[Closed] New HMRC guidelines on the bike to work scheme

thread on this earlier this week.

Good, it's about time they made the rules more explicit, it was always supposed to be a market value payment. I can't understand why employers were letting bikes go for a nominal sum, what with their responsibility to shareholders and so on.

I can't understand why employers were letting bikes go for a nominal sum, what with their responsibility to shareholders and so on.

Because the employers have already got their money back via the monthly salary sacrifice payments so there was / is no need to profit from the final payment. Employers just want rid of the bikes.

This is a link to the new guidelines from the HMRC website.

[url= http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm ]HMRC ride to work valuation guidelines[/url]

[url= http://www.singletrackworld.com/forum/topic/c2w-scheme-new-market-valuation-guidelines-published ]Earlier thread[/url]

So assuming your employer does charge you £250 on a 1 year old bike that was worth a grand brand new, the scheme is barely worth bothering with any more, surely?

edit: ignore me, I've just read the other thread and the bikebiz story, that makes more sense now.

so there was / is no need to profit from the final payment

Profitting from selling an asset is exactly what they should be doing.

What if your boss still officially owns the bike? I.e. you ride it but he still owns it - you can't be taxed on what you don't own?

Profitting from selling an asset is exactly what they should be doing.

True in most cases but the ride2work scheme is a very emotive staff benefit and as a result "profiting" causes alot of tension with staff who already think they have paid for the bike. True its a hire scheme but in most peoples minds its HP therefore they have paid for it.

If you extend the hire period longer you don't need to worry about the ownership payment and you can just keep using the bike as normal.

Our place is looking into various ways of solving this, and the current possibility is that the annual payments represent 75% of the retail value, and that the 25% end payment makes up the full and final purchase price. Therefore the employee doesn't pay more than 100% of the cost of the bike.

The tax and legal bods are looking into the various solutions - hopefully they'll choose the most equitable for all of us.

I'd be interested to hear what they come up with pk-ripper...

johnners, can't decide if youre fishing or not but that really isn't in the spirit of giving an incentive. In addition to getting all of the money back in year one, the employer saves on NI contributions (about £130 on a £1,000 bike), as the value of the asset can be written off as cap ex over the usual period.

So, on a £1,000 bike on the BTW scheme, an employer should get around:
£110 in saved NI
£200ish in saved corporation tax (at usual rate of 28%)
£100ish on the final valuation

So, exployee saves 40-50%, the employer gets a happy employee (tied to the job for 12 months or more) and about £430 for its hassle.

I reckon investing £851 (ex VAT) for a £410 nett return is pretty good for most shareholders, personally...

johnners - Member
Good, it's about time they made the rules more explicit, it was always supposed to be a market value payment. I can't understand why employers were letting bikes go for a nominal sum, what with their responsibility to shareholders and so on.

Employers run it as an employee benefit, and employee benefits mean happy staff, happy staff mean productive staff.

So it makes sense that they take a hit on the final value at the benefit of employee morale.

You will find articles on www.road.cc which Singletrack links to over there on the right of the page.

Also try other bike forums/news sites like bikebiz, bikeradar - lots of stuff about on this subject, though mostly confused speculation and disappointment at this point in time.

The company I currently work for charges 5% at the end of the year for the handover or £50 on a £1000 bike.

HMRC now want a slice of that action, so for a basic rate tax payer it's 20% on £200 or £40.

A couple of other things mentioned in the HMRC documents which the press haven't overly publicised is that the purchase price can now be plus VAT, ie. £1175 (notice how last year a lot of £1000 bikes now cost £1100?).

And......it's now based on purchase price (with receipt), not RRP.

£200ish in saved corporation tax (at usual rate of 28%)

Aracer: the purchase of the bike can be classed as capital expenditure and written off in the usual way at 20% of the value for 5 years, assuming the £50k limit hasn't been reached. I think it's the Inc vat price too, so in year one they can save corporation tax on £200, year two £160 (20% of £800) and so on...

Apart from that they get their capital expenditure back in the form of "hire" payments and that the asset is disposed of at the end of year 1. They presumably can't write off capital in year on an asset they no longer own? I'm far from an expert on this, but what you're saying doesn't add up.

There's nothing to stop the employer giving you the bike at the end of the period, you just have to pay Tax an NI on the benefit in kind ie £250 on a £1000 bike after 12 months, paying the Tax and NI on £250 is better than paying the whole £250 🙄

Indeed, but will employers actually implement such an employee friendly approach! I very much doubt that mine will as they try and rake in as much as possible from such flexible benefit packages 🙁

aracer: Yes, good point - I'm no expert either and hadn't thought of the disposal of the asset.

At the moment then, I guess employers can claim 40% in year one (I think that's still valid until April) and then 20% each year that they still own the asset.

The fact that the employee effectively pays for the asset in salary sacrifice doesn't affect the right of the employer to claim against the AIA.

Do they not pay corporation tax on the "rental"

Aracer: a bit of digging and it looks like the final value can come from your salary, albeit net rather than gross.

They'll obviously be no additional benefits for the employee but as I'm assuming that's still regarded as salary sacrifice then that effectively removes the need for the employer to regard it as income.

Would a move to 2 years instead of 1 year bring much to the user? Further depreciation whilst using the bike - 20% or could it be more?

I've just had a look at the link and it makes sense to go out to 18 months / 2 years for the return - the table makes sense to me.

I think it depends on your employer tootall.

If they are happy to, then they could still sell you your £1,000 bike for £1 at the end of the 12 month term. You would then pay tax and NI as benefit in kind on the balance of what you pay and the 25% rule; so £249 in this instance. In this way, the real final value you effectively pay would be somewhere in the region of £60-100, depending on your salary and and so.

It's not really much of a change for many, unless your employer forces the 25% valuation, which is the fear that most seem to have (perhaps legitimately)...

No reason at all while the hire period can't be 2 or more years. The price of the bike needs to be reclaimed in year one (from what I understand, regardless), but I'm not sure if you have to pay a nominal sum to your employer for rental in years two and so on.