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“Would they like the shirt off my back as well?” Bike shop owners fume as Cycle to Work scheme stops retailers charging additional fees

Cyclescheme says removing “unexpected charges” will create “a more positive and fair experience” for customers, but some bike shop owners claim the change will see them lose money on Cycle to Work sales

Cycle to Work scheme provider Cyclescheme has come in for heavy criticism from bike shop owners who have branded the company’s decision to update its retailer partner agreement – preventing retailers from charging additional fees on bikes purchased under the scheme – as “incredibly short-sighted” and “infuriating”, and a change that could lead to shop owners losing money.

The UK’s largest provider of access to the Cycle to Work scheme, the government’s tax-friendly initiative which enables people to buy a bike and accessories through salary sacrifice, Cyclescheme announced this week that it is updating its policies in order to, it claims, “ensure fairer pricing for Cyclescheme customers” and guarantee that “participant experience is in line with their expectations”.

The changes, which will come into effect on 22 December, will see Cyclescheme ask their retailer partners to “commit to a policy of no additional fees and full availability as advertised when a customer redeems a Cyclescheme certificate”. The updates, Cyclescheme says, also reflect the most recent FCA regulatory requirements and compliance policies.

“We are committed to getting more UK employees cycling to work, by removing the financial and accessibility barriers associated with getting a new bike,” Adrian Warren, senior product director at BHN Extras, Cyclescheme’s parent company, said in a statement.

“This update to our retailer agreement ensures that Cyclescheme customers are being met with consistent and transparent pricing, reducing confusion for retailers and participants, and aligning with regulatory guidance.

“With a shared goal between retailers and Cyclescheme to get more people cycling, these changes will create a more positive and fair experience for all participants.”

London cyclists at Hyde Park Corner (copyright Britishcycling.org_.uk).jpg

> New Cycle to Work ‘Flexi Voucher’ founder claims to offer “better experience for cyclists”... but existing provider says it “mimics” its own scheme and is not the “real thing”

However, while Cyclescheme emphasised its “shared goal” with bike shop owners, the news hasn’t gone down too well with some of the retailers themselves, who say the decision to restrict dealers from charging additional fees could lead to them losing money or being forced to back out of the cycle to work scheme.

“An incredibly short sighted and poorly worded statement from Cyclescheme. I’d expect this to be retracted sharp,” Donnie Macleod, owner of Auchterarder-based Synergy Cycles, wrote on Facebook following the announcement.

“The suggestion of unfairness is utterly hypocritical. We no longer compete for the cycle to work customer as much as we compete for (dwindling) margin! The idea that anyone other than the real benefactor of the scheme should pay for the scheme is absurd.

“The tax benefit alone to the buyer is sufficient to pass the fee on to them and it need only be re-worded to them to suggest a saving that is just a little shy of their tax bracket rather than directly proportional to it. We know this because everyone who we ask to pay it, does!

Arguing that the cost should “ultimately be absorbed by the company/employer”, Macleod continued: “It’s bonkers that we the provider of the product, the expertise, the care, and service to deliver the benefit in the first place should have to pay for it. Completely backwards!

“Their statement should be ignored and if they’re serious about protecting their customer they need to remember who’s actually delivering to them.”

> How to save money on a bike with a Cycle to Work scheme

“That’s a joke,” agreed Paul Williams. “Cyclescheme can take their massive cut for doing next to nothing, while a dealer sells a bike that’s 25 percent off then adds it onto a cycle scheme which leaves them losing money.

“It even says full availability which to me means they can’t remove sale bikes or say ‘full price bikes only’ from the scheme availability. This will lose them a lot of dealers or it’ll just be ignored. Shops aren’t going to sell bikes at a loss.”

“Would they like the shirt off my back as well?” asked Bristol-based Will Wells.

“I can’t see how this will be policed,” added Jamie Quiggin. “We don’t charge any extra on RRP bikes, but when a bike is discounted we provide a cycle to work price, which is closer to RRP, but will still show a discount. They will have to be careful that this doesn’t come across as price fixing.”

