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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.