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It's funny really, Id wager most of you have bought expensive mountain bikes under the scheme rather than an actual commuting bike and now you are moaning its not fair or worth doing as you may have to pay a little more at the end. Seems to me you are milking the scheme which could well have had an effect on them changing the rules?
As for higher tax rate payers being able to abuse the scheme too, it shouldn't be open to them.
fwiw I used the scheme 2-3 years ago to buy a folding bike to actually commute to work on and have not paid a final payment to own the bike. I dont mind the company keeping it as I didnt use the scheme to part finance my nice mountain bike/racer.
Id wager most of you have bought expensive mountain bikes under the scheme
Spesh Tricross Singlecross that I use every day to commute to work on actually...
As for higher tax rate payers being able to abuse the scheme too, it shouldn't be open to them.
How would you legislate such?
As for higher tax rate payers being able to abuse the scheme too, it shouldn't be open to them
Why?
I wonder how the new guidance will affect the bike shops. I'd wager the increase in business has been significantly greater than the value of the bikes sold through folk getting into cycling generally.
And sure some of the folk on here will have bought bikes other than to commute on, but one of the bigger benefits has got to be more folk on bikes on general.
Maxray, as a higher rate tax payer, why shouldn't it be open to me?
For what it's worth, I did buy a £2k bike on the scheme, which has seen approximately 120 miles a week commuting for the last 7 months and approximately 30 miles riding it for pleasure in that whole 7 months as I have a top end road bike for that.
So, where in your opinion did I go wrong, and why shouldn't I have used the scheme?
I suspect the the vast majority of bikes bought on the scheme are in the £250-350 bracket so the new valuations will have little affect for most
it'll only be 'the end of the scheme' for those that were probably cyclists to start with & maxed out the available amount they could spend
The issue is that high rate taxpayers benefit more than the lower rate, when it should probably be the other way round. Closing it to the higher rate tax payers isn't really the best way to solve that one.
I can feel the headache coming already....
Matthew
Right your company will have 3 options (this is down to your company, not the provider such as Halfords/Cyclescheme, we will advise)
1 - At the end of the hire period charge you the 25%
2 - Extend the hire period to say 4 years - You still pay for 12 months but the bike will remain property of your company until the 4th year.The value of the bike at this time will be minimal so the company could write it off or you could pay the value of the bike at that time.
3 - Charge you part (say £50) of the 25% (lets work on £1000 here) so 25% = £250 - £50 = £200 = The figure you'll pay tax on via your P11D
It is not "the death of the C2W scheme" or anything like that at all. Infact all the companies we have been briefing about it have welcomed it and taken to it positively as they now have some firm guidelines to operate from instead of the previous ambiguous ones.
The only real area that i don't have an answer to at the moment is whether it is going to be applied retrospectively - So if you are still in your hire agreement term and haven't made any final payment then this *may* apply to you (myself included)
Thanks for clearing it up a bit, Houns.
Id wager most of you have bought expensive mountain bikes under the scheme rather than an actual commuting bike
I bought a cargo bike, that I use for riding to work every day. (Well, the days when I am at work.)
Pretty much all my colleagues who have bought a bike under the scheme have bought relatively modest bikes, which they use to get to work.
The bulk of the people who made use of the scheme will not be MTBers using it to get a bike on the cheap, or cheating the system to buy forks or posh wheels or whatever.
I thought the idea was to encourage those who might not normally cycle to work to do so. If there is no saving on the cost of a bike regardless of whether its a £200 bike or £1000, people won't be inclined to do it.
Would the tax office not save more by doing less farting around with the guidelines than what they lose on any taxable benefit a few cyclists might gain from the scheme?!?
If there is no saving on the cost of a bike regardless of whether its a £200 bike or £1000, people won't be inclined to do it.
You still save money on the scheme.
You don't have to pay 25% of the bike's value at the end, but anything you pay less than that is classes as a taxable benefit.
If the bike was £400 new, the buy back 'value' is £100. But, you don't have to pay that. If you only pay £20, you are getting an £80 'benefit' from your employer. So you have to pay the income tax that you would pay on £80 of earnings - £16?
If the bike was £400 new, the buy back 'value' is £100. But, you don't have to pay that.
Will you tell my employers that please? I'll have to pay whatever they decide to charge. I suspect that more than a few will charge 25% as that's what HMRC recommend.
I understand the point you're making, I just think the view that you waon't have to pay any more is a little "rose-tinted"
What mike said....Some employees could end up paying [i]less[/i] under the new regs than they would previously
Surely it cannot be applied retrospectively? Bit of a kick in the teeth if so.
