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news
London cyclists at Hyde Park Corner (copyright Britishcycling.org_.uk).jpgCyclescheme now claimed to be "unviable" for retailers following change in threshold
Cyclescheme, the UK’s biggest provider of bikes under the Cycle to Work initiative, says it is looking at altering its commission structure following complaints by retailers that changes in the price threshold allowing people to obtain more expensive bikes while enjoying tax breaks are making it “unviable” for them.
Last year, the Department for Transport amended its guidance to highlight that any Cycle to Work scheme provider registered with the Financial Conduct Authority (FCA) could provide a bike of any value.
> You will now be able to get bikes worth over £1,000 on the Cycle to Work scheme
Previously, there had been a general ceiling of £1,000 for bikes supplied under the salary sacrifice scheme, although larger employers registered with the FCA were exempt from that.
> How to save money on a bike with the Cycle to Work scheme
According to a report in the Financial Times this weekend, the scrapping of the limit has had a knock-on effect for bike shops participating in the scheme, because while the profit margins for more expensive bikes are lower, the commission rates of the businesses providing access to the scheme remain unaltered, irrespective of the value of the bike.
The newspaper says that Cyclescheme takes 10 per cent commission on the retail value of bikes and 15 per cent on accessories purchased through it, while a similar scheme run by Halfords charges independent bike shops 15 per cent of the value of bicycles procured through it.
It cited the case of London-based Pearson Performance, with owner Will Pearson saying that one recent transaction conducted through Cyclescheme for a customer taking delivery of a £2,200 bike and accessories worth £300 saw the Cycle to Work scheme provider take £265 in commission.
Describing his company’s return on that sale only as “acceptable,” Pearson went on to say: “If somebody comes along and buys a £7,000 bike and then produces a cycle scheme voucher, it’s great for the customer, it’s great for the cycle scheme provider, but it’s not so great for us.
“Typically, as prices go up, the margins come down.”
As a result, he and other bike dealers – including London-based Velorution and Cotswold Cycles in Moreton-in-Marsh, Gloucestershire – have been lobbying Cyclescheme to revise its commission structure.
“If we are having to give up to 15 per cent of that £7,000 away, it doesn’t make it a legitimate proposition for us,” he explained.
Adrian Warren, senior product director at Cyclescheme, confirmed to the Financial Times that the company was rethinking its commission scheme, acknowledging that the current flat rate may not be “the best way forward.”
He said: “The last thing we want to do is treat bike shops unfairly. Talks are ongoing but we are confident we will have a new commission structure in place in the coming weeks that benefits everyone.”
Cyclescheme was founded in Bath in 2005 and in 2009 was named the UK’s fastest growing private company by turnover by The Sunday Times. It was sold in 2010 to the Grass Roots Group, which was itself acquired by US-based Blackhawk Network in 2016.
In June, it said that in the three months since 31 March, employer registrations had risen by “a staggering” 310 per cent due to employers “heavily investing in cycling as a benefit for their workforce” during lockdown.
It added that in June alone, sales of bikes using its certificates had risen by 59.7 per cent.
Simon joined road.cc as news editor in 2009 and is now the site’s community editor, acting as a link between the team producing the content and our readers. A law and languages graduate, published translator and former retail analyst, he has reported on issues as diverse as cycling-related court cases, anti-doping investigations, the latest developments in the bike industry and the sport’s biggest races. Now back in London full-time after 15 years living in Oxford and Cambridge, he loves cycling along the Thames but misses having his former riding buddy, Elodie the miniature schnauzer, in the basket in front of him.
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51 comments
There is a handback option ... but your employer does not have to offer it. After all, most employers are not going to want employees handing their bike into them at the end of the scheme.
I don't think it is the standard HMRC rule - it is the hire rules of CycleScheme - GCI operate 6 year hire period (the salary sacrifce does not need to be over 6 years), where by you pay £1 at the end of the six years if you wish to keep the bike.
It's both. HMRC guidance is available here: https://assets.publishing.service.gov.uk/government/uploads/system/uploa...
CycleScheme have decided to allow the hire period to be four years, and HMRC state that after four years the residual value should be 3 - 7%
GCI allow the hire period to be six years, after which HMRC state the residual value to be negligible.
There are of course other ways a cycle to work scheme could be implemented in line with the guidance.
No other scheme ever charges anything like that. Most effectively extend the "hire period" indefinitely. Green Commute Initiative charges a notional £1.
Also, I'd have more sympathy with the concept of a final payment if one hadn't already paid the full cost of the bike over the year. Compare it with how car leases are structured - you don't just divide the purchase price by the number of the months in the hire period to get the monthly payment.
The 4 year period is not that big an obstacle. You pay for it over 12 months and delay the final payment for a further 3 years. The bike value has depreciated further so your final payment is a lot smaller.
You technically don't own the bike, but that doesn't really matter. You can have a second bike after 12 months.
You are right, the scheme doesn't work on 12 month purchases, but I don't know anybody who does not tick the 4 year option. Basic rate taxpayers get interest free credit and save £250 on a £1000 bike. Still not bad. Higher rate tax payers save more.
