[Closed] Cyclescheme's 25% Evaluation

Just reply stating that you don't want to be invoiced for that amount and that you'll pay the initially suggested 6% + VAT and take the difference as a taxable benefit (on which you'll pay tax at your marginal rate).

Or just wee in their shoes ?

HMRC aren't cricket players - they do what they like when they like.

I would continue the loan of the bike until you decide to leave the company. over time, the bike will depreciate until it's value is negligible. Then get them to give it to you.

http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

the only thing is that the bike will officially be thier property until the transfer of ownsership, but who cares? to all intents and purposes it's yours, unless you want to sell it.

Do you have to make any payments to 'Loan' the bike?

Also the 25% market price should be £250 inclusive of VAT. The employer should take 25% of the net price and then add VAT.

No payments required - never any payments required, just employers don't want to pay for the bikes so there is normally a salary sacrifice to .

Correct me if I'm wrong but you've bought a bike from your gross salary thereby saving 41% off the retail price (I based this on a salary of 26k and the typical calculator on the cyclescheme webstie). Your work wants to charge you 25% of the initial value, so your saving reduces to 16%.

Based on that, no I don't think you are being "ripped off" as you would have bought a brand new bike for 84% of its retail price.

Nope, your employee is not ripping you off just following government guidelines.
In fairness to the government 6% was a comical undervalue of a bike's worth.
[url] http://www.guardian.co.uk/lifeandstyle/2010/aug/13/cycle-to-work-scheme-bargain-ends [/url]

Tell 'em you don't want the bike then wait for them to realise it is useless to them and they will sell it to you for the originally suggested price.

Sell the bike. I'm sure it's worth more than the amount your company is going to charge you.

Then you can go and buy a replacement yourself.

and they will sell it to you for the originally suggested price.

or someone else who will pay the 25% ??

Not everyone saves 41% either. Some companies don't pass on the VAT saving and many bike shops charge a 10% "fee" for cycle2work schemes. In these cases the savings are minimal.

Even a 16% (actually 11% taking the VAT into account) saving is probably less than you could get in the sale, plus you've got the additional hassle of restricted choice and waiting times in many cases.

Our company has queried this with cyclescheme. We've been told that cyclescheme will allow people to self assess the condition of the bike, which will then inform FMV. Condition will be from A (A cycle that has been ridden regularly but infrequently to and from work throughout the hire period. Predominantly used on the road or cycle paths for short distances) to D (A cycle that has been used frequently for commuting & leisure but without anything more than the minimum care necessary. Large mileages would have accumulated on the bicycle and a reasonable percentage of these may have occurred off-road).

I would suggest you inform them of the considerable amount you spent on it to keep it working - new tyres, chain, sprokets, cable etc etc. This needs to be taking into account when valuing it. If its still too much for you tell them you dont want it. They will probably realise its not worth them keeping it.

I would suggest you inform them of the considerable amount you spent on it to keep it working

That's a point.

Legally, the bike belongs to the company and you hire it, yes?

So - why are we liable for the cost of maintenance, shouldn't that be the responsibility of the owner?

Slightly more seriously,

When you join the scheme, you enter into a legal contract. I'm pretty sure I have an email somewhere that says something like 'after the hire period you can buy the bike back at market rates, typically 5%'. I appreciate that they can change terms when they like for new contracts, but can they legally stick a 500% increase on the final payment on existing contracts?

I think I'd be arguing that "I was told it'd be 5%, now you're saying it'll be 25%, I woudn't have entered the scheme if I'd known" and hope you have a nice HR dept.

also the shouldn't be vat on the 25% as it is a second hand bike

we've been working extensively on this in the last few weeks as a Large CTW retialer and we hope that there will be a clarrification on this in the next few weeks but we have taken from the guidlines that a comapny who sdoesn't charge the 25% will have to tax their staf on that "benefit" and therefore the actual cost will be the tax on the 25% value (about 8% for most people)

cougar - the wording in the Hire agreements is that that bike MAY be offered for sale at a FAIR MARKET VALUE. no indication is given in writing of the figure being 5%.

Interesting how different providers are all opting to take differing stances on how the scheme will be admimistered at the end of the hire term.

While 5% was a very low figure, the bike has been fully paid for, and therefore has no value to the company (unless they are the business of accrueing a massive pile of used bikes). Remember, it's supposed to be a Tax Free scheme - an incentive to get people on bikes. Perhaps a victim of it's own success?

IMO the whole scheme is a bit of a fudge in that for it to exist it makes use of existing legislation. The company stands to make money on this as far as I can see - saved Emp NI, etc.

no indication is given in writing of the figure being 5%.

