Does anyone know if this is due to scrapped?
HMRC reviewed it in Dec 2009
if not scrapped it will become less beneficial is the market value element issues gets tightened up
How are they "tightening" up precisely?
Tour de france commentators said it was due to be scrapped soon, they didn't say when however, just went off on a rant about Napoleon not actually being a midget 🙂
How are they "tightening" up precisely?
by checking change of title of goods is at market rate - cyclescheme has started sending out condition forms to be completed by the supplying shop to get a value.
if title changes for less than the market value, then that is taxable..
i think the schemes were set up without much input from hmrc, where the assumption was that the hire money would equal the cost of the bike and at the end you would just transfer title for a nominal fee...
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.
cyclescheme has started sending out condition forms to be completed by the supplying shop to get a value.
Interesting. Do you have any further details on this?
Interesting. Do you have any further details on this?
some guys in local bike group have got them as they are coming to the end of their hire periods..
not yet seen evidence of the actual values being placed upon them though...
for example a brompton new is £700 basic, probably still worth £350 after 12 months.... and def not a pound or 5% etc
Presumably the amounts already paid as part of the scheme must be factored into he price payable.
Otherwise, there is a danger that some bikes will cost as much as or possibly more via the scheme than they would paying with one's (already taxed) income.
Looks like it's on its way out. And I own six bikes, none of which have relied on the scheme....
cyclescheme has changed the wording on the faq..it changed sometime ago, but bearing in mind their original contract used to state that unless the company wanted to do it they would title for a £1...
Step 6. At the end of the hire period the owner of the bike may choose to offer the employee ownership of the bike for a full market value.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.
Presumably the amounts already paid as part of the scheme must be factored into he price payable.
no. as the money you sacrifice is to hire.. and hire only.. hire cost would not effect value - apart from general wear and tear etc..
otherwise it would be like renting a house for 5 years then buying the house at market value minus 5 years rent.
yes the scheme has flaws that if tightened up on will kill it off
Otherwise, there is a danger that some bikes will cost as much as or possibly more via the scheme than they would paying with one's (already taxed) income.
Yep pretty much,
You are hiring a bike really - not buying one. Technically.
B%()&^(*^&!!! If I'd have know I wouldn't have bothered. Wasn't detailed when I took my latest agreement out in May.
The simple solutions is for the employer to simply extend the term of the hire but restore the salary given, after a few more years ownership the value will be further eroded making the market value even lower. Even if this does not happen, the best solution is for the employee to still purchase for a de minimis sum and be taxed as a benefit in kind. If the value is 25%, you will still net have received tax relief on 75% of the cost of the bike.
My aggremment says that i will be charged and end term charge of £30.7
Was told i would be able to keep the bike,they've never had one back yet.
Surely this would stand as this was agrrewede before i took the bike.
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Which is no longer standard 😥
The simple solutions is for the employer to simply extend the term of the hire but restore the salary given, after a few more years ownership the value will be further eroded making the market value even lower. Even if this does not happen, the best solution is for the employee to still purchase for a de minimis sum and be taxed as a benefit in kind. If the value is 25%, you will still net have received tax relief on 75% of the cost of the bike.
yes our company has sacrifice for 12months, hire for 18, some have hire for 36months!
Im confused 😕
I got a new bike in June and cant make head nor tail of that stuff. Something to do with people who are exempt etc. 😕
rootes1 - Memberotherwise it would be like renting a house for 5 years then buying the house at market value minus 5 years rent.
But you wouldn't rent a house at the full value divided into 12 or 18 months.
rootes1 - Memberfor example a brompton new is £700 basic, probably still worth £350 after 12 months.... and def not a pound or 5% etc
If this happened to me, I'd refuse to pay £350 for a bike that I'd already paid £700 in 'hire' costs. The employer could have 'their' bike back - most employers aren't going to be able to deal with used bikes so what would they do with them? Ship them back to the shop for resale?
Elmo, does it say what that is for?
MartinGT, which aspect is confusing you?
IdleJon - Rootes is right, but you are right as well about employers not wanting the bike back so the best solution is to either extend the loan or take the hit as a benefit in kind then you only pay the tax on the market value which is still a big saving. Admin costs will however effect this.