This is the problem.
Do you need a bike that is £1000+ to commute? Would a more modestly priced bike not be capable of getting you there? This is the very problem with the scheme. It isnt so much providing a bike to commute as funding a hobby. I get that if someone is in the market for a new bike and this will ecourage them getting one which obviously benefits the retailer and the environment but a bike costing £2000 upwards? Really? How is that going to get you to work any better than a grand bike?
Another problem which has been skimmed over at best is so many businesses who allow this scheme do very little in the way of secure places for people to store the bikes once in the workplace which means more and more are getting stolen. Great if you have a place you can store it but how many people every day get their pride and joy stolen while at work? Kind of defeating the object is the very bike you bought to commute on isnt being used for its purpose because its either been nicked or the owner is unlikey to bring it due to a lack of safe bike storage once they get there.
I don't see why it's a problem. I don't strictly need an expensive bike, but as I was spending roughly an hour a day in the saddle commuting, I thought it made sense to upgrade to a really nice bike to make the ride quicker and more fun. As it happens, my workplace doesn't do the cycling scheme, so I didn't get any tax breaks. (I'm now doing more leisure rides due to less commuting, so I do consider it a hobby as well).
The limit of £1000 seems very low compared to tax breaks given for company cars and why do we not want commuters to be able to get e-bikes or whatever they want if they are going to be reducing pollution and congestion? It just seems an arbitrary amount so why not increase it to £5000?
The flaw as I see it is that there's no policing of what the bikes are used for, so the scheme can be abused by people who buy a bike and then find that they don't like tangling with busy traffic and leave the bike unused. The enthusiasts that are having their hobby being funded are quite often going to be commuting by bike to get in a bit of extra training, so they're likely to be fulfilling the actual aim of the scheme. (I also think their increased fitness and health would result in less costs to the NHS over the long term).
Secure parking is definitely an issue though, but that's a problem whether or not cycling gets a tax break. A lot of bike that are stolen from e.g. train stations are in the £700-£1000 bracket (I can't back that up with stats though) so upping the £1000 limit isn't going to make much difference to that - most people think that £500 is a lot to spend on a bike. Ultimately, it's down to the police to act on bike thefts (when they're given enough resources to work down the priority list) - schemes using tracked bait bikes can be very effective in catching the crims.
I believe the main impetus [cited as being] behind the change was the idea that it would open it up to supporting purchase of e-bikes, and so encourage more people with longer commutes to consider making them by bike.
absolutely, you cant buy much of an e-bike for under £1000 at the moment, presumably the tech cost will come down after a while, but the people most likely to want to ride bikes by using this scheme are going to be after e-bikes.
I got an £1800 Raleigh Motus e-bike for my 33-mile each way commute. Using the Bike2Work scheme it's costing me about £100 per month.
But yeah, I'd have got something cheaper if I was buying it outright.
People who are not rich enough, or lucky enough to live within easy commuting distance on a bike.
Something light, nice to ride long distances at speed with hydro discs and so on costs more than £1000 in my experience, especially in recent years when either prices have gone up (weirdly) or conponents and
so on have been downgraded. Prices really have shot up far higher than inflation it seems to me
Rohloff alone is £1200.
Someone who wants to multi-use their bike and hasn't got the funds and or space to keep N+1 dedicated machines?
If we're concerned about treasury funds I think fuel subsidy would be a great place to start.....
Amongst others... disabled people. Capping the scheme at £1,000 discriminates against those who need a cycle with expensive customisation and/or electrical assistance. It discriminates against parents that might need a cargo bike to include the school run in their commute.
Of course. I don't have a bike that was cheaper than that and it makes the journey very enjoyable. (And why should I be denied a bit of fun?)
Some shops (and direct sales brands) charge the comission, or at least some of it back to the consumer, which can negate some of the benefits of the scheme itself. Hopefully cyclescheme will be more realistic in what they're trying to make out of the industry that supports them.
That's a lot of commission for doing very little 🙁
That is true for the more expensive bikes now available through the scheme ... that is basically the point being made.
The purpose of companies like CycleScheme is to give employers the ability to offer salary sacrifice benefits to their employees without needing to go through the process of jumping through all the hoops of ensuring legal compliance for the scheme themselves ... which employers are free to do if they wish.
With a maximum £1,000 available for purchase of a bike, that means a maximum commission of £100 for a single transaction. If you can now buy a £7,000 machine, that 10% commission now represents £700, and becomes unrealistic. That needs to be sorted.
The CycleScheme has turned into a cash cow for US private equity firms. £3.9m profit on turnover of £7.2m.
https://www.ft.com/content/a884b2b9-abdd-49ae-a325-c945bf0a1fe5
Any business that can make that sort of return has to be dubious. They must have gained some sort of unfair power or advantage over the other stakeholders. It should be the job of government to prevent such abuse.
Ah but then this present government (and all the ones before) might accidentally legislate against it's tax avoiding sponsors. We couldn't have that now could we? Damage Boris' Golden Era of cycling, perish the thought.
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