It is not "the death of the C2W scheme" or anything like that at all. Infact all the companies we have been briefing about it have welcomed it and taken to it positively as they now have some firm guidelines to operate from instead of the previous ambiguous ones.
Mmmmm - so now, firms can stipulate that they are going to charge 25% of the purchase cost after 1 year to recoup some of the admin charges.
All well and good for the firm - a bit less attractive to the person buying the bike. Seems like a pretty good get out clause for less than keen firms to me.
Surely it cannot be applied retrospectively? Bit of a kick in the teeth if so.
It's a change in guidance, not rules. It can be applied to any active agreements. I'm not sure it could be applied to ones that have finished - except for in the current tax year perhaps.
firms can stipulate that they are going to charge 25% of the purchase cost after 1 year
AKAIK, it it against the regs to agree a 'purchase price' until the end of the hire agreement, the emphasis being on the word hire - it is not a purchase scheme. At the end of a 12 month hire you have the option to purchase the bike or give it back; your employer will suggest a purchase price, you decide..
Will you tell my employers that please? I'll have to pay whatever they decide to charge.
Well, it is their bike...
Hehe, will give my employer more reason to extract even more £££ from us. They already pocket the VAT on the scheme rather than pass it on to the employees.
Max I bought a road bike as I use the road to get to work 🙂
Presumably the LBS you bought it from will value it? In which case your LBS should be able to value it accordingly. I guess it is better for those of us with 18 month periods.
AKAIK, it it against the regs to agree a 'purchase price' until the end of the hire agreement, the emphasis being on the word hire - it is not a purchase scheme. At the end of a 12 month hire you have the option to purchase the bike or give it back; your employer will suggest a purchase price, you decide..
Well yes, but if there is Government issued guidance on what to charge, why would the business decide otherwise - especially with the tax implications.
geoffj - agreed, what I meant is they aren't obliged to agree the fig up front. This has implications for people (like me) on a current scheme. Up till last week I was expecting to be offered to buy my bike for around £25 in Nov, now I expect I will be offered it for around £175. The Company Policy says 'fair market value at the end of the hire period'
As an NHS worker, the benefits fromt he scheme are even less, regardless of higher tax payments (not sure why this is - something to do with NOT getting tax off the original purchase price).
I worked it out, and before this "25% malarkey" I figures, on a 1k bike, I would end up paying [i]about[/i] £800 ish, plus the 'final payment'.
I relised it wpouldn't really be worth it seeing as I'd pay full RRP on whatever I got, whereas 'last years' bike could be had for roughly 30% off...
DrP
So if the bike was valued by the supplying retailer, it would make sense not to look after you. There's a great ethos to encourage!
A lot of fannying around and seems like a lot of abuse of the scheme. Would be easier just to make firms offer a 200 quid interest free loan or a lower rate of VAT on the first 200 quid of any bike purchase.
I'm choosing 200 just because it's the price of a perfectly good hybrid that anyone could commute on and if people want something more flashy, they should pay for it themselves.
Ah well, at least I've had a couple of nice bikes out of it. Was planning a third, but you can't have it all I suppose
As an NHS worker, the benefits fromt he scheme are even less, regardless of higher tax payments (not sure why this is - something to do with NOT getting tax off the original purchase price).
I worked it out, and before this "25% malarkey" I figures, on a 1k bike, I would end up paying about £800 ish, plus the 'final payment'.
Same here as a University employee my saving is nearer 20% than the advertise 40-50%. I've got a couple of months left to run on a scheme and hope they sort out this apparent confusion before then as otherwise I'm worried I'll end up paying more than £1000 for the bike overall!
Ah well, at least I've had a couple of nice bikes out of it. Was planning a third, but you can't have it all I suppose
🙄
It's folk like you.....
It's folk like you.....
Who ride to work every day?
Who don't even own a car?
Who have ridden c2w bikes for over 50% of use on the commute?
Look, I commute about 300 miles a month. There's no way I'm doing that on a £200 lump. Ironically, I'm currently doing it on neither of my c2w bikes, which is why I need a third one 😉
I have tried explaining this stuff before but I will try once more. I have not been involved in any schemes but I have the misfortune of understanding tax law. If your employer provides you with a benefit in kind - say a car for private use, pays your kid's school fees etc - you are taxed based sometimes on set rates (cars) or otherwise at the cost to the employer of providing the benefit. That is the background.
