Bike2work – cyclescheme woes

Sometime ago, I bought a bike on the bike2work scheme.
I maxed out the £1500 limit, to be paid back over 18 months, and paid a wee bit more on top.

After 6 months, I’d paid back £500. But then I quit my job.
I stumped up an agreed (large) final payment with my now former-employers.

Roll forward a year, and I get a letter from Cyclescheme saying I’ve now completed the 18 month term and have 3 options:
1) Pay £105 to keep the bike for another 3 years
2) Pay £315 to keep the bike
3) Give the bike back.

Obviously, I thought it was done and dusted. In fact, I’ve since sold the bike as I no longer needed it, and don’t have, or am prepared to pay the £315.
My former employers have admitted they were not aware I would have to pay again. Like me, they though that was that.

If I do, I end up paying more than the £1500 “loan” in total, which seems a bit off.

How can I avoid the £315 payment?

With OPT 1, what happens at the end of the 3 years? I think that would be it finished.

legally you never own the bike you only hire it from your employer so until you formally take title it is not yours to sell..

also depends if yoru company took up cyclescheme ‘offer’ to managed the end of hire where the ownership revert to them. If so they now own the bike so you will have to deal with them.

IF not and your employer now owns it – ask them to transfer the bike to you as a benefit in kind – then using the HMRC matrix assign a value to that benefit. you will then pay tax on that benefit – this is the cheapest way of formally taking ownership….

Even with option 1 you still renting, but by that time the bikes value will depreciate to not a lot and the charge to take ownership will be a lots less..

Nah, after the 3 years, I then am offered the chance to buy the bike at apparent market value…

you didn’t say what the ‘final’ payment was for us to give you a relevant answer to your question

also you employer must have looked into this a bit in order to get the limit to £1500 rather than the usual £1000…

legally you never own the bike you only hire it from your employer so until you formally take title it is not yours to sell..

which is where the misunderstanding has come in, I thought I had bought it.

lots of employers did not fully read cyclescheme contract docs…

we had ours modified after a formal legal review.

If you told us how much the final sum you paid to your previous was, it would be a lot easier to give an opion.

So my guess is that your £500 installments plus this large sum is way south of the initial £1500, so you should stump up what you are being asked for or declare the benefit in kind.

Either way you owe all of us so please get it sorted.

Sorry.

I paid £851.

Just looking at cyclescheme’s website:

What happens if an employee leaves their job or is made redundant?
Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 7 working days following collection of the goods. This means that if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay i.e. without any tax exemptions.

Says nothing there about an extra final payment (I know that’s not the contract I will have signed…)

you only hire it from your employer

Not in our case, emp;loyer has totally handed everything to Cyclescheme so the bike is theirs and all dealings are with them (so it doesn’t matter if you leave employer).

I got caught in the period where HMRC changed guidance and ended up takin the option to pay an additional one-months-equivalent deposit to extend the lease period for several years at which point the value of bike is (IIRC) either £0 or equivalent to the deposit. If I want it then I keep the bike and they keep the deposit, lease over, asset transfered, done.

I don’t like it as the bike is still someone else’s and if HMRC revisit the guidance there’s a chance I’ll get clobbered again. Plus strictly speaking, if it’s nicked etc I would have to replace. Still, seemed cheapest and easiest option at time.

Personally, as an employee, the way my employer runs (or not in my case) the scheme is probably one of the least advantageous ways. Can’t even exploit the BIK option at end of lease.

there isn’t an extra final payment if you give the bike back (as its only rented this is the ‘default’ position)

just cough up the £100 and after another 3 years they’ll ask for nothing (as it’ll at that point be worth nothing)

Given you’ve paid 90%, just write back to cycle scheme and tell them you settled early with your former employers. Let them figure out what is right, if anything,to pay based upon that !

did anything you’re employer give you say ‘in full and final payment’ – if it did then just point the cyclescheme people at them?

i know the HR people have been in touch with Cyclescheme about this after I asked them. Originally, it looked liek it was all sorted.

I’ll dig through the paperwork tonight, I know i’ve got a receipt for the cheque I gave them somewhere.

dont do it through cyclescheme they only take a cut for doing nothing, actually easier for employer to do in house.

ps you can keep bike re capital gains tax etc but you apparently have a certain amount of capitals gains tax allowance anyway.

Not in our case, emp;loyer has totally handed everything to Cyclescheme so the bike is theirs and all dealings are with them (so it doesn’t matter if you leave employer).

seems to be on the increase, I notice that Evans will take on the ownership to allow for people to leave/change employment more flexibly..

on our current schemes (now with halfords and not cyclesheme)

you hire for 12 months – you don’t get the VAT saving, then after twelve month you will granted title of the bike and the value (determined by the HMRC matrix) will be declared as a benefit in kind…

saving are not as good, but it is a simple system and will not lead to long hire period with a requirement to insure etc etc

really the scheme as was originally set up is dead in the water – but given the abuse it has had, not surprised..

Update:
Found my receipt.
It states quite clearly:
“Final payment for bike to work scheme”

Let the showdown begin…

Update:
Found my receipt.
It states quite clearly:
“Final payment for bike to work scheme”

Let the showdown begin…

what final payment?

as in final ‘hire’ payment

or

final payment in terms of final ‘hire and take title of the bicycle’ payment?

