Some guys at work have been stuffed by the old misunderstanding over the hmrc values. Anyone fought their hr department and won over this issue?

Luckily my company have decided to wait another 3 years before exchanging, meaning the price will be down where it should be!
Wondering what the plan is with the new round, not sure whether to get another bike this time.

Just don’t transfer ownership of the bike over to the employee. Let them use it rent free for any period up to 7 years when the transfer value in the eyes of the HMRC is nil.

I understand all the ways to keep the value down but what do you do when hr ask for 250 when the dame bike last year was only 50. I’m also curious to know where the extra money is going as hmrc only want the tax from it.

Or persuade your HR department to just charge you the tax on the benefit of transfering for a lower price. If they do any other benefits that result in people getting P11Ds it should be easy enough for them.

The other route is to persuade HMRC that your bike isn’t worth what they say it is. If it’s had a particularly hard life, takes some photos and see if you can find some ads for similar bikes to back up your claim.

You won’t persuade your HR department to go against HMRC guidance, but as above, there are various ways to reduce the pain.

EDIT having seen your latest:

They’ll be pocketing the difference, I suspect. If you can persuade them to just charge you the tax, bear in mind that they’ll have to pay a bit of Employers NI on it too.

Also, bear in mind that they cannot force you to buy it. I doubt they want the bike, so the first thing to say is “no thanks”.

But that’s the rub, we’re not asking them to go against the guidance, just understand it properly

Point them at this?

http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

In particular the second half of the third para:

“If the employee pays less than market value, the difference will be taxable as employment income.”

That makes it pretty clear what the rule is, and what to do with a below market value price.

Cheers. It also looks like they calculated the new value with vat and then added vat to the final figure.

Or, perhaps I should just keep checking back with hr to see if they have any bargain bikes for sale!

Let the company have the bike then buy another cheaper?

Is it also fair to say that the information from HMRC is guidance?

onzadog do you work for notts city council? just got my letter this week!

‘fraid so. Give me a shout on LH266 if you like, I’m already working on this with a couple of people. Unless you’ve spoken directly with SC.

Don’t quite understand why you need to battle with your HR department, surely it is only the HMRC rules/guidelines which need to be satisfied.
I would have thought there are three basic options open after the initial 12 month hire period on say a £1000 cycle;
1, Do not transfer ownership to the employee and let them use the cycle rent free until the value is nil.

2, Transfer ownership to the employee for a nominal sum, say £1. The employee then owes the HMRC tax on £249 collected via a P11d (£50 or £100 depending on your tax band).

3, Transfer ownership to the employee for the recommended valuation of £250 and incur no further tax liability.

Obviously, option 3 is the least desirable choice!

that’s why we need to do battle with HR. They’re running the scheme and are only offering option 3. Hopefully, the battle will result in option 1 or 2 being offered.

put in a counter offer with a lower value. you should also be able to discount any repairs/ maintenence to it. this will include chain oil, tubes tyres etc.

This has reminded me I need to speak to HR as well. Had a letter through a couple of weeks ago.
For me, if the bike is 12-18mths old they will be charging me ~23% of RRP to exit scheme, regardless of condition/ mileage.

I was under the impression that HMRC guidelines were for the residual value to be treated as a taxable benefit, not charge to HR – assuming there’s a bit of employer discression here?

There is obviously no reason to take ownership of the bike after the first 12mths, but still slightly annoying if you end up leaving the company for some reason…

Your hire agreement is likely to state that you were responsible for maintenance. Repairs are another matter, but probably should have been covered by a warranty.

The issue with going back with a lower price is that as soon as you go below HMRC’s guideline FMV, you either have to pay tax, or convince HMRC that it’s not worth that amount, which may be hard:

If employers chose to use lower values, it would remain open to HMRC to challenge these and the employer or employee (as appropriate) would need to be able to provide evidence in support of these values i.e. to demonstrate that the employee could have realised no more than these sums from sale or disposal of the cycle. We would expect evidence of a lower value to include:

* a photograph of the cycle demonstrating its condition along with a description of any important aspects of its condition that are not evident from photographic evidence,
* broad details of the extent of usage of the cycle (which can vary considerably even between cycles that meet the “qualifying journeys” main use condition for exemption), and
* contemporaneous evidence of the amount for which that type of cycle in that sort of condition would have realised in a private sale and in a sale to a cycle retailer.