Perhaps not on the C2W contract, but it was certainly there on the info issued by my place of work. So whilst it might not have any legal standing, I'd certainly be arguing with HR about it.

i think with all the c2w there has been an element of miss selling/miss information as whilst they all say 'fair market value etc... when using calculators and marketing the 'savings' touted do nto at all take into account transfer etc.

in our contracts is states transfer of title may be possible at market rate subject to a 10% minimum or we can hand back to company for 10% admin charge

though for the latest intake we switched from Cyclescheme to Halfords - across two intakes we have had nearly 700 takers so these changes could affect lots of bods

as mentioned above paying tax on the benefit would be the way to go.

or just keep 'hiring' the bike for a zero value

Cougar - Member

Legally, the bike belongs to the company and you hire it, yes?

So - why are we liable for the cost of maintenance, shouldn't that be the responsibility of the owner?

The contract between company and recipient will normally have a clause which makes it clear that these costs are the responsibility of the keeper.

Cougar - Member
Slightly more seriously,

When you join the scheme, you enter into a legal contract. I'm pretty sure I have an email somewhere that says something like 'after the hire period you can buy the bike back at market rates, typically 5%'.

If that clause is in the contract then it falls foul of the HRMC guidelines for these schemes as the company IS NOT allowed to promise you this option.

When you join the scheme, you enter into a legal contract. I'm pretty sure I have an email somewhere that says something like 'after the hire period you can buy the bike back at market rates, typically 5%'.

The contract can't state a final price, or it would have been a hire purchase agreement, not a lease agreement.

As I understand it:

Companies don't have to charge fair market value, but the employee will have to pay the tax on the difference between the FMV and whatever is paid.

The 25% is a suggested basis for FMV, given by HMRC. That doesn't mean that 25% is the FMV for the bike. If the FMV is assessed differently, the employee would pay the tax on the difference between that assessed value and what is paid.

as mentioned above paying tax on the benefit would be the way to go.

for us as the 'users', yes, but how many HR depts are going to want the work of doing this when they can simply lift a figue off HMRC guidance and ask for a cheque or payroll deduction of that figure and job done ? No P11D to change etc etc

This is a saga now.

Companies do not want to be raising P11d's and calculating BIK tax for many employees who do not currently receive benefits.

I run a scheme at my work place - we have 9 people on it. I shall be charging them all £1 a year after the initial hire period till the residual value drops to nil.

i understand on the to be release cyclescheme form you will be asked to enter cost of maintenance / parts over the hire period to deduct from value..

all in all this all sucks.

the other option for all this would be to lower the monthly 'hire costs'

Cyclescheme can't lay down the law to employers about what price they should sell the bikes to employees - it is up to the employer.

There is VAT on second hand bikes.

Trimix - excellent approach.

Trimix - not many HR Depts are likely to be taking that approach as most schemes are not run by people as enlightened as you though..

I run a scheme at my work place - we have 9 people on it. I shall be charging them all £1 a year after the initial hire period till the residual value drops to nil.

good idea

Cyclescheme can't lay down the law to employers about what price they should sell the bikes to employees - it is up to the employer.

I got my bike through Cyclescheme. The reason my employer went through a scheme was to avoid having to do any calculations on tax, etc. So, if the scheme tells them to charge me £x and tax me £y, that's what they'll do.

S'mee again,

What I'm not understanding is that I've made 12 monthly payments of roughly £60 a go. I don't have a payslip to hand, but it was around that. I'm sure that it was something like £80 before deductions (I only earn 19.5k).

Sooo, 12x£60 is £720 (roughly) plus £295 that my employer wants as a 25% final payment means that I could be paying more than the original cost of the bike! Have I completely misunderstood the scheme? I though there was supposed to be a saving as an incentive to buy into it?

❓

Whilst I can sympathise with that position, the only answer is to either educate your employer or cyclescheme. I must admit to be somewhat surprised by cyclescheme's approach as they have by far the most to lose if they can't find their way through the new rules. If I was running their business then I would adding the option of providing P11D information to their service and giving employers the option.

25% final payment means that I could be paying more than the original cost of the bike! Have I completely misunderstood the scheme?

What you seem to have misunderstood is the difference between your gross and net salary. The £720 that you have paid was from your gross salary, i.e. you haven't paid any tax or NI on it. If you think about it in terms of how much of that £720 you would have received if you hadn't bought the bike on the C2W scheme which would be £576, assuming no NI and 20% tax. This what it has actually cost you.

If I was running their business then I would adding the option of providing P11D information to their service and giving employers the option.

think they might be planning to

The amount the employer takes is rental but it is treated like repayment of a loan so the employer has been repaid after 12 months. As a nice bonus they have also save on the employer NI assuming you do this as salary sacrifice. So any payment at the end of the hire period is a profit for the company.

