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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