Meanwhile, the owner of Hereford Electric Bikes said: “What infuriates me is the fairer for ‘all participants’ statement. Is the retailer a participant? Clearly not in the eyes of Cyclescheme.”

Cyclists and pedestrians in Castle Park, Bristol (image: Adwitiya Pal)

> Cyclescheme now claimed to be "unviable" for retailers following change in threshold

Responding to the criticism from retailers, BHN’s Warren told road.cc that the changes were made as a result of customers complaining about being hit with “unexpected charges” when buying bikes or equipment under the scheme, and that the updates would improve the customer experience and lead to more people taking advantage of the scheme.

“At Cyclescheme, we are proud to partner with over 2,600 cycle retailers across the UK and recognise the importance of our network,” Warren told road.cc.

“The considered retailer update is rooted in united commitment and passion to get more people cycling.

“Feedback from our scheme participants has shown that there has been some frustration when faced with unexpected charges to obtain selected bikes and/or equipment.

“We are confident that by creating a consistent and transparent set of guidelines for retailers, this will improve the user experience for our shared customers, and therefore increase the uptake of the Cycle to Work scheme in the long term.”

> Cyclescheme slashes retailer commission rates after industry pressure

This latest change isn’t the first time that Cyclescheme has come in for criticism from retailers concerning its policies.

In 2020, the scheme was forced to reduce its commission rates in the wake of industry pressure and complaints by retailers that changes in the price threshold, allowing people to obtain more expensive bikes over the previous £1,000 limit while enjoying the same tax breaks, were making it “unviable” for them.

“As part of our ongoing commitment to unify our network and ensure value for all, Cyclescheme is going back to its roots,” the company said at the time.

“We were born in a bike shop and remain passionate supporters of the high street and independent businesses.”

Ryan joined road.cc in December 2021 and since then has kept the site’s readers and listeners informed and enthralled (well at least occasionally) on news, the live blog, and the road.cc Podcast. After boarding a wrong bus at the world championships and ruining a good pair of jeans at the cyclocross, he now serves as road.cc’s senior news writer. Before his foray into cycling journalism, he wallowed in the equally pitiless world of academia, where he wrote a book about Victorian politics and droned on about cycling and bikes to classes of bored students (while taking every chance he could get to talk about cycling in print or on the radio). He can be found riding his bike very slowly around the narrow, scenic country lanes of Co. Down.

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36 comments

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IanGlasgow | 7 months ago
0 likes

If Cyclescheme are charging retailers 10% (inc VAT) of the purchase price (up to £3k) then retailers will have to allow for that in the advertised price.

So if they can sell a bike at £2700, they'll have to charge £3000 to cover Cyclescheme's charges. Which means they have to advertise it at £3000.

That means either the advertised price is negotiable - if you're paying cash you could reasonably expect a discount.

In reality not every bike is sold on Cyclescheme. If a retailer sells, let's say half of their bikes through the scheme they could sell the bike for £2850. Now those paying cash are subsidising the cost of Cycescheme.

I guess the real reason Cyclescheme are doing this is to compete against other Cycle to Work schemes (like Green Commute Initiative) who charge a lower fee but allow the retailer to pass the fee on to the customer.

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Tom_77 | 7 months ago
1 like

My employer uses Bike2Work as their provider - setup by Derek Hatton*.

Not sure what sort of cut they take.

 

* I'm a bit to young to remember him, but AIUI he was kicked out of the Labour party for being too left wing.

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IanMSpencer | 7 months ago
1 like

I am guessing that one problem will be the "what is the cost of the scheme?" which if it involves stuff like APR, then you run into the same problem as car retailers.

If a car (or indeed any other product) retailer offers 0% APR, then the price you buy the car for for cash has to be the same as the price for interest free credit, or else it is technically not interest free credit as there is a charge for financing which has to be accounted for in the APR calculation. 

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hawkinspeter | 7 months ago
3 likes

I still think that it would make more sense to just reduce/eliminate VAT on bikes and bike related accessories. That would then make all retailers part of the scheme and it would also work for the self employed or even job hunters.