So the idea then is that someone on the lower tax band would pay, using the Evans calculator, £587 for a £1000 bike then as it's likely to be worth £500 after 1 year they'd pay that too? Good way for the company to make some cash from it's employees as the cost to them would be £851.
The only thing Evans say about ownership after 12 months is:
At the end of the lease period, the employer may transfer title of the goods to the employee
no, the cost to the company would be -£500 - employee has £1087 deducted from their pay, company slings evans £587 of that.
don't see it happening myself
My employer didn't ask for anything at the end of the 12 months and it's never been mentioned at all.
£587? Surely the company pays £1000 less the VAT?
My girlfriend's company operate an extended hire period; the loan is paid back over a 12 month period, but the lease period runs for 36 months. It should mean the assessment of "fair market value" will be significantly lower than that of a 12 month lease agreement. Hopefully.
Also see [url= http://tinyurl.com/2upagxv ]This[/url]
I will try to explain. I will ignore VAT and other incidentals.
Company buys a bike from a bike shop it pays £600.
(Running total, Company down 600, Bike shop up 600, employee 0)
Employee sacrifics salary equal to £50 per month for 12 months to company. Employee would have paid say 20% tax on that so the cost is only 80% of 50, so 40 a month.
x 12, running total, company flat -600+50x12=0,bike shop 600 up, employee down 480, taxman down 120, so it adds up to zero in total)
Company gives bike to employee, mkt value is 200, so employee has to pay tax on benefit in kind of £40 (i.e. 200 @ 20%)
Final total, company flat, bike shop up 600, employee down 480+40=520, tax man down 120-40=80
Is that clearer?
Its a "collection and disposal fee"
But they don't get it.
Sort of admin i guess!
Condition has to come into it somewhere ...
When my 'last years' C2W ended my employer asked how many miles the bike had done, and what condition it was in ... so I answered 3,000 miles and 'poor'. This sounds like an essential factor in calculating the Fair Market Value!?
Kinda worried now though, as 'this years' C2W bike was collected a couple of weeks ago 🙁
At the end i have read
I I may be given the opportunity to purchase the bicycle for an amount not excedding £35 pounds.
Which is, on second glance the final payment.
yer to make sure our company does not get bikes back, they added a clause to say if you did not wish to take title at market value with min 10% then you will have to pay 10% 'admin' fee to end the hire period.....
obviously market value reflects 'condition'
This is all bad news for the scheme, but i think the scheme intent was right, but it has been so abused by people....
Bugger it. I was lining up to try and get my first road bike on the scheme before the VAT rises (my employer doesn't pass on VAT for whatever reason)
I bought a £1k mountain bike about 2yrs ago and ended up paying 13x£70.98 so I really didn't do very well out of it.
Second hand it is. ffs.
The market value of most of the cyclescheme bikes i see is around zero, as they are the most neglected bikes i have seen in my life...
My employer didn't ask for anything at the end of the 12 months and it's never been mentioned at all.
Me too, hope it doesn't come back to haunt me one day.
I bought a £1k mountain bike about 2yrs ago and ended up paying 13x£70.98 so I really didn't do very well out of it.
That sounds like £70.98 before tax x 12 plus 1 more to buy - if so that's OK.
I'd imagine for those that have used the scheme as it was meant to be used - i.e. ridden it to work more days than not in all weathers, a change in final value calculation will have little relevance especially if the loan is extended to 36months as the bike will be pretty much ****ed.
For those that used the scheme to buy themselves a tax free shiny weekend toy that never went anywhere near a salty commuting road and probably like most "mountain biker's" bikes sat in the shed for 360 days of the year - Ha Ha! Those that had a little arrangement with the bike shop to top it up - Ha Ha Ha!
If it comes to anything it could be the best thing that could have happened to the scheme if it encourages it only to be used by real commuters that are committed to using it a lot as a workhorse not a cherished bit of weekend bling. It will shrink in size and not be such a target for mindless government saving.
Very odd that elmo as its not legal to state the final amount on the paper work as it changes the form of agreement.