So when your employer allows you to buy the bike for a certain price at the end of the lease they need to work out whether you have been received a benefit. With the new guidance, employers now know precisely how much the benefit is and will report it according. The benefit being the difference between what you pay and the value determined by the guidance note. There is certainly no [u]obligation[/u] for the employer to charge this amount and it would be a pretty stupid and short sighted employer who went back on what was no doubt said when the employer set up the scheme.
As far as the retrospective nature of the guidance, the point of charge is the time the bike is transferred so if the bike has not been transferred yet I would envisage the employer would apply the guidance from now on to all transfers. As far as the past is concerned, this is where my knowledge is not as good but in general terms if the value used to transfer is the bike was transferred is challenged by HMRC it will generally be the employer's problem for failing to report the right amount of benefit and I don't think they have any come back to the employee. This will likewise be the case if companies choose to ignore the valuation table in the future and can't justify their valuations.
Of course as Houns has said the simple solution is to continue to hire the bike to the employee for no cost for a further period until the valuation is equivalent indicated but not agreed final purchase price. Alternatively if you want a bike every year, you buy at the end of one year and take the hit and accept if you want multiple bikes you only get 75% of their cost tax free, subject to VAT which will depend on how the employer treats the initial purchase. (20% will apply to transfers that take place after that rate comes into effect.)
Surely it cannot be applied retrospectively? Bit of a kick in the teeth if so.
I don't think it can. You've signed a contract detailing terms and conditions. This cannot be changed without your permission.
I don't think it can. You've signed a contract detailing terms and conditions. This cannot be changed without your permission.
The Ts & Cs haven't changed - the guidance has. There was little guidance about what FVM was - there is now.
So it can be applied to current agreements IMHO.
If it's just guidance, then it can be ignored no?
If it's just guidance, then it can be ignored no?
not by you
backhander - MemberI don't think it can. You've signed a contract detailing terms and conditions. This cannot be changed without your permission.
As was mentioned earlier in the thread, your contract said [b][i]nothing[/i][/b] about the size final value payment, just that there would (may) be one - indeed by law the contract must NOT indicate the final value payment, otherwise it's an HP scheme and thus not eligible for tax relief
It will hit the bike shops very hard as a lot of people will not now bother with it.
nbt - correct.
The overall benefit is still there but over a longer period if employers extend contracts. It is still more of a tax incentive than most businesses get so if bike shops fail to take advantage of it I think they should probably be looking at themselves.
bye bye CTW.
No employer will want to be stuck with the bikes.
As suggested before
[*]£1000 bike leased from the company for 12 months [/*]
[*]it's then transferred in to your name for £0 - £[i]whatever they want[/i][/*]
[*]If it's less than 25% (£250) then you'll pay Tax and NI on the difference[/*]
[*]If the company is seeing the benefit of the scheme then it's probably in their interests to charge you £0 or £1 and let you square things up with the tax man for the benefit you've received from your lovely, friendly employer.[/*]
[*]They're not stuck with a bike no one wants,[/*] [*]the tax man gets what he's due[/*] [*]you'll still pay <£100 as a final payment, which in the big scheme of things isn't that much of a hardship.[/*]
You save £££ on a bike
You're fitter and off work less
You pay your tax
You think more of your employer as they've been nice to you
The bike shops continue to sell more bikes
The economy booms and we cycle our way out of recession 😀
Oh, and even the tree huggers will be happy.
See! Everyone's still a winner. You'll just end up a few tens of pounds more out of pocket.
Right, I have to go and have meetings at work! I'm administering the scheme at the mo and have 40+ people wanting bikes already with another 15 days to go for ordering the vouchers. There could be a few very unhappy people if things don't turn out well! (not to mention those who's existing loan period ends in 5 days time! 😮
cue a tax guru to come and rubbish my approach 😀
The trouble is, whilst companies could be nice and:
a) still charge a trivial amount at the end of the scheme and let you pay tax on the "benefit"
b) extend the loan period so the official valuation is less
both of those options result in more hassle for the company. Given the way these things seem to be administered I can see a lot (most?) companies taking the low hassle approach and charging 25% at the end of the scheme.
ararcer has it right IMO. As I said in an earlier post, most employers won't want the added hassle of advising HMRC of sale price, adding to P11D etc when they can just go with the guide figs. Not many HR decision makers ride bikes and therefore probably think it's still a good deal (generalistion of course, but I think most likley scenario)
But would they potentially want to be left with the bikes because people did not want to pay?