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IanMSpencer replied to hawkinspeter | 7 months ago
4 likes

If you have accidentally drifted into following Dan Neidle on Twitter who is well up on his tax things, he shows that removing VAT almost never results in a price reduction to the consumer.

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hawkinspeter replied to IanMSpencer | 7 months ago
3 likes

IanMSpencer wrote:

If you have accidentally drifted into following Dan Neidle on Twitter who is well up on his tax things, he shows that removing VAT almost never results in a price reduction to the consumer.

In that case, keep VAT on bikes, but allow consumers to reclaim any VAT spent on bike related purchases.

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Xenophon2 | 7 months ago
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I'm not in the UK and unfamiliar with the scheme but one question:  if shops don't like the conditions, what keeps them from backing out?

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stonojnr replied to Xenophon2 | 7 months ago
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Nothing, except its a way of shifting stock & creating new repeat customers.

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Sredlums replied to Xenophon2 | 7 months ago
1 like

A sale earns them money, even if it the lose some of it on the commission to Cyclescheme. If they don't participate, they lose those sales.
Doesn't take a degree in economics to figure that out.

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Xenophon2 replied to Sredlums | 7 months ago
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Exactly.  So if they want those sales, they'll simply have to suck it up and deal with the conditions.  Whining is useless.

Or they walk out, it's a free world.

It never ceases to amaze me how most heralds of free enterprise turn socialist once the system works against them.

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mark1a | 7 months ago
8 likes

An example of C2W done better is Green Commute Initiative. A social enterprise that charges 5% commission to retailer, no end of hire fees and no limit on purchase price. 

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Fluffed replied to mark1a | 7 months ago
3 likes

GCI is great, definatelty worth asking your employer to add them as an option.

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jollygoodvelo replied to mark1a | 7 months ago
3 likes

Came here to say - why does everyone act like Cyclescheme are the only provider? 

GCI is far better and there are at least 3-4 others. 

Shops can simply stop offering Cyclescheme. 

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SaneRebel replied to mark1a | 7 months ago
1 like

The way to go. Encouraging my employer (2000 employees) to switch to this scheme soon when current arrangement ends. Halfords is even worse - charge 15% to their 'partner' shops. 

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Wingguy | 7 months ago
6 likes

It's lovely to hear that Cyclescheme, who paid a dividend of £8Million to their shareholders last year, are committed to working hard for better consumer pricing by getting someone else to pay for it.

If they're worried about unexpected charges for customers I assume they're also axing their own hefty end of hire fee as well, right? I mean, they're not run by a bunch of greedy, cynical finance sharks so they must be doing that too, right?

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stonojnr replied to Wingguy | 7 months ago
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Isn't the end of hire fee literally the taxable value of the bike so part of HMRC rules about benefits in kind and tax ?

Unfortunately you need a middleman company to make the scheme work because of the financing rules,credit, debt and outcomes that aren't always about keeping the bike.

I don't understand why shops are selling C2W bikes at discount though, I thought they had to charge RRP, as how else do you work out the correct tax position.

It kind of sounds like maybe some had found a loophole that exploited the rules and gave them an extra cut from the sales, which Cyclesheme have closed.

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Wingguy replied to stonojnr | 7 months ago
3 likes

Cyclescheme charges a 7% extended hire fee direct to customer (on top of their immediate 10% cut) to delay ownership of the bike until the HMRC taxable value is nil. Other schemes charge £1 for this extended hire period.

Sure you 'need' a middleman, however with the combination of 10% + 7% Cyclescheme take the biggest cut on the market - over 3x more in total than GCI, for example! Even more than Halfords with their upfront 15% bike shop cut.

Your comment about discount and tax position makes no sense and is based on an obvious misunderstanding of the ride to work tax benefit. VAT is still paid on the bike at point of sale and this is worked out the same way it normally is - a percentage of the selling price. The tax benefit is realised by deducting the employee's scheme repayment from their paycheck before NI and income tax is levied. The only thing that matters here is the voucher value and the employee's salary. Whether the bike was discounted or not makes no dfference. It can't possibly make a difference. The people administering the payroll deduction don't know whether the bike was discounted. They don't even know what was bought - it's completely irrelevant.