[i]That sounds like £70.98 before tax x 12 plus 1 more to buy - if so that's OK[/i]
Yep final payment was a full months payment, it means a £1k bike cost me £922.74, not quite the big discount I was expecting more like an interest free loan
The scheme should be changed so it doesn't provide a greater benefit to higher tax payers.
DT78 but you pay that 922.74 out of pre-tax income which if you bought it privately you would have paid tax on so your saving was 77.26 plus your combined marginal NI and tax rate times 922.74.
Really? Hmmmm maybe I did get a good deal then, I thought it was £70 a month deduction after tax. Maybe I will try to get that roadie on the scheme this year then.
firestarter - Member
Very odd that elmo as its not legal to state the final amount on the paper work as it changes the form of agreement
Well that would equate to about 10%,which is perhaps what they value these bikes at after "18 months of commute".
Surel they must have some figure in mind to calculate losses,values and the like from the outset. Perhaps 10% is that minimum figure. If they don't take it back they dont pay to re-cycle it either.
Heres hoping anyway!
Convert, couldn't agree less. Making the scheme a bit more expensive isn't likely to encourage people who aren't regular cyclists. People who are into bikes will still use it, but the more you remove the bargain factor the less likely you are to tempt new cyclists, which is a shame.
Oh and Ha Ha Ha, just about to sort my 3rd C2W. Cheers for all your lovely tax money 😀
I just paid my fee for taking on title and it was £37. The value of the bike and extras was about £630. I don't reckon that's too bad.
My wife is just about to get a new bike (that she will use to bike to work on) - is it still worth it? Also, what happens if she goes on maternity leave during the hire period?
I’ve always understood it as the bike being a company owned asset during the hire period, obviously they claim the VAT back on the initial purchase, and then the employees “rental” payments effectively cover the cost of purchasing the bike, the final fee (in my case it was £50 on a £500 bike so 10% of original retail value) is really a fee to cover the transfer of ownership (say admin and/or a nominal sum so it qualifies as a sale) effectively the company breaks even on the transaction, doesn’t have to worry about storage of a physical “asset” which they only have to hold legal ownership of for ~ 12 months before passing it on for a minor fee….
If HMRC are going to force companies to sell the bike at “Current market value” at the end of the Hire period where is the incentive for anyone to participate?
Casual commuters looking for a £350 town bike will have to pay out £297 (Ex VAT, and obviously with some tax relief) over 12 months and then the company will have to sell it to them for “market value” lets say they foolishly look after it that is estimated at ~£150 the poor bugger entering the scheme is going to wind up spending ~ £450 to own a £350 bike, this has to be bollocks, the same problem still exists for the higher value “serious” cyclist using the scheme looking at ~£1K bikes…
Surely the company has the right to value an asset (already paid for through rental revenues) at whatever cost they want? Even if it means they don’t turn a significant profit from the whole scheme…
Otherwise the HMRC are essentially telling companies to rip off their own employees, and employers could well wind up stuck with a load of bikes they have no storage space or useful business need for, that their employees will not buy from them at the asking price…
The scheme as it currently operates works quite well, why piss about with it? You’ll discourage all cyclists from using it surely this is HMRC simply knackering a perfectly good scheme that encourages both exercise and trade…
Or have I miss-understood… Basically am I better off buying my next commuting bike using my already taxed take home pay?
There will not [u]have [/u]to sell it for market value, however if they sell it for less than market value the difference between the amount paid and the value will be treated as taxable income - see my example on the previous page.
I see, so even once you’ve bought it (and assuming if your employer is reasonable about the sale price to you), you still potentially wind up liable for a chunk of tax based on an estimated value, so you are really at the mercy of the person valuing the bike, the better you look after it, the more it will cost you to buy in theory, where as if you treat it like shite and thus de-value it (and remember it’s not actually your property) it may cost you less to own… 🙄
Seems like it could be less bother and possibly cheaper to just take a 0% credit deal form one of the various shops offering it…
It doesn't matter how you argue it, if they charge more than around 10% for the final value fee it simply won't be worth doing. You are always limited in the bikes you can get, but the savings make it worthwhile. Eg I can't get a boardman or any bikes from Evans but I'd prefer to and will do if it was my own money not cyclescheme.
I blame the Torries!
