So I enlist for the Bike To Work scheme and ask for £800 so I can get
the Dawes Galaxy for £750 (Halford's price, you can get it loads
cheaper here:

Quoted message said:

Assuming you are a basic rate tax payer[1], you will save about 250GBP
on the bike. Your employer will get 112 back in VAT

Erm, on £800, the total saving for a basic rate taxpayer is going to be
more than that. In round numbers, income tax at 41% (including
so-called "national insewerants", both employer and employee)
and VAT at 15% (of the inclusive price) is a 56% saving, or £448.

(round numbers because I'm guessing the actual rates).

Yep, that's right. The government still take more than half your
money, when it's earned by hard work. That which is unearned of
course gets far more favourable treatment.

--
not me guv

Quoted message said:

Quoted message said:

mikef said:

[email hidden] wrote:

[snip]

Quoted message said:

(Not exactly sure what the legal situation would be if the bike is
stolen. Presumably as it's the employers property and the employee has
no insurable interest (?) the employee is going to have to rely on the
employer insuring the bike for them)

(?) I guess this depends on how any salary sacrifice contract is
worded.

mine explicitly places the responsibility on me (as they did for
computers at home)

Quoted message said:

I would also have thought that there was no obligation on the employer
to sell the bike to the employee, and should the firm go bust part way
through then presumably the bike would be sold by the receivers so
there's more risk for the employee than the employer, whoever funds the
initial purchase.

interestingly, my agreement (if I took it up) says that even if I
supplement the purchase price myself (to go over GBP1000) the bike is
still the firm's property unless and until it is disposed of at the end
of the lease.

best wishes
james

Ian Smith said:

Quoted message said:

Assuming you are a basic rate tax payer[1], you will save about 250GBP
on the bike. Your employer will get 112 back in VAT

My employer (technically not, but near enough) passes the saved VAT to
the employee, so you save (according to your figures) 362GBP. That's
fractionally lower than the 'normal' saving quoted, but about right.

Interesting that my figure is lower than the normal quoted. It should
be higher because if you are taking a lesser salary sacrifice then you
save less tax and NI. My quick back of envelope calc suggests you
should save about 320GBP (maybe my Tax/NI figures are wrong - I'm
assuming 22%+11%, it's 40%+1% for higher rate)

Quoted message said:

Quoted message said:

So the bike is going to cost you 500GBP plus whatever you have to pay
for it at the end of the term.

10GBP.

One person in this thread has said that they pay 10% (although this
appears to be offset by a discount from Halfords?)

Quoted message said:

Quoted message said:

Your employer OTOH, is making about 200GBP on a 750 loan (reduced NI
plus reclaimed vat)

Only if your employer decides to syphon off the VAT for itself. I've
not heard of any doing so, but presumably yours does.

Mine doesn't offer this at all. For one person on this thread you take
a salary sacrifice of 1/12 the cost of the bike.

And I'd be very uncomfortable about the insurance position. At least
for me, my Brompton has a utility value of about 200GBP/annum (the
difference between my season ticket and one that includes tube travel).
If I commuted all the way on a sufficiently regular basis that I didn't
need an annual season ticket then I suppose I could justify anything up
to about 2000GBP/annum. As the Brompton is mine I can obviously insure
it, but it if were my employers then the situation gets more tricky. If
your contract makes you liable for its loss/damage then you have an
insurable risk.

I have no idea what the "normal" schemes do about this but I can see
insurers being very reluctant to pay out.

Tim.

PUSHERBOT said:

My employers waives the buyback fee

This is not necessarily a good idea. So long as you buy it from your
employer for a "fair market value" then you have no tax liability. As
soon as your employer gives it to you you are potentially receiving a
taxable benefit and need to declare it.

At least one company I've heard about used to put equipment to be
disposed of in a skip and place the skip outside the gates for the skip
lorry to collect. If employees raided the skip before it was collected
then that was an issue between the disposal company and the employee
but employees weren't allowed to take stuff out of the skip until it
had been moved outside the gates. Of course, this was gamed by the
employees, stuff worth having would be put to one side and carefully
placed on the top of the skip before it was moved and then immediately
"reclaimed".