Finally, to say this is about shops trying to make an extra cut is disingenuous, this is about shops trying not to make a loss. Take a bike that is being sold on clearance at 35% off, the shop is unlikely to have much more than 5% left on that after trade price and VAT are taken into account (let alone overhead). If the shop are not allowed to add a surcharge to cover the 10% that Cyclescheme then they'll make a loss of 5% (again before operational costs are even accounted for). Cyclescheme will still make 17%. So please, tell me again who is trying to exploit a loophole?

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OnYerBike replied to stonojnr | 7 months ago
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Yes, HMRC rules do require customers to pay for the taxable value of their bike on order to own it.

However, the way Cyclescheme (and other providers) work is normally "Pay now own later" - i.e. at the end of the first year, customers pay a "deposit" and then continue to hire the bike (at no further cost) until n years later, the "deposit" is used to buy the bike and ownership is legally transferred to the customer. In practice, after paying the "deposit", the customer in effect owns the bike - there is no further communication or contact with the scheme provider.

Cyclescheme have decided n to be 3 years (so the bike is 4 years old at the point the customer officially takes ownership) and HMRC rules state the the value of a 4 year old bike is 7% of the new value (if it cost >£500 when new). Other schemes, such as the GCI, allow n to be 5 years, and HMRC rules state that the value of a 6 year old bike to be negligible (a symbolic £1 is sufficient).

There is no practical difference between the Cyclescheme approach and the GCI approach - in both cases, the customer is, in practice, free to do what they want with the bike at any time and no-one cares or checks. The only material difference is the Cyclescheme approach means the customer spends more money and Cyclescheme get more profit.

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stonojnr replied to OnYerBike | 7 months ago
0 likes

When I got my C2W bike 7 years ago, i dont remember the scheme provider though I don't think it was cyclescheme, but it operated exactly as you've laid out how cyclescheme work theirs currently.

Even now with a different provider who lets you use Halfords, still works on the 3 year + 1 premise & no one has ever queried the final payment.

And it was definitely RRP cost on my bike, no discounting.

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Wingguy replied to stonojnr | 7 months ago
1 like

stonojnr wrote:

I don't understand why shops are selling C2W bikes at discount though, I thought they had to charge RRP.

One more thing on this particular point - no-one but the shop itself can demand that a shop only sells product at RRP. If any ride to work provider, or even HMRC themselves, tried to demand that they did, it would be price fixing and highly illegal. It's why RRP has two Rs, the first R is specifically there to indicate that it is not a fixed, concrete, market wide price. 

Something a lot of people don't realise is that price stickers do not legally set the price of an item - they are actually only an 'invitation to treat'. A notice to the consumer that the item is for sale and that is how much the proprietor would like to sell it for. The actual sale price of the item isn't legally set until you have a contract with the seller - ie. you have both agreed on a price and you have paid money towards it. What that price end up being could be anything at all.

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stonojnr replied to Wingguy | 7 months ago
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Emphasis on the "I thought" part, mainly because when the 1k limit was in place, and some schemes still enforce that limit, no one ever said go find a shop that will discount your >1k rrp bike to under the limit.

Equally manufacturers at the time the scheme started fell over themselves to create a whole raft of bikes for just under 1k, why if a shop can discount it again and it not be a problem ?

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Wingguy replied to stonojnr | 7 months ago
0 likes

stonojnr wrote:

Emphasis on the "I thought" part, mainly because when the 1k limit was in place, and some schemes still enforce that limit, no one ever said go find a shop that will discount your >1k rrp bike to under the limit. Equally manufacturers at the time the scheme started fell over themselves to create a whole raft of bikes for just under 1k, why if a shop can discount it again and it not be a problem ?

I think you've confused yourself here. We're talking about shops selling bikes that are already discounted and not wanting to lose what little margin they have left (or even, not make a greater loss than they've already decided is acceptable).

