Avoid Cycle to Work Transfer Fees | Save More with Gogeta
Here's everything you need to know about cycle to work transfer of ownership fee and why, as long as you choose the right cycle to work provider, it won't eat into your savings.
The cycle to work scheme is an amazing tax benefit that can help you make big savings on bikes and cycling accessories. By paying out of your gross salary, you save on tax and national insurance contributions. Plus you get to split the cost over 12 months (or more) by paying via salary sacrifice out of your monthly pay. It’s a win win.
But you might have seen references to end of term transfer of ownership fees and be worried and confused about what they mean and how they might affect your savings. We’re here to help and reassure you that, as long as you choose the right cycle to work provider, the transfer of ownership fee is nothing to worry about.
What is the transfer of ownership fee?
When you apply for a cycle to work scheme, you get to pay for a bike and cycling accessories out of your gross salary, and then pay the cost back over 12 months (or more) via salary sacrifice.This HMRC bike to work scheme works on the basis that you are hiring the bike from your employer over that period of time. At the end of the initial salary sacrifice term, if you were to take full, legal ownership of the bike, you would be subject to Benefit in Kind tax.
HMRC states that Benefit in Kind tax charges should be based on Fair Market Value, and the valuation rates for bikes and equipment are set by HMRC. To comply with HMRC requirements, cycle to work providers charge a ‘transfer of ownership fee’ to scheme users, which negates the need to pay any Benefit in Kind tax. With some cycle schemes this can be as much as 10% of the value of the bike, which seriously erodes any cycle to work scheme cost savings you had made.
Below is the HMRC valuation table for calculating Fair Market Value:
How to avoid transfer of ownership fees
Here’s where it gets interesting. And where your choice of cycle to work provider is really important. Most legacy bike to work schemes will charge you a transfer of ownership fee of up to 10% at the end of your salary sacrifice period.
Gogeta doesn’t. We want you to save as much money as you can and so, after the salary sacrifice period is finished, we automatically enter customers into a cycle to work hire agreement period of 72 months. This means for that time you are technically still ‘hiring’ your bike, and therefore are not subject to Benefit in Kind charges. At the end of the 72 months hire period, HMRC states that we still need to charge you something to transfer legal ownership to you - we charge £1, the very minimum amount possible.
So you have a choice, You can choose Gogeta, and pay a transfer of ownership fee of £1 or another legacy provider and pay up to 10% of the value of your bike.
What does the cycle to work hire agreement actually mean?
Don’t worry, although with Gogeta you are entered into a 72 month cycle to work hire agreement once your salary sacrifice period is over, to all intents and purposes the bike is yours to keep. There is nothing you need to do, except to see out the hire term with no further charges or deposits. This offers the best benefit, with no high transfer of ownership fees.
How to join a cycle to work scheme
To use the cycle to work scheme, your employer needs to sign up. It’s free to join and offering the cycle to work benefit for staff doesn’t cost them a penny.