funkynick

I’m going to, no intention of selling it any time soon. But common courtesy would have been to let us know. Not that I would expect anything else from my employer – they informed us that 10% of my business unit were being made redundant in a round robin email which included a headline item about the enormous profit they had just made.

geoffj – I know but the same tax rules apply right? Their scheme will be affected in the same way.

Oh and for those people with something written into their agreements this is from the CycleScheme FAQs:

What happens at the end of the hire period?

At the end of the hire period employees may be given the opportunity to buy the bike for a full market value, however this cannot be an automatic entitlement. The cost of full market value cannot be stated before or during the hire period as this could be considered a benefit in kind and therefore not be eligible for tax benefits. Many employers opt for Cyclescheme to take ownership of the bikes at the end of the hire term, in which case any offer sale to the employee will come directly from Cyclescheme.

I run the scheme where I work and am just wondering if there is anything stating how much has to be paid each month? If I set the payments over 12 months to equal 75% of the value and then charged the other 25% as a final payment / transfer of ownership, would that not get round the problem and not leave the company out of pocket?

Yes. There’s an answer on the Evans site about this. The only issue is that the employee may not buy the bike at the end of the term, leaving the employer out of pocket, until they sell the bike.

I’ll be taking the extra 3 years. Not the end of the world for me. I spoke to cycle scheme on the phone and it made things a bit clearer. I also asked them what would happen to returned bikes. they said they would be given to charity or disposed of. i asked if cycle scheme would be selling any but they said no.

Handsomedog.. it’s the company’s bike, they can do with it what they like! You are only hiring it remember…

So that means they’ll pay for repairs?

It’s all a bit rubbish really as the company are making money from this and could now make more by charging fair value – that is they’ve recouped the cost through the monthly payments – and more as save Employer’s NI – then they can make even more cash by charging you 25%.

As people have mentioned it could be seen as a taxable benefit so as to prevent tax eveasion you just pay the tax on the FMV. So why isn’t this an option to most people? 2 guys at work are getting stung for this. OK stung is maybe not the right word it was all in the fine print etc etc, but when I did the cyclescheme thing a few years ago it was sold to me as work buys bike you pay that off that tax free NOT work buys bike, you hire it, bike never belongs to you, you have to buy it at the end. (altho no doubt it was in the contract I signed but not in the sales patter…missold possibly?)

I can’t really see the problem myself – as geoffj says you pay around a net 60% of sticker price over a year, then £70 to cyclescheme and 3 years later you own the bike, effectively saving a couple of hundred quid on a £1k bike.
For me, I’ve used my current commuter in various guises for about the last 7 years, so keeping the next one for 4 isn’t a problem. I can only assume that most of the whiners on here are those who have (ab)used the scheme in the past to get a new bike every year, and thus those people are now losing out.

cyclescheme and your employer or whoever is running the scheme for you has had to revise massively upwards the final valuations of the bikes,
as both the individuals using the scheme, and any company running these schemes was avoiding a large amount of tax by devaluing the assets worth at the end of the scheme. This is why so many serious cyclists with N+1 bikes invested in the scheme for N+2 bikes..
You don’t need to spend £1k on a bike to work, if you made a handsome profit in the past well done, if you ever for a moment thought the tax man wouldnt clamp down on this tax loophole wakey wakey..
The scheme may now be less popular for serious cyclists but may still support those that actually have a need of a cheap bike to commute on, as was originally intended. As for bike shops that have survived on poor service and high turnover through the scheme – a few may go to the wall.

you pay around a net 60% of sticker price over a year, then £70 to cyclescheme and 3 years later you own the bike

That is an appropriate option but employers don’t have to offer this. What seems sensible to me is the monthly payments should add up to 75% of the bike value (without VAT) then the employee pays 25% at the end to buy the bike from the company.