One place I used to work at didn't go to those extremes, you could
recover stuff from a skip on the site so I suppose an employer could
say "your lease of the bicycle is now over - go and put it in that skip
over there as its of no futher value to us" and you could then
immediately take it out again.

Tim.

Nick Kew said:

Erm, on £800, the total saving for a basic rate taxpayer is going to be
more than that. In round numbers, income tax at 41% (including
so-called "national insewerants", both employer and employee)
and VAT at 15% (of the inclusive price) is a 56% saving, or £448.

(round numbers because I'm guessing the actual rates).

I have been assuming that the employer keeps the employers NI and the
VAT. At least for the VAT that seems incorrect in some cases.

If you are a basic rate taxpayer, my assumptions give you 33% discount
less any final payment for the bike.

The OP could already get a 20% discount by buying elsewhere less any
interest paid on the money borrowed or interest earned on the money in
the bank.

So the savings could reasonably range from about 13% to about 36% in
this case depending on the OPs scheme.

At least for me, up until April this year, a salary sacrifice would
have meant also having to reduce pension contributions. And given that
my employer matches 75% and I get 40% back from the taxman anyway this
would be a really silly idea. (I now pay the minimum amount that brings
my employers contribution to its maximum level as the age related
limits have gone so this wouldn't matter now) It could still matter to
someone in a final salary scheme and would also affect things like
maximum mortgage available.)

Tim.

Quoted message said:

I have been assuming that the employer keeps the employers NI and the
VAT. At least for the VAT that seems incorrect in some cases.

As previously posted, there is no doubt that an employer can choose to
make the scheme bad value, but since there's no requirement to make it
so, I'm not sure what your point is.

Quoted message said:

The OP could already get a 20% discount by buying elsewhere less any
interest paid on the money borrowed or interest earned on the money in
the bank.

But my employer lets you buy elsewhere, doesn't charge the employee
the VAT, lets you buy the bike for very much less at the end, and
doesn't reduce the pension payments it makes.

regards, Ian SMith
--
|\ /| no .sig
|o o|
|/ \|

On 18 Aug 2006 17:19:53 GMT,

Ian Smith said:

Quoted message said:

I have been assuming that the employer keeps the employers NI and the
VAT. At least for the VAT that seems incorrect in some cases.

As previously posted, there is no doubt that an employer can choose to
make the scheme bad value, but since there's no requirement to make it
so, I'm not sure what your point is.

That the employee doesn't get to make the decision and up until this
thread I wasn't aware that any schemes did give the VAT back.

Quoted message said:

Quoted message said:

The OP could already get a 20% discount by buying elsewhere less any
interest paid on the money borrowed or interest earned on the money in
the bank.

But my employer lets you buy elsewhere, doesn't charge the employee
the VAT, lets you buy the bike for very much less at the end, and
doesn't reduce the pension payments it makes.

Not every employer does let you buy where you like; infact I think the
majority don't.

Most people seem to think that paying less to the taxman is a good
thing. It is, but only if you are better off as a result. One of my
friends, who is (was, he doesn't practice now) an accountant has had to
deal with people who have gone bankrupt because they thought tax
deductable equals it doesn't cost anything and so bought equipment that
they didn't need and couldn't afford.

Your scheme looks like it is about as good as it can get, thats great
and I hope lots of people are taking advantage of it. But even then,
someone could spend 1000GBP on a bike and then discover that the 4k
reduction in the mortgage they can get makes the difference between
living in rented accomodation for another year and buying their
first house.

Other schemes are not as good and it's more likely that the sums wont
add up even if they look good at first glance.

(The pension thing referred to pre April - for me the limit was 17.5% of
salary IIRC. If I took a salary sacrifice my pension contribution would
have to have reduced or, at the very least, I would have lost any tax
benefit on that part of my contribution - I'm not sure if it was
actually illegal to pay too much into a pension fund)

Tim.

