Cycle to Work scheme is 'sucking the lifeblood' from local bike shops, say retailers - here's how to save on tax, ethically

The UK's Cycle to Work scheme has received bad press, of late, with retailers claiming that the programme is "sucking the lifeblood" out of stores, while another said that providers would actively poach customers. 

However, the Cycle to Work scheme - which allows people to save tax on bikes via 'loaning' them from their employers - should be a positive incentive used to help get more people riding bikes. It allows perspective cyclists to save up to 42% on the cost of a full price bike, with payments automatically deducted from their salary. 

So, is it possible to utilise this very helpful scheme to get a bike, while also not hurting your local bike shop? Of course. 

The biggest issue that shop owners speak of is the high commissions from some of the biggest Cycle to Work schemes, like Cyclescheme, Cycle Solutions, and Halfords. These charge commission fees of up to 10%.

"You've got a middle man, who charges a lot of the money, essentially. It's painful, we don't want to turn down business, it does drive a lot of business for us," Gavin Hudson of Butternut Bikes told Cycling Weekly previously. 

"The Cycle to Work scheme is a fantastic saving, and we like that people have access to bikes they wouldn't otherwise afford. The real issue is the people choosing the scheme are different from the people paying [for] it."

The Cycle to Work program gives employees of enrolled companies tax deductions on bikes and equipment, which are paid through salaries, in a bid to get more people commuting by bike. Customers buy vouchers from Cycle to Work scheme providers, before redeeming them at retailers that sign up to the scheme. 

The answer to not hurting bike shops too much, while also accessing the savings from Cycle to Work, is therefore to use the right scheme. 

Not all schemes are created equally. There are two which offer much lower commissions - Gogeta or the Green Commute Initiative (GCI) - which ask for 3% and 5/6% respectively, and are thus favoured by local bike shops.

Joanna Flint, the marketing director of the GCI, explains: "We are the only provider which is set up as not-for-profit social enterprise and the only one with the sole purpose of getting more people cycling.  We are not part of a larger organisation which has other distractions and profit targets to meet; we are a pure cycle to work provider.

"We strongly support independent bike businesses believing they can provide the level of expertise and after-sales service our customers require. We pay our partners within 24 hours of voucher redemption to help them maintain a healthy cash flow."

Gogeta was founded by Barry Scott, who came from running an independent bike shop, and so knows of the "frustrations" with the scheme.

"Legacy schemes claim they are ‘free to use’ but instead charge big commissions to retailers, some of whom then pass on surcharges to customers and/or exclude deals like sale bikes," Claire Hawksley, Gogeta's head of communications, says. "Legacy schemes also then charge customer punitive ‘end of hire’ charges, which can run in to £100’s. 

"Gogeta thinks it’s only fair that everyone that uses the scheme covers the costs, so we charge employers a small platform fee and keep our retailer commissions as low as possible. This unlocks the best deals for cyclists, because retailers that work with us are not allowed to charge a surcharge and customers can also get access to sale prices. Our ‘end of hire’ fee is also just £1 - we have to charge something, this as an HMRC requirement."

Scott tells CW: "I feel I have credibility when we said we wanted Gogeta to work for retailers just as much as it works for the end user. If retailers dread accepting a cycle to work voucher from a legacy scheme, due to margin erosion, then you know somethings gone terribly wrong over the last 20 years the scheme has been in place. It's time to fix that."

Gogeta is also a B-Corp company, demonstrating that it meets social and environmental targets, adding to its ethical status.

Meanwhile, GCI does allow retailers to pass on the commission fee to the customer, which might mean a higher price for the customer, but does mean that the bike shop isn't operating at a loss when selling sale items.

How do customers/employees choose the right scheme?

The issue with simply saying "choose the right scheme" is that your company might not use this. Your HR department might use a 'legacy' provider, which charges high commission. Hawksley says that one of Gogeta's key messages to retailers is that they do have the power to influence the Cycle to Work scheme chosen.

"We’ve actually had a lot of success with employees getting their business to sign up to Gogeta, often on recommendation from a bike shop," she explains. "This is where lots of our business comes from. Retailers recommend us to customers, then customers either speak to their employer directly and get them signed up, or they complete a form on our website and ask us to contact them on their behalf. 

"We always make sure to refer the customer right back to the bike shop. We have seen this time and time again, it can and does work."

Whilst this can be difficult for those who work in the public sector, there's much more freedom for those in the private sector. Flint says: "Demand from employees will encourage employers to analyse the marketplace for a supplier."

GCI also offers a pay-as-you-go scheme, for those who want to to use it but can't through their employer. And, they have a net-salary deduction scheme (Everyone Cycle) for national minimum wage employees, who might find it difficult to access traditional Cycle to Work programmes, which is another complaint over the system at the moment.