If that clause is in the contract then it falls foul of the HRMC guidelines for these schemes as the company IS NOT allowed to promise you this option.

So if that was the case, where do we stand? Should the company be liable for making up any shortfall between me and the scheme?

(It's academic for me now as I'm no longer in the scheme, just curious)

Trimix, that's an option, although none of the users who take that option will be eligible for another bike as they will be deemed to still be in a scheme until a final payment is made

gonefishin, i think beagleboy has already taken off his deductions.

Some people will end up losing money on the scheme if the final payment is 25%.

pk - its possible to have multiple schemes running at the same time, several people at work have done this, taking out a new 18 month loan every 12 months

HH - That is not strictly true, the exemption from the benefit in kind rules only applies to one bike at a time ( see [url= http://www.legislation.gov.uk/ukpga/2003/1/section/244 ]law here - refers to a cycle[/url]) so theoretically the employer should be treating the loan of one of the bikes as a benefit until one of them is transferred to the employee.

DP

Okay had beagleboy not bought the bike the £1000 pounds that the bike cost would have been liable to £200 of Tax and £110 of NI, or 31%. Now assuming that the "rental" over the year is equal to the amount of the bike then the cost to Beagleboy in terms of the loan is £690 (£1000 - 200 - 110). His company now want to charge him 25% of the orignal cost of the bike £250 so the total cost to Beagleboy is £940. Granted it's not as big of a saving as it might otherwise have been but it's not more than the orignal purchase price.

What you seem to have misunderstood is the difference between your gross and net salary. The £720 that you have paid was from your gross salary, i.e. you haven't paid any tax or NI on it. If you think about it in terms of how much of that £720 you would have received if you hadn't bought the bike on the C2W scheme which would be £576, assuming no NI and 20% tax. This what it has actually cost you.

Original post reading fail.

He's pointed out that the bike cost £999 originally. His gross salary has been reduced by £999 over 12 months. The net salary difference to him should be around £690, taking 20% tax and 11% NIC into consideration. Together with the FMV of £249.75 (£293.45 is wrong as they are failing to deduct VAT from the original price of the bike before adding VAT to the FMV), the total cost to him of purchasing the bike will be £939.75; a 6% saving.

Update from the cyclescheme website:

[i]HMRC have recently supplied the matrix they apply when valuing a bike at the end of the hire period, which we welcome as guidance.

Cyclescheme would like to reassure our clients that we have a process in place that ensures our schemes continue to be compliant, whilst retaining their attractiveness to employees and employers alike. More information is available on the Employer's page.

We would like to clarify that if an employer sells the bike to the employee at less than the HMRC guided percentage (as most will choose to do), the employee will only have to pay tax and National Insurance on the difference in these two amounts and not have to pay the final value amount.

For example, a £500 bike undamaged, after 12 months would have a market value (using the HMRC matrix) of £100. Should the employer sell the bike to the employee, for £5 then tax and national insurance would need to be paid on the £95, and the employee would not pay £95.
[/i]

For example, a £500 bike undamaged, after 12 months would have a market value (using the HMRC matrix) of £100. Should the employer sell the bike to the employee, for £5 then tax and national insurance would need to be paid on the £95, and the employee would not pay £95.

Seems pretty straightforward to me, my scheme runs over 3 years, so HMRC say my bike will be worth £120 (12%) at the end of that time, if my employer gives me the bike I pay tax and NI on £120, a much better option than paying £120.

Panic over, who'd have thought people would misunderstand something from the Tax bods and go into blind panic.

Panic over

the total cost to him of purchasing the bike will be £939.75; a 6% saving.

Is it really worth the bother, seriously?

You can still get 0% loans in a lot of bike shops as long as you don't bank with the First Central Investment Bank of Nigeria or you could go totally crazy and save up for the ****er in the first place.

Hence as evidenced by this thread, that's exactly what a lot of companies will do.

Although that evidence is tiny.

Making the scheme not particularly good value when you can typically negotiate a 10% discount by not going through the scheme

Really, I got 10% off and went through cycle scheme.

[url= http://www.cyclescheme.co.uk/employer,intro.htm ]Cyclescheme response[/url] to HMRC new rules, 6th August, maybe not relevant to everyone...

Although that evidence is tiny.

C2W scheme needs scrapped anyway. Too many people ripping the arse of out it - including many on here.

Too many people ripping the arse of out it - including many on here.

I ride mine to work all the time, exactly what it's meant for. It's good 1/8 mile to work by bike and then I use it on my days of for leisure on occasions. Exactly like the scheme is about.

I got my C2W CX bike on the 31st of December 2009 and I've done 26 commute round trips on it (754 miles) some of them offroad on the Quantocks, I'm quite happy that I'm following the letter and the spirit of the scheme.

Sounds exactly like cricket to me (s****....)