OK, so one for the accountants here:
If the company depreciates the value of the bike in 1 year to £0. Puts this value as a cost on its P&L statement and offsets it aginst its profit, can it then revalue the asset and record a higher book price, which it could then use as the base for selling to the employee?
I guess depreciatiing an asset in 1 year is not very common, but if you used the same analogy for some plant or machinery, which was depreciated over 5 years and then revalued and then sold, it all gets a bit muddy?
Whaddya think?
Just out of interest how does it work with accessories? Is it the same, for instance you buy a £600 bike and then spend £400 on a mudguards, rack new helmet, waterproof etc...
Is it final value of the total or just final value of the bike (at £600)
If they write the bike off in their P&L then take money for it they will need to reflect the "gain" in their accounts.
There are loads of ways to interpret the scheme, which makes it very hard to give specific advice. In the case of a £1000 bike you are still saving the VAT, and the income tax on a large percentage of the purchase. If you need to make a one-off payment to the tax man to take ownership of your bike it is unlikely to be more than £100 and it will probably come out of your tax code over the course of a year which you will hardly notice.
Luckily there is a concept of materiality in accountancy, which basically reflects the fact that there is no point pissing about worrying about small amounts of money. As long as your accountant can justify the treatment of the transaction it is unlikely to be flagged as an issue in an audit.
There will not have to sell it for market value, however if they sell it for less than market value the difference between the amount paid and the value will be treated as taxable income - see my example on the previous page.
true and as you say paying tax on the benefit will not be that much...
but then they would still need to know the market value to work out the value of the taxable benefit
Just out of interest how does it work with accessories? Is it the same, for instance you buy a £600 bike and then spend £400 on a mudguards, rack new helmet, waterproof etc...Is it final value of the total or just final value of the bike (at £600)
is is worked out against the value of your original voucher value - so if that included accessories then they would be taken into account - might be useful as these will depreciate quicker..
I think you could solve a lot of the abuse of the scheme by simply limiting the max value to £500. High enough that non-cyclists could get a decent commuter bike, low enough so existing cyclists won't use it to get a discount on their second/third/fourth bike
I run about 6 schemes at work, I shall be valuing the bikes at the end of the term. They will be worth bugger all. The valuation is up to me, I do the accounts, I value the assets. My auditors are not bothered about such small value assets.
As someone who has implemented the scheme in two organisations, the guidance from HMRC has remained virtually unchanged since the inception of the scheme. To specify what the value is for transfer of ownership at the start of the hire would mean that the scheme would fall foul of the rules on hire purchase. The most common practice in respect of market value is usually to take 5% of the original voucher value plus VAT. This would include safety equipment bought on the scheme.
If you want to get more than £1,000, ask if your employer has a consumer credit licence. This dictates whether they can go above the £1,000 limit.
Will the scheme be abolished? Who knows? If they abolish it in the future and you are already in the scheme, I would expect HMRC to come up with transitional arrangements to ensure that you suffer no detriment.
Worry less people. The scheme is there and there is no good reason other than a bit of forum worrying to stop you from doing it. 😀
Sanny (real job - HR and Finance Director)
Depends what you mean by “abuse”, I know we have a couple of people on our scheme who have used the full £1K on offer to acquire a Boardman pro each which they actually use to ride to work, not every day and the bikes are getting used at weekends for “leisure” purposes…
I on the other hand, got a £500 Carrera road bike specifically to commute on and that is all it’s ever been used for…
Are my colleagues abusers of the scheme or just making reasonable non-commuting use of their new bikes?
I think the real abusers are the people posting up on here asking for suggestions for a £1K “donor Bike” when they are very clearly looking to get a C2W bike and promptly steal the goodies from it to fit to their Cotic/456/etc for weekend duties…
Well, the accountant at work had heard rumours that the scheme was closing and was suggestng to the boss it shouldn't be run agan at our company so I contacted cyclescheme for their take on it.
They may be biased but I'll be taking my email question and their reply into work on Monday to see if we can get the scheme going again:
"Hello
I wonder if you could help please?
My employer who allows purchases of bicycles and equipment through your company have stated that they are aware that the system as a whole is due to be closed completely and will no longer exist in any form.