Yes, I’d guess you’ve paid the full hire amount, but that doesn’t mean you own the bike any more than paying for a year’s car hire means you own the car.

“ps you can keep bike re capital gains tax etc but you apparently have a certain amount of capitals gains tax allowance anyway.”

CGT wouldn’t come into this at all, you haven’t made a Capital Gain, and there’s no way you could ever make any sort of gain on something that depreciates.

CGT is a tax (over a threshold) on the gain you have made, not the original capital amount. So unless he has a magic bike that appreciates in value and he then sold it for way more than he bought it for (and that would be a gain of over £10.1K, assuming he hasn’t had any capital gains of other transactions), then it’s got nothing to do with it.

Probably!

apparently can be considered a capital gain if full tax not paid, ie coz you dont pay vat or tax on original price of bike

It’s not a Capital Gain, it’s a Benefit in Kind.

Its a disgrace that these companies are coming after people to rob them.

The scheme was intended to give people cheap access to bikes and promote a healthier lifestyle. These businesses are setting out to acquire a paper debt that none of the employers care about so that they can systematically extort money out of the employees.

what would be the fines for breaching the contract, would cyclescheme be bothered to take you to small claims court?

Buy an supermarket special, a decal kit and send something back to cyclescheme?

Shandy – people got cheap access to bikes, they just don’t get ownership of the bike. It’s not even meant so you can get a MTB to play on, it’s meant to encourage cycling to work.

The “cheap access” bit was meant to be facilitated by government tax breaks for employers and employees. These third party scheme providers have come in and expolited the legislation to try and extort money out of the employees.

We had people paying their income tax, buying a bike and paying VAT on it.

Then

People saving income tax (nice gesture by the government), buying a bike and saving VAT on it (another nice gesture by the government).

Now

People saving income tax (nice gesture by the government), buying a bike and saving VAT on it (another nice gesture by the government), then a third-party company exploiting the legislation to squeeze a couple of hundred quid out of people at the end of the scheme.

All the scheme has achieved is that cyclists are now paying the scheme providers a couple of hundred quid that would otherwise have gone to the tax man. In a lot of cases people weren’t even aware of this when they signed up. The scheme providers have just squeezed themselves into the value chain and ripped off a load of people.

Perhaps the scheme providers haven’t explained themselves properly – the deal always was that your payments were rental, not installments. That was made very clear in the legislation. Then, at the end of the rental period, the bike was supposed to be sold on the open market for a fair market value. The aim of the scheme was never to give you a cheap bike, it was to give the company a cheap way of getting a bike fleet.

That’s where it was fiddled a bit, and has been clamped down on by the Inland Revenue – people were claiming that a £1000 bike was worth £50 after 18 months, which is obviously ridiculous – so now they have more realistic fair market values you have to pay to get to keep the bike at the end of the rental period.

You still make a saving, just not as big a saving as you did before the Inland Revenue clamped down.

Ok, so I’ve had a response from Cyclescheme.

Clause 9 of my contract states, regarding ending my rental contract early:

At this time, you will also need to discuss with the Employer what is to happen to the Equipment.

ie, the final payment I now have to cough up to cyclescheme. This was never done, and my former employer has admitted they weren’t aware of it. Ho hum..

In the meantime, has anyone ever been able to complain against the change of rules, ie the increased official final value percentage, being instigated on live contracts? I started my contract in May 2010 and the rules were changed in August.

Perhaps the scheme providers haven’t explained themselves properly – the deal always was that your payments were rental, not installments. That was made very clear in the legislation.

No, it wasn’t. There is a difference between “legislation” and the scheme conditions. Legislation was created by the government to initiate the scheme. Terms & conditions laid down by the schemes are not government policy.

The scheme providers are deliberately muddying the waters on this. Hardly anybody I speak to understands the difference between the government legislation and the conditions added in by the schemes. The schemes themselves have even set up a lobbying group to pressure HMRC for more leverage in order to screw the last penny out of the ruling.

The salary sacrifice scheme was included to help employers recover the cost of their outlay to run the scheme. It wasn’t intended as “rental”, it was intended to help employers recoup costs and encourage them to participate. Under this situation the employee had the use of a bike for a reduced outlay, the employer provided a benefit for their staff, and the government made a magnanimous gesture in order to encourage healthier living and sustainable transport.

The scheme providers got involved to run the scheme for large organisations, and charged a fee to do so. Fair enough. The schemes were paid their fees, the companies recovered their costs, the employees had access to their bikes. When the inland revenue made their judgement on fair value it was intended to tidy up a loophole on transferring ownership (in keeping with the tight BIK laws we have in the UK), to ensure that assets weren’t being transferred below market value.

In a company-run scheme this isn’t much of a problem. The company owns the bike and has recouped all of their outlay, the employee continues to use the bike, everybody is happy. No further money changes hands.

Where the schemes are involved they are exploiting the fact that they own the bike on paper (despite being in receipt of full payment plus an administration fee) and issuing ultimatums like the one in the OP.

There is no option to keep the bike, despite it being paid for in full. Instead they will take it back and sell it, force the employee to pay £315 for it, or in a magnanimous gesture they will allow him to rent a bike he has already paid for, for £105 