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news
commuter-5339073_1920Cycle to work scheme provider claims it was 'dropped' by Canyon and blasts new Cyclescheme partnership
A cycle to work scheme has launched a scathing attack on Canyon, after it was allegedly 'dropped' by the bike manufacturer which has now partnered up with Cyclescheme.
The not-for-profit Green Commute Initiative (GCI) claimed that 'without warning or invitation' Canyon dropped them and signed up to an exclusive deal with the UK's largest provider, Cyclescheme.
GCI went on to accuse Canyon of allowing 'big business' to benefit from a UK tax break on the Cycle to Work scheme.
Canyon said it was 'surprised' by the hostile reaction and insisted it was just looking to offer 'as many UK consumers the opportunity to purchase a bike' as it can.
In a press release, Green Commute Initiative, said: "With Canyon’s departure from GCI’s supplier portfolio, questions are being raised as to whether European Big Capital is helping American Big Capital benefit at the UK taxpayer’s expense.
"GCI was the first Cycle to Work Scheme provider that Canyon had worked with and it’s fair to say that one of the main attractions was the low commission rates charged by GCI.
"GCI is a UK-based not-for-profit social enterprise and its ethos is one of fair play, transparency and honesty.
"This was reflected in the contract with Canyon which was open dated and not exclusive.
"However, in March 2021, and without warning or invitation to bid, Canyon informed GCI they had signed a new and exclusive deal with US-owned CycleScheme."
GCI added: "CycleScheme charge an end-of-scheme fee (their Own it Later plan) which effectively increases the cost of Canyon bikes by 7 per cent over the same bike obtained via GCI’s scheme.
"A typical Canyon bike costing £2,229 plus shipping of £57 would give a salary sacrifice total of £2,286.
"However, if you want to own the bike you have actually already paid for, you’ll need to pay CycleScheme a whopping £160. This makes the actual cost of the bike £2,446."
> You will now be able to get bikes worth over £1,000 on the Cycle to Work scheme
GCI continued: "Of course, this makes it easy to understand why CycleScheme demanded exclusivity.
"If Canyon were to offer GCI alongside CycleScheme, then it would be clear which one offered the best deal.
"The 7 per cent end-of-scheme fees may be bad enough for the individual consumer to swallow but there are wider implications when you consider that the Cycle to Work Scheme is heavily subsidised by the UK taxpayer.
"GCI believes the tax break should go to those doing the cycling, improving their health and reducing air pollution etc. otherwise it should go back to HMRC where it funds hospitals, schools and the roads required to commute on.
"We strongly feel it definitely should not go to increase the profits of an overseas private equity company.
"Over the years, CycleScheme, along with its American owner Blackhawk, has probably received multiple million pounds in end-of-scheme fees that originated from the British taxpayer’s subsidy of the Cycle to Work Scheme.
"That doesn’t seem right. It certainly doesn’t reflect GCI’s values and we’re surprised a company like Canyon, who claim to be at the heart of cycling, would embrace them."
In response Nick Allen, Canyon's UK market manager, said: “GCI have been a great partner and one that has enabled us to support the huge interest in the cycle to work initiative.
"Over the last few weeks we’ve engaged in positive conversations towards the expiration of our agreement with a view to amicably ending our relationship with GCI.
"As such we’re a little surprised by GCI’s reaction.
"The overriding reasons we have taken the decision to partner with Cyclescheme as our preferred provider are 100 per cent customer centric, our absolute number one priority in the coming years.
"Firstly we want to able to offer as many UK consumers the opportunity to purchase a Canyon via this fantastic initiative and working with Cyclescheme, the largest UK provider, gives us the best opportunity to achieve this goal.
“Secondly, through our partnership with Cyclescheme and crucially important to our business we are now able to integrate the automated purchase and checkout experience into our website, thus providing the perfect fit for our Direct-to-Consumer business model."
Mr Allen added that Canyon would be open to working with GCI again in the future after an 'incredibly successful' couple of years.
A spokesperson for Cyclescheme said "We look forward to working with Canyon, as we do our other brands and retailers, to grow the number of cyclists in the
UK.
“With over 16 years’ experience, Cyclescheme is a total cycle to work solution. Clients trust us to support their employees in choosing to cycle commute and help them maintain this habit in the long run."
Latest Comments
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Any chance you could precis that into a couple of sentences so that I can be bothered to read it?
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There is no need for "" around numerous, that is a matter of fact. Similarly, I'm a bit too close to talk freely, but I've been informed that as...
