MegaSack DRAW - This year's winner is user - rgwb
We will be in touch
NHS trust, we use cycle solutions who've done me a quote for £900 bike which is OK, had estimate of £63 final payment which extends term over 3 years but nothing else to pay, or additional £250 to finish the 12 month payments and keep the bike. Seems strange to extend the lease terms, can anyone shed any light why they are doing this?
It's to do with how HMRC regard the value of the bike at the point that ownership transfers.
Employers used to just transfer ownership for free (or a small admin fee) at the end of the 12 months, but you can't really argue that a year-old bike is worth nothing. That then has tax implications (for both the employer and employee) so the easiest solution is to sell at "fair market value" (20-25% or so), or else to pay a one-off amount to go on hiring the bike for 3 years.
[s]Much like a computer and other business things, you [b]can[/b] say that a 3-year-old bike is worth nothing, so they can then transfer it to you at the end without it being a tax dodge.[/s]
Actually, it still has a residual value until 4-5 years old -
So the £63 will include some amount to reflect what the bike is deemed to be worth at 3 years old.
Ah, so it's worth less after 3 years, sort of makes sense. Thanks.
Takes 6 years for a £500+ bike to become negligible in value - see table in this doc