The company accountant has now said that the new 'window' to members of staff to purchase a cycle and accessories is being postponed indefinitely in light of the planned ending of the scheme as notified by HRMC.
I would be very grateful if you could advise if you are aware of this official closure as if as far as you are aware it is untrue, I can make a request for the window to be reopened.
Kindest regards
Steve Monks
"Dear Steve,
Further to your email regarding Cyclescheme, I would like to advise you that Cyclescheme is going from strength to strength and there are no plans to end the scheme.
Best wishes from the team at Cyclescheme!
Kind Regards,
Tudor Davies
Help Desk Administrator
Cyclescheme Ltd
PO Box 3809
Bath BA1 1WX
t: 01225 448933
f: 01225 339058
e: info@cyclescheme.co.uk
w: www.cyclescheme.co.uk "
Depends what you mean by “abuse”, I know we have a couple of people on our scheme who have used the full £1K on offer to acquire a Boardman pro each which they actually use to ride to work, not every day and the bikes are getting used at weekends for “leisure” purposes…I on the other hand, got a £500 Carrera road bike specifically to commute on and that is all it’s ever been used for…
Are my colleagues abusers of the scheme or just making reasonable non-commuting use of their new bikes?
I think the real abusers are the people posting up on here asking for suggestions for a £1K “donor Bike” when they are very clearly looking to get a C2W bike and promptly steal the goodies from it to fit to their Cotic/456/etc for weekend duties…
abusers are people who that [b]never[/b] use the bikes for commuting or work use and never had or no intent to..
does it really matter? I bought a carrera vanquish on my scheme and although I cycle to work every day I've actually been using my inbred for the last 9 months or so because I became so fed up with punctures.
I'm looking at joining again and was tempted by the voodoo wanga (we can only get ours from halfords) at £899.99.
I'm sure I would use the wanga to come to work on at times but lets be honest, it's a bike for sport not commuting. Who would I be hurting?
I'm still cycling to work plus I've managed to get a bike on the cheap. If I didn't enter the scheme I'd be cycling to work anyway, it's still 1 less car on the road.
Our final payment I believe is 5% of the residual value. It's a figure halfords will come to without seeing the bike. I'd imagine on a £900 bike after 12 months they'd estimate it at about £450 which would mean a final payment of about £22.50. I paid about £14 on the vanquish.
just got my offer to purchase my Marin (£999) - £52.50 which tbh is a bit of a bargain. next up is a cx bike I think...... hmmm
As im self employed and cant participate in c2w I am just jealous that anyone gets a cheap bike and I cant
I was wrong, It's 5% of the the new price not second hand. Here's the example I've been given by our HR.
Total retail cost of bike and accessories: £600.00
Estimated income tax saving:: £102.12
Estimated NI saving: £56.16
VAT saving £89.36
Actual cost of bike & accessories: £352.36
Estimated total saving: £247.64
Percentage saving over RRP: 41%
Monthly salary deduction £42.55
Tax saving -£8.51
NI saving -£4.68
Actual monthly repayment £29.36
Based on that the voodoo wanga would cost me about £600 instead of £900. The % saving above doesn't take into account the final payment.
so I shouldn't be looking after my bike basically? I've a Cube Agree GTC Race that was 1800, and I've commuted approx. 3k miles on it so far to work, and occasional weekend use (I have a BMC for that).
BUT, given that I like my bike to always work well, I've kept it clean, well lubed and in good repair and would estimate it to have a decent residual value. If I'm to get hit for another £400 at the end of the deal through tax, I could have negotiated a better net deal direct from the shop myself!
Hmm, best think again on the Cervelo S1 that was due to be ordered soon.
Revisiting this, if market value is to be applied on the resale value, and any discount on this is chargeable, then it makes sense to agree to pay your employer as little as possible and just pay the tax and employee's NIC on that "gain". Of course, this means that basic rate payers finally get an advantage over higher rate payers.
It's all a load of scare mongering...as [i]Sanny[/i] stated, the scheme has changed VERY little...How the hell are the HMRC going to police a 'market value' for the bikes on the scheme...ain't going to happen, same as the bike should be used for 50% travelling to work, to check is improbable..
Use the scheme...don't worry