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Even online-shops offer very limited discounts... I waited for this week to get a 10-25% but nothing on the articles I need....
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What we need is a hanger that can be bent back.
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Gloucestershire have told me the outcomes to nearly all my reports. I have to wait 12 months to find out now whereas I got them immediately before...
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33 comments
Why can't Canyon subscribe to both initiatives?
Cyclescheme would have asked for exclusivity, in the hope employers choose them ahead of others.
I wasn't aware that the 7% end of hire fee profited Cyclescheme, I thought it went straight to HMRC. Having bought two bikes over the years I feel distinctly mis-sold on this...
I don't know how other companies do it, but the 7% deals with a perceived risk that by taking ownership of the bike at 4 years, there is a benefit in kind unless the hirer pays the market rate (HMRC says it's 7% at 4 years for a bike >£500 purchase price). The employee is a hirer, since that is the principle of the scheme.
With Cyclescheme, the ownership is transferred to Cyclescheme, so whether the employee is hiring it from their employer after the first 12 months may be an issue, but if HMRC determines that he is, that 7% avoids a tax liability on the residual value.
if there really is a benefit in kind issue, it can be resolved be declaring it and then paying tax on the 7% rather than the full 7%. so 1.4% for the basic rate taxpayer, or 3.15% for the higher rate taxpayer
Although I am yet to understand how I can be considered to have recieved a benefit in kind from my employer, when the entire purchase price of the bicycle has been deducted from my salary.
It seems to me that the scheme has been set up to benefit employers (who save on NI contributions and then can sell you the bike you have already paid them in full for) and scheme providers (who take a massive commission from bike shops for very little work), but cyclists not so much, unless they are higher rate taxpayers.
As a basic rate taxpayer, you benefit from paying for the bike from income which has not had 20% income tax or 12% employee NI deducted from it. It's not as sweet a deal as higher-rate taxpayers (40% tax, 2% NI), but it's still pretty good. £2000 of bike only results in your take-home pay going down by £1360, and it's spread over a year.
I'm pretty sure it goes straight to Cyclescheme. The way the cycle to work schemes are set out, you initially don't own the bike, but merely hire it for a certain period. At the end of the hire period, you can either return the bike to its owner or, as a completely separate transaction to the hiring, you can buy it from the owner (the owner being Cyclescheme or other scheme provider). You are required to buy it at its fair market value at the point of that transaction - if you were given it for free or for less than the market value, then it would be classed as a Benefit in Kind.
HMRC provide guidance on the fair market value, which (on bikes initially costing >£500) is 7% after 4 years or a nominal amount (£1) after 6 years.
The rub is that with Cyclescheme's "Own it later" option, you put down a "deposit" after year 1, and then continue to hire the bike (at no cost) for a further 3 years before the "deposit" is used to buy the bike. However, after you have paid the "deposit" at the end of year 1, you don't have any further contact with Cyclescheme. There is absolutely nothing stopping you selling the bike, changing jobs etc. - in short, you effectively already own the bike. Equally, it would make no practical difference if rather than "own it later" after 4 years, you "owned it later" after six years - except that in the latter scenario you would only have to put down a £1 "deposit" at the end of year 1 to own the bike at the end of year 6. I therefore question whether this arrangement is strictly legal in its current form, and if it is I can see no reason other the profiteering by Cyclescheme why they chose the four year option rather than the six year option.
Why would exempting cycles from VAT be a better solution for the low paid than C2W? The more expensive bikes would be reduced more in actual amount but still only in the reach of higher income groups so it still appears to benefit them more.
VAT is 20% whilethose on higher incomes pay tax at 40%, so the savings wobe reduced significaantly for higher earners, whilest making it an op tion for those on low who currently cannot acess the C2W scheme, because the salary sacrifice takes them below the min wage thresehold
all buyers would get the same percentage reduction.
At present the highly paid will save 40%, while the lower paid may not even save 20% if this would take their pay below minimum wage.
To answer some questions and correct a couple of errors:
The salary sacrifice scheme offers headline stated as 25%-39%. The range takes into account income tax and NI savings, with different thresholds/tax bands and tax rates. The more you earn, the more you save. If there is a final payment, that needs to be considered as part of the budget, and that final payment is subject to personal taxation.
VAT on bicycles and most goods and services is 20%. Helmets and some other safety gear is zero-rated; these can be obtained on salary sacrifice schemes.
