I'm running the Cyclescheme at my work this time round and have been doing all the research prior to it starting in August and I see that in Dec. '09 HMRC reviewed the scheme and advised:
Sale of cycles after end of loan period
The cycles exemption relates solely to cycles that are not sold to the employee. However, an employer or a third party cycle provider may choose to offer the cycle for sale to the employee after the loan has ended. If the employee is able to buy the cycle for less than its market value, the difference will liable to tax and to employer’s Class 1A NIC liability.
There is currently no agreement about any simplified approach to valuing cycles and therefore each cycle that is sold in this way should be valued at the time of sale.
Cyclescheme themselves offer an option whereupon they will take ownership of the bike following the loan period and then sell to the employee stating:
Needless to say, it is not possible to predict the market value of a bike prior to the end of the hire period, but in our experience the bike’s value is typically a fraction of the original retail price due to the frequency of usage encountered when commuting to work throughout the year and any additional leisure usage.
Am I being cynical by thinking that 1/2 could be considered 'a fraction'?
Clearly this is going away from the 'nominal fee' there used to be at the end of the loan period which was usually somewhere in the region of 5-10% however could it not be the case where an employer could set up a valuation scheme at the end of the loan period? This could be based on market value minus parts and labour costs to allow for wear and tear replacements etc. So come the end of the loan period the employee is not paying £300+ (having already paid itro £580 in salary sacrifice) for a £1k bike?
Or am I getting concerned over nothing?
I've contacted our 'Key accounts advisor' to get 'a fraction' quantified.
This could see the number of people taking up the scheme at my work plummet.