--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://tjw.hn.org/ http://www.locofungus.btinternet.co.uk/

Tim Woodall said:

On 18 Aug 2006 17:19:53 GMT,

Ian Smith said:

Quoted message said:

I have been assuming that the employer keeps the employers NI and the
VAT. At least for the VAT that seems incorrect in some cases.

As previously posted, there is no doubt that an employer can choose to
make the scheme bad value, but since there's no requirement to make it
so, I'm not sure what your point is.

That the employee doesn't get to make the decision and up until this
thread I wasn't aware that any schemes did give the VAT back.

I don't understand - no-one is forced to participate, are they?

I'm not sure about the VAT- I think most do give the VAT back (or
rather, don't take the VAT in the first place) - is the Halfords
voucher redeemed against with-VAT or VAT-free cost of bike? If it's
against with-VAT, what proportion of companies insist on a salary
sacrifice that matches the voucher face value? We simply don't have
the figures to know.

Quoted message said:

Other schemes are not as good and it's more likely that the sums wont
add up even if they look good at first glance.

But since it's a voluntary scheme, if it isn't worth doing for a
particular individual, they simply don't do it.

Quoted message said:

(The pension thing referred to pre April - for me the limit was 17.5% of
salary IIRC. If I took a salary sacrifice my pension contribution would
have to have reduced or, at the very least, I would have lost any tax
benefit on that part of my contribution - I'm not sure if it was
actually illegal to pay too much into a pension fund)

I think relatively few people, even pre-A-day (or whatever it was
called) were receiving the maximum legally permitted into pension
funds. As noted, if it's not worth doing, then don't do it, but for
the majority of people it is worth doing.

regards, Ian SMith
--
|\ /| no .sig
|o o|
|/ \|

On 18 Aug 2006 20:44:40 GMT,

Ian Smith said:

But since it's a voluntary scheme, if it isn't worth doing for a
particular individual, they simply don't do it.

Yes, exactly. But we already know from the OP that he's given up a 20%
discount for the privilege of taking part in the scheme. That's why I
asked right at the beginning "Is it worth it?" This was addressed
primarily to the OP rather than to the scheme as a whole.

If his scheme is as good as yours then definitely, yes. If his scheme is
like what I've heard of where your only savings are tax and NI on the
salary sacrifice of the full cost of the bike then it's borderline.

The OP could be saving a few hundred pounds, or he could be saving about
50-100. In return for which he is having to wait several (summer) months
to get the bike.

Tim.

--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://tjw.hn.org/ http://www.locofungus.btinternet.co.uk/

Tim Woodall said:

On 18 Aug 2006 20:44:40 GMT,

Ian Smith said:

But since it's a voluntary scheme, if it isn't worth doing for a
particular individual, they simply don't do it.

If his scheme is as good as yours then definitely, yes. If his scheme is
like what I've heard of where your only savings are tax and NI on the
salary sacrifice of the full cost of the bike then it's borderline.

The OP could be saving a few hundred pounds, or he could be saving about
50-100. In return for which he is having to wait several (summer) months
to get the bike.

Tell you what, if a hundred quid is so pointless / borderline to you,
I'm willing go to all the bother of finding something to do with it,
if you send it to me.

regards, Ian SMith
--
|\ /| no .sig
|o o|
|/ \|

Ian Smith said:

Tim Woodall said:

On 18 Aug 2006 20:44:40 GMT,

Ian Smith said:

But since it's a voluntary scheme, if it isn't worth doing for a
particular individual, they simply don't do it.

If his scheme is as good as yours then definitely, yes. If his
scheme is like what I've heard of where your only savings are tax
and NI on the salary sacrifice of the full cost of the bike then
it's borderline.

The OP could be saving a few hundred pounds, or he could be saving
about 50-100. In return for which he is having to wait several
(summer) months to get the bike.

Tell you what, if a hundred quid is so pointless / borderline to you,
I'm willing go to all the bother of finding something to do with it,
if you send it to me.

Stop being silly.
The point Tim is making is whether its worth missing a summer's cycling for
between £50 and £70 saved on a £500 bike.

If you want to save even more, don't get a new bike at all.

- Nigel

--
Nigel Cliffe,
Webmaster at http://www.2mm.org.uk/