You CAN make is of the cycle to work scheme if you are on NMW. What you cannot make use of is any salary sacrifice that takes your resulting income below the NMW. This disproportinately affects those on low rates and reduced/part-time hours.
As a condition of running a cycle to work scheme, an employer MUST make the scheme available to all employees. If an employee wants to participate but cannot afford salary sacrifice because of their income, the employer must make a bicycle available to them. It does not have to be permanently or exclusively available, nor the bike of their dreams, so a collection of pool bikes may meet the requirement. This is often an overlooked element of the scheme, because nobody is really interested. But a 17-year old, getting to a new out-of-town logistics job to which the buses don't run at 5am, who can't afford a car and hasn't got a bike, would be an ideal candidate for a loaner to get him mobile.
To that end, remember that the salary sacrifice is not primarily [nudge-nudge, wink-wink*] a way to own a bike, you are hiring it for the hire period. It is not a condition of the hire that you are entitled to keep the bike at the end of the hire. If it is, it's not technically a cycle to work scheme.
* there's a lot of nudging and winking going on. There are Ts&Cs to make it comply with HMRC rules on benefits in kind. For example, present Covid circumstances aside (for which there is a specific exception), use of the bike should be primarily (>50%) riding to/from/for work. Yet employees are not required to keep a record of mileage and employers are not required to monitor it. This is the biggest nod and a wink the Treasury will ever give you outside a Tory fundraiser: we all laugh heartily and flick through the bike catalogue for our n+1.
Of course this makes all the claimed "savings" a falicy. Can anyone think of anything else where the rental charge for 12 months is equal equal to the list purchase price of the same item?
So we are being asked to jump through hoops to hire something at an inflated cost, so that we might get the opportunity to buy it at the end.
Don't fall out with your employer in the meantime, they are under no obligation to sell you your bike, although I don't recall any reports of an empoyer retaining ownership of the bike out of spite.
When I first had a bike under a c2w scheme, at the end I was offered the choice of final payment OR I could pay them to take their bike off my hands. Whose bike is it anyway if I have to pay them to take it away?
Good point GMB about the scheme being accessible to all employees. One of the companies i work for, where I suspect the majority of workers are minimum wage, there's an option of a £125 Halfords mountain bike. For a nominal £10. That will suit certain commuters in certain scenarios.
"GCI is a UK-based not-for-profit social enterprise and its ethos is one of fair play, transparency and honesty."
It seems like this may be a statement which actually describes GCI rather than just the usual whitewash put out by most firms. If it is they have no chance in the modern world of dog eat dog and cosy relationships with government.
It appears that the cycle to work scheme is yet another example of a government initiative which appears to benefit the less well off but, because of the small print, ends up benefitting the better off and big business. Unfortunately the PR benefits and lack of "fair play, transparency and honesty" on the part of government means they are vote winners.
I'd like to know
1) how much revenue is reduced by the cyckle to woirk schemes
2) how much profit is made by companies running the scheme
3) how much is saved by cycle buyers
4) how much VAT is paid on all new bike purchases.
It seems to me that purchases of new bikes could be much more fairly subsidised by removing or reducing VAT on new bikes, such that the loss to the exchanequer was the same as under the scheme, buyers would benefit more and these scheme administrators would not be making profits.
What are you, some kind of communist? Won't somebody think of the poor venture capitalists?
Probably true (and more true now than it would have been when it was set up, because of the increase in VAT) but what you would lose is the aspect of employers promoting the scheme to their employees and the pschological 'savings' motive. A VAT exemption just means that the price of bikes comes down a bit generally - it doesn't plant the idea of buying one into people's heads, and it doesn't make them think "I'll buy one because I'm getting a bargain discount", even though the actual cost may end up being the same.
Interesting, it also doesn't serve as an interest free payment model.
However how many of these people responding to the idea being planted in their head make much use of the bike? No one benefits if employees get cheap bikes which they don't use (other than cycle scheme and the manufacturers selling more bikes)
On that front, an anecdote.
The CEO of our small company mentioned the scheme in an online meeting last year (most staff are still at home). The people that expressed the most interest in the idea were the ones least likely to ride a bike - and absolutely NEVER on the road to the office. One of them even said she's do it so that her other half (who also never rides a bike) could get one "on the cheap".
As the sole 2-wheel commuter in the organisation I was not impressed.