Assuming that the scheme previously asked for £50, and they’re now asking for £250, I’d ask them to charge you £72.70, and tax you on the difference. The extra £22.70 should exactly cover employer NI contributions on the benefit, and leave them exactly where they’d have been if they’d got away with selling to you for £50.

i just emailed them and said i didnt have the cash right now and queried why they had changed theri rules on final payment. they got back to me saying next month was fine to pay, still waiting to hear their justification for charging so much! theres at least 3 of us at my place who have been it by this so I’d be interested to hear if you have any luck…

There are 4 in my department alone who have been hit. I can’t help but wonder how many there are across the Council.

Evans has a handy article on its blog about this stuff

extending the hire agreement until the value became nil would probably be the best course to persue i reckon. ill see if they get back to me…

Slowrider, I take it you’re not one of the ones at risk then?

for redundancy? nope, thankfully not…yet

In that case, I’ve got two questions.

1. what do you do?

2. Got any jobs going spare?

ha! work for disabled childrens services and, subject to funding, quite possibly!

Working in Traffic and Safety, I’m not sure I’ve got immediately transferable skills!

Similar problem with my (public sector) employer – the HMRC guidance allows options for the employer to choose from – my HR department are going for the fair market value option as its ‘easiest’ in their view.

Not to further depress people but I’ve had a similar battle to the OP on behalf of some of our BUG and HR have simply refused to play ball – they are not required to choose the option thats cheapest for the employee and as they resent administering the scheme to start with (we had to fight to get on it) they seem to be taking pleasure in hitting users as hard as possible and are refusing to consider longer hire periods or paying tax on the benefit in kind. I don’t think we will have many takers for the next round of the scheme based on feedback from the BUG as many are now suspicious that HMRC will simply change the policy again.

Tell everyone to give it back to the company MrSynthpop.

I’d sort of guess that it may cause more headaches for them trying to get rid of a load of 2nd hand bikes and they may have a rethink

Is it an optnio to tell the company to collect the bikes, and then independently, offer to collect all bikes from the employees returning them, and to buy them privately from the company, for a fee less than you sold back to the company for?

Ie they say mrp is £250.

you say fine – collect it.

Company have heap of bikes to sell.

You offer them £100 for each bike collected?

Only if the company could persuade HMRC that that was a fair market value for the service you’re offering. Otherwise, they’re still selling stuff to an employee for less than FMV, which is a taxable benefit.

In any event, you’ll probably find that your hire agreement requires you to return the bike.

Onzadog, you got anywhere? ive still had no response…

Hi
I also work in Local Government and just had my final letter.
My employer considered the 3 seperate options. They have opted for direct transfer of ownership with no fee then declaring as benfit on which I pay tax -next year I think.
(I bought a £1000 Boardman road bike so would have had to pay ~£250)
Cheers
Steve

many are now suspicious that HMRC will simply change the policy again.

HMRC didn’t change the policy, they revised the guidelines.

fatgit – that’s a good deal, as it costs them real money in employers NI.

HMRC didn’t change the policy, they revised the guidelines.

Fair point although I do feel that given HMRC adopted a postion of benign ignorance over a decade or so of the scheme its a little bit more than simply providing more detailed guidance and does reflect a shift in enforcement policy as regards employee benefits in leiu of pay, HMRC dressing it up as a mere clarification belies the number of people (and by implication companies) who have used/absued the system to date – its unrealistic to think that the widespread abuse of C2W could have persisted if HMRC had not opted to ignore the issue until recently and I suspect its tied to last summers ECJ rulings on the handling of VAT recovery under such schemes as much as to concerns about C2W.

Arrgh, I look at singletrack to get away from this junk, going to look at bicycles now.

Ignore

FAO anyone working for Nottingham city council who has had their letter asking for repayment. I got an email this week saying to hold off on paying it back because they are looking in to extending the lease to 4 years. If you want me to forward it to you you can email me at work, there are two Tom Smith’s in the ncc directory, I’m the one working in CHS

Has anyone had any luck with this advice?

http://www.bikebiz.com/news/read/cyclescheme-brings-hmrc-value-clarification-to-bike-dealers

http://emails.cyclescheme.co.uk/files/hmrc/flyer.pdf

Tom, are you sure you’re in the phone book? Culdn’t see you there.