I recently decided to look into the “cycle to work” scheme. After spending several hours reading the fine print, I’ve concluded that “they” (the ever-present government ministers, the taxman, the system in general) are wearing their underpants on their head.
The links above are full of things like “Save up to 50%”! Wow. I’d love to. But there are quite a few catches, the clincher being this one:
Arrangements at the end of the 12 month loan period
All payments made over the repayment period of 12 months are for the LOAN of the bicycle and accessories. However, at the end of the loan period the University may decide to offer to sell the equipment loaned to you at a fair market rate. Unfortunately this can’t be confirmed until the end of the 12 month period.
This is standard, its not a University of Bristol thing. So what does that MEAN? Basically, you have to pay more at the end of the contract, for “your” bike – so how much? Many people say they paid a “nominal fee”, £5, £50, that sort of thing. BUT. The government decided that the second hand bike was worth 25% of its FULL VALUE. Now, this is not a bad valuation. What is bad is that you have to pay this to your employer to get “your” bike from them. They can’t even waive the fee because the taxman will charge them.
So what is the saving? I’m paying the higher tax band so it works out that I save 40% on the shop price. But I have to pay the University 25% back, making it 15 off%. Not that great, but still something, right? Again with the BUT. But you can’t buy just anything from just anywhere; sale items typically get a 10% markup in this scheme due to the costs of being in it. And the final but: you are required to get insurance, because it is not your bike, but the Universities. That is going to be 5%, right there.
And there we are: I save, all in, nothing. Better yet, someone on a lower income would save less tax and could be out of pocket!
There are a couple of caveats: potentially, the company doesn’t have to charge you the full 25%, and if they feel nice, they might just “gift” it to you and charge the tax on the value (which might be 10% of the total price). But they might not. Are they perhaps making saving cuts at the moment? Do you trust them? Really? Really?
So the people who introduced this rule are basically wearing their underpants* on their head. They know should cycle, so they give us an incentive. They make a law giving us a tax discount. People must be covered up, so they make a law that we have to wear underpants. But the rules say that the bike is the companies property, so they tell them they must account for their assets. Underpants “must always be worn”. So the incentive is lost, and better yet, lots of money is wasted on the scheme. So they wear the underpants on their head, better yet covering their eyes so they can’t see the other naked people.
If only they said how much it would save in advance, at least we could appreciate the benefits (or otherwise). As it is anyone sensible sees the worst case scenario and fears it. Uncertainty is no incentive.
* The analogy permits women to continue wearing bras, provided that they also wear them on their head just like in Weird Science.