Cycle commuter for almost 35 years, the various schemes that I have been offered have never provided anything for the way I cycle (utility/commuting abd leisure). Constant upkeep, small scale purchases from myriad suppliers. Things die and need to be replaced, no chance to fill out a lot of paperwork and waiting for a long time.
Even building my shockingly expensive Ultimate Commuter, I was on a short term contract, LBS built it, but I sourced a lot of the parts from all over, some from the US.
I did once think of going for it to buy a Cannondale Hooligan, , but the C2W scheme was only open for a very limited time, probably with few numbers being available.
Do what at least some countries in europe do...
Bike shop issues 2 receipts and you as the buyer submit one to the taxman to get discount on tax code (could probably now do online by QR code tax receipt)...
This can follow across jobs, adjust for income changes (e.g. using a bike to get an above minimum wage full time job that pays enough to actually be taxed), split purchases (e.g. bike in one, panniers for carrying stuff in another), is easier to organise (don't need to price up with LBS, then get vouchers, then buy) and doesn't end up with a middleman charging the bikeshop a significant chunk of the savings (leading to a fair few refusing or restricting schemes).
If you need a loan to buy the bike that can be done through relatively standard means, without making it uneconomical for LBS to sell used bikes etc under the scheme because margins are less than fees. (Could still keep employer based loans based on current cyclescheme etc, just have more competition on the loan side...)
Of course given savings to NHS we should also scrap VAT on bikes (yes, there are some benefitting who don't need it by buying £10k carbon exotica, but they are probably still saving the NHS more by riding it vs driving than the VAT income...)
The Cycle to Work scheme is a mess. It's a completely back-to-front, regressive scheme that punishes the low paid and hands more money to the wealthy.
On minimum wage or close to it; you can't use the scheme at all.
On basic rate income tax; save 20% (minus fees and final payment).
On higher rate income tax; save 40% (minus fees and final payment).
Here's a simpler suggestion that would offer the same average subsidy across the board; scrap VAT on bikes, parts and repairs.
I don't see why they need these 3rd party firms at all. Tax the cost of the bike at source is your tax code. Then everyone could get one and moving jobs would be irrelevant.
They're not necessary if your employer - as mine does - administers the system themselves.
The advantage was that I could buy any bike from any retailer and negotiate a discount. My employer offered to pay the retailer by cheque or credit card. Many retailers won't offer discounts if you're paying using one of the 3rd party cycle to work schemes.
I was divided on these as to whether they are better than buying in the sales, but at the moment stocks are in short supply and prices are going up, so there's very few normal discounts.
I've just signed up for my second voucher and will save 32% on basic rate tax plus NI, but realise there is a 7% at end of scheme to pay so I'm down to 25% off. My manufacturer also charges me half of the 10% that cycle scheme charges the shop, so that's another 5% reduction in the saving. But that's still worth it on a bike that has no prospect of a sale.
More concerning is the GCI claim that the 7% end of life charge is "profiteering for hedge fund owners". In the cycle scheme literature it's listed as a charge for hmrc tax reasons. I wasn't aware that cyclescheme were the only ones to do it. That being said, my employer only uses cycle scheme so I'm stuck with them. The lack of choice here is less than desirable, and I'm guessing that's why canyon switched. I couldn't have bought a canyon through their previous scheme, but I could now. It's just unnecessary barriers that certain brands/shops use certain schemes.
HMRC rules are that a bike that costs more than £500 is worth 25% after 1 year, 7% after 4 years, and nothing after 6 years.
Cycle schemes offer to extend the hire period to reduce how much you pay at the end. GCI extend it to 6 years, all the others that I know of extend it to 4 years.
c2w Support allow you (or did, when I used the scheme - admittedly 10 years ago now*) to extend until the FMV is zero - in fact they pretty much assume that that's the default position.
[*Happy (slightly delayed) 10th birthday, bike.]
Don't forget that workers on or near minimum wage don't qualify either; if the cycle to work wage deduction takes them below the minimum hourly rate.
I was unaware of this. Thank you.
Most of the benifits of course are to the higher rate taxpayers.
Unfortunately so.
I too was unaware of the issue of those on/just above minimum wage.
When I last checked the amount saved on a £1,000 bike (a lot more than I've ever paid for one!) over 12 months it was less than the 10% discount I get at my LBS.
If I used a credit card then took advantage 0% on transfers offered by most card providers I could get some interest-free credit and spread the cost. I'd also not have the hassle of the paperwork and the whole 'transfer of ownership' thing at the end of the hire period.
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