Cycle to Work Scheme

Hi

So we are looking into doing the cycle to work scheme with cyclescheme. Has anyone had any experience of them and also what hassle have people been having with regards to the whole thing.

Whats the best way to account for it on the books. I'm guessing the bike will go onto the FA register and then after the first year when the extended arrangement is put in place through cycle scheme an amount for the sale income with go on the P+L.

Can anyone explain the VAT in simple terms because on cycle scheme they are saying for example:

Amount £1000
Tax Savings - £200
NI Saving - £120
FINAL COST - £680

Gross Sacrifice - £83.33 (Does this amount include the VAT??)
Net Sacrifice - £56.67 (I'm guessing this is the amount taken out of take home pay also does this include the VAT??)

Also how does the company account for the VAT on the cycle to work scheme?

Any explanation to simplify would be greatly appreciated.

Tom

Comments

  • NeilHNeilH Trusted Regular Registered Posts: 544
    Hi

    In general, the amounts taken from employees includes VAT and it's accounted for as a normal supply, VAT can be re-claimed on the purchase of the bike.

    In reality, the employee is basically buying the bike from the employer in instalments. You would not capitalise the bikes, instead you would record a current debtor of the amount due/outstanding from the employee, which would be reduced as the employee makes payment from their salary (gross).

    Alternative schemes are available under hire purchase approach where the employer makes deductions from the employees salary (gross) and pays these to the "hire" company. The employee has the option at the end of the agreement to purchase the bike at a competitive price.

    Either way, tax and NI savings will be made.
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