So, the answer to your question "why didn't shops just discount >£1k bikes to <£1k bikes in the old days if they were allowed to?" is exactly the same as the answer above - they don't want to lose money. Think about it, you're asking why shops didn't suddenly offer ad hoc discounts for people because they were paying by a method that also cost the shop a big chunk of its profit margin? It's not one of life's great mysteries, is it? It's exactly the same answer as why doesn't any shop discount any item to any price on any day. It's exactly the same answer as why can't I walk into Tesco and tell the cashier I'm only going to pay £5 for the £10 pizza I just picked up. The problem is that the shop needs to make a profit selling things or it won't remain a shop for very long.

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BBB | 8 months ago
6 likes

The scheme meant to get more people on bikes that relies on admin middlemen charging shops 10% should be blown to pieces and rebuilt from scratch. Oh and yes  the majority of individuals simply use it to finance their existing hobby, especially those on higher tax bracket who benefit the most. 

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flybywire | 8 months ago
4 likes

High proportion of these bikes through c2w schemes very rarely or ever get used to c2w! It's a swizz. Tax payer pays indirectly too. 

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momove replied to flybywire | 8 months ago
0 likes

And how do you know that - has there been some research published on it?

Of course tax payers pay for it. Tax payers pay for everything the government does, it's how government works. And in this instance, it's "paid for" by HMRC collecting slightly less tax from a person for a year.

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Rik Mayals unde... | 8 months ago
3 likes

“We are committed to getting more UK employees cycling to work, by removing the financial and accessibility barriers associated with getting a new bike,” 

 

So why expect hard working local bike shops to participate in this scheme and suffer a 10% hit on the price which goes to the cycle sheme companies? If the companies want more people to cycle to work, why should the supplying dealers take the hit? If I was taking advantage of a cycle to work scheme I wouldn't think it unreasonable if my local bike shop added on the scheme costs, otherwise why should they participate in them? This is all about the companies who run the scheme taking 10% of a bike price without doing anything for that at all, and expecting the bike shops to absorb it. Greed, that's all it is.

What the buyers don't realise is that as well as having to pay the scheme companies 10% of the price of the purchase, the bike shops have to waits sometimes weeks before getting paid from the scheme for the bike. That is enough to create serious cashflow problems for the shops. And if they choose a bike which is discounted, the retailer still has to pay the cycle schems fees, meaning many are faced with selling the bike at a loss. 

If customers are complaining about being hit with unexpected charges, why not put it in the wording when applying for a bike to work scheme that the purchase price will include an administration fee?

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Brauchsel replied to Rik Mayals underpants | 8 months ago
1 like

Presumably a lot of people using C2W are people who wouldn't otherwise have bought a bike at all, and so it creates extra demand and gets potential new repeat customers into bike shops. Plus essentially free advertising via the Cyclescheme website, which (especially when tailored to the employer) adds a bit of authority.

Finders'/introducers' fees are nothing new, and businesses can choose whether or not to pay them. Employers (who are the ones forking out the cash at point of sale) can't be arsed dealing with employees complaining that they were charged £1100 for a bike listed at £1,000, which they do even though they're getting tax savings bringing the cost well below that. 

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Rik Mayals unde... replied to Brauchsel | 8 months ago
0 likes

I get that, but feel sorry for the shops supplying the goods, sometimes at a loss. it isn't right.

Sadly we live in a world where many people don't give a stuff about anyone else, as long as they get a bargain.

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Brauchsel replied to Rik Mayals underpants | 7 months ago
1 like

I get that, but nobody is forcing the shops to sell at a loss. They set their prices, at rates they feel will be best for their businesses. 

I've said it before, but a lot of bike shops might do better if they stopped selling bikes. Stop trying to compete with internet sellers (unless you've got a niche that means people will pay extra to buy in person), and focus on maintenance/repairs. Less stock, better cashflow, smaller premises. No company has a right to stay in business unless it's selling something people want at a price they'll pay. 

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stonojnr replied to Brauchsel | 7 months ago
1 like

There's very little profit in just workshop repairs, it's a sideline in most bike shops in some cases largely to have someone who can competently build up frames for new bikes.

you do much better selling bikes, or getting people to buy things they don't really need for bikes.

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