Ignore me, I’m adding a comment as a ‘bookmark’ so i can find this is my activity log at a later date.

headfirst – Member
Ignore me, I’m adding a comment as a ‘bookmark’ so i can find this is my activity log at a later

+1

Sorry – double post – crappy iphones

My employers are are bunch of con artists. I bought my bike priced at £800 on the BTW 18 months ago and have been paying £20.51 a fortnight. With the tax and NI savings it means I have paid approx £640 for the bike. I have just got my letter through saying I have 3 options under the scheme – a) Keep the bike and pay a final value of £168 + Vat of £29.40 (which will mean I have paid £837 for the bike (Oh – and the £198 comes straight off one pay)), b) pay 5% pf the value (£40) and give the bike back, or c) stop paying at the end of the scheme but the bike still belongs to them for another 5 years!
Moral here – don’t trust the local council on a salary sacrifice scheme – I could have bought the bike outright elsewhere for much less in the first place!

That is the scheme though. They aren’t trying to con you.

Sorry bikechain but I disagree – when I joined the scheme almost 18 months ago I was told I would pay approximately 5% final value at the end. The goalposts have been moved part way through. If I had known thish would be the outcome I wouldn’t have bothered as i could have bought the bike cheaper – and would probably have bought a different bike tbh as we were limited to what the coop had in.

Total cost of bike and accessories: £800.00
Net cost of bike and accessories, including finance and admin costs (if applicable): £800.00
Income tax saving over hire period: £160.00
NI saving over hire period: £88.00
Final cost of bike & accessories: £552.00
Total saving:** £248.00
Percentage saving over RRP: 31%

Add the 25% = £200 = £752 savings = £48

EDIT: If you are a higher rate tax payer and your firm can claim back the VAT then savings are worth it. If you’re not and they can’t then it’s not IMHO.

e.g.

Total cost of bike and accessories: £800.00
Net cost of bike and accessories, including finance and admin costs (if applicable): £680.85
Income tax saving over hire period: £272.34
NI saving over hire period: £6.81
Final cost of bike & accessories: £401.70
Total saving:** £398.30

Add the 25% = £200 = £601.70 savings = £198.30

Or, as I’m going, just keep it for 3 years and only pay 7%

Would be worth digging out your original paperwork and raise the issue at work if you feel you are being hard done by. Part of the problem with the scheme is the vagueness of the terminology and the interpretation of it. Not ideal.

Are you in Edinburgh by the way? User name hints at it.

lorettocourt – from your figures, it appears that you have only saved 20% (i.e. basic rate of tax) on the up-front cost of the bike. In most schemes, there is also a saving on VAT of another 17.5%. You should raise this with your employer (although it may be too late to do so now).

It would also be worth asking what they intend to do with the bike. If they allow it, it would be more attractive for you to pay the tax on the £168+vat (i.e. £40) as a benefit-in-kind and then retain the bike. Alternatively, take them up on the offer of option (c). This seems to be the least cost option and you still have a bike to ride.

I’ve had the clarification from my employer about the cyclescheme – as above, pay a 7% deposit and it’s mine after 4 years. You can still take out the scheme every year, very odd.

They haven’t got back to me about the cost of clothing as the wording isn’t clear.

Wondering, what would happen if you leave your current employer within the 4 year period?

Wondering, what would happen if you leave your current employer within the 4 year period?

Doesn’t matter according to Cyclescheme website.

8.0 Leaving your employment
If you leave your employment for any reason during the term of the Extended Use Agreement, the Agreement will remain in force until its expiry as long as you continue to meet the eligibility criteria as detailed in section 2.0 Eligibility, but you must inform Cyclescheme of any change in
circumstance.

Option c is defintely the way to go – tempting as it is to dismantle it and give them a box of bits back as it is, I would get shafted by the “have to take care of it clause” and I would have just ended up renting a bike. It just riles me that we were lied to at the start of the scheme – and I’m not the only one at my work that is aggrieved and is going to be taking this further. I would have just gone elsewhere and bought a bike interest free and had a much better choice of bike. Bikechain – definitely edinburgh as I know you are and have probably chatted to you at some point in time 🙂

Had to post again after work today – I’m on our bike users group and two of the lads from our postroom asked me for a word about cyclescheme – turns out both have just had their ‘final settlement’ figures through which are predictably well in excess of what they had been led to expect in the past. Both have got commuter bikes on the scheme although one went a little crazy and spent £800.

Anyhow both are hacked off about the changes but what I thought was interesting is that they had wound themselves up not just about the taxman but also the LBS they used who had upsold them both with promises of bigger relative savings. Their verdict was ‘should have got something for £100 from halfords’ which to be fair is probably true for a lot of commuters but it doesn’t bode well for some LBS’s. We can argue all we like on here about what the scheme really meant by FMV but these guys first experience of ‘grown up’ bike ownership has left them feeling like the shop has misled them.

We are always/have always been very careful to spell out the pros and cons of the scheme and it’s clear during those discussions that most folk just see the headline figure and reckon it’s something for (next to) nothing. Most are surprised when it’s pointed out the bike always belongs to the employer (or scheme administrator).

For sure, we expect to a big drop off in the number of £1,000 MTB hardtails we sell to committed cyclists, but then the scheme was never really aimed at them anyway.

Not really a case of just seeing the headline figure when the bike shop staff tell you “you will only pay 5% of the value at the end and the bike is yours” – good job I have a few LBS around here as I won’t be going back to that one now – I would rather cross the city to a differetn one.

Its a shame you let your greed at getting a cheap bike overlook the publicly available and well known information.

Why you accuse your employers of being con artists I don’t know. Do you think they have any advantage from this?

To be fair TJ, experience “as a user” was that only a small final payment was being requested. That was commonly reported on this forum and in other places. While we now know that this was an error, you can hardly blame folk for acting on it. As I understand it, higher rate taxpayers still stand to gain more out of the scheme. Again, a flawed delivery.

As for the OP, I still think that his employers have screwed up somewhere along the line as there is no way it should cost more than RRP.

TJ – yes the employers do gain from this because, as far as I am aware, they are not paying NI contributions on my salary sacrifice either thereby saving themselves money. The LBS has made a fortune – though may not in the future as people will stop using the scheme – I can think of 200 who will most likely not use it and possibly not use the bike shop again due to mis-information from the staff. As for the “greed” comment then that is just inflammatory – imagine wandering around your local supermarket and picking up something marked up at £1 and then on getting to the checkout you are charged £2 would you complain? I think so – if not then you have more money than sense bottom line is we were told one price and then charged another 18 months down the line. The information may be widely available publicly now but it is different information from that which was around 18 months ago.

ooft! well said Lorettocourt – sounds familiar that name…

Of course I was being inflammatory – just the counter to your ranting.

Its in no way comparable the supermarket situation and to blame your employers is ridiculous.

As onion says we are staggered by the lack of understanding people have over the scheme and have lost many ‘sales’ by pointing out the actual facts of the scheme.

It’s your money. You need to know exactly what you are spending and it seems almost impossible to get an actual real figure that people can understand.

We sell it as 12 months interest free borrowing of a bike and nothing more. We don’t even state savings as we have no way of knowing what anyone will save.

Take option c btw. Maybe see you out on a ride sometime?

I would definitely say ‘think twice’ about entering this scheme now. I was lucky because I only had to pay 5% at the end but my employer was stalling on it saying I might have to pay a ‘different’ amount. Might not be worth entering the scheme now especially if you’re intending to spend even more cash on upgrading parts like I did.

I’m not so bothered about the scheme going forwards – it’s a tax break and the government is in it’s rights to revoke or change, but I feel sorry for the guys caught retrospectively

The main problem with moving the goalposts of the scheme (or should I say ‘clarifying’ the scheme) is that it’s retrospectively applied. This means the people who entered into a contract which they thought they understood the cost, some even with letters clarifying amount, are in fact now looking at spending more.

I’m sure if someone had the balls (and money) to get some lawyers on the case and take it to court it would have legs.

They really should just make bikes VAT exempt at least then everyone will know where they stand, no need for admin companies like cyclescheme, confused punters, confused employers etc…. straight forward and easy to admin.

This is all down to an HMRC clarification of the meaning of “market value”. Frankly the “typically 5%” was ridiculous and always likely to be clamped down upon.

ITEPA 2003 s.244 is explained here:

http://www.hmrc.gov.uk/manuals/eimanual/EIM21664.htm

The effects of transferring the cycle to the employee are here:

http://www.hmrc.gov.uk/manuals/eimanual/EIM21667.htm
http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

Given that a lot of the people who got a £1k hardtail for general riding rather than commuting should never have benefited from the scheme in the first place (as the bike is not used mainly for “qualifying journeys”), I don’t think that group have much to complain about.

I’m sure if someone had the balls (and money) to get some lawyers on the case and take it to court it would have legs.

Do you even know what you’re talking about? I’m sure it wouldn’t even get past the First Tier Tribunal.

The legislation always said “market value”. 5% is clearly not market value.

It’s not retrospective as when you enter into the cycle to work scheme you are entering into a contract for the loan of a cycle; the tax and NI savings come from this loan contract and the scheme would not qualify if there was a guaranteed purchase at the end of the scheme.

Even the 25% figure seems low to me – a hard ridden, undermaintained commuter might be worth that but a year old bike that has been looked after should be worth a lot more.

IMO, the “plan c” of an extended loan is the best solution in the meantime, and for the scheme to continue to be worthwhile the loan payments should reflect 75% of the cost of the bike rather than 100% as normal.

It amazes me that so many people, many of who seem to be high band tax payers (and therefore one might assume reasonably literate), are unable to read the terms of the contract they signed with their employer and/or cyclescheme!

That said I do think some people are “mis-sold” the scheme either by their employer’s promotional material, cyclescheme (who lets remember are the people profiting from increased participation) or from some LBS’s and their marketing from cyclescheme. If they’ve been genuinely mis-sold then there’s an argument that any credit agreement formed could be cancelled – although that wouldn’t entitle you to keep the bike.

As I understand it the easiest thing for an employer to do is “nothing”. They can continue to allow you to use their bike indefinitely free of charge – that “benefit” is not taxable. Of course they can then ask for it back at any point – which will make someone who think they bought (not rented) a bike uneasy.

I find it odd that employers are happy to transfer their assets to cyclescheme at the end of the scheme free of charge (as far as I can see) and that this doesn’t create an accounting headache with disposal at what is apparently less than market value.

However I find it hard to feel any sympathy for a typical STW Cyclescheme participant who was probably milking the scheme for as much as they could whilst I, as a non-participant, am effectively subsidising the scheme (by paying my “full” tax on my earnings). Would I have done that same if I was in the position to do so? Probably. Would I be moaning about the change? No – I bother to read the “rules” to anything which is potentially changing my t&cs of employment or sacrificing salary.

I’ve just been re-reading my paperwork and it states quite clearly that it is a Hire Agreement for 36 months, it doesn’t mention anything about purchasing the bike at the end of the period.
I’m quite happy with that, the fact that some employers where giving the bikes away or only charging 5% as a Fair Market Value was always going to end in tears. 🙄

Do you even know what you’re talking about? I’m sure it wouldn’t even get past the First Tier Tribunal.

The legislation always said “market value”. 5% is clearly not market value.

No I’m not a lawyer so of course this is opinion – I’m not arguing about the legislation, I’m arguing about individuals who have letters from cyclescheme/employers whoever which state how much the monthly salary sacrifce will be and states what the final payment will be (which now has changed), which I’d say gives the individual the expectation of what they will pay.

I’ll have to dig my letter out, maybe I misread as suggested, but I’m sure it said one further monthly payment of the same amount to own the bike, not ‘FMV as defined by HRMC’ maybe it said ‘typical’ or ‘likely’ in there which means they are covered.

Anyways I doubt anyone is going to bother over a £70 so its a moot point.

im in the same situation

what gripes me is all the posters and email and promotion from my employer indicated 5% !

im going to have to hunt out the contract i signed and see what the exact wording was.

i do think that i was given inacurate information were by my employer and Edinburgh bike coop.

IMHO the bigger issue was the word “preffered supplier”
The council support a shop local campaign and then they narrow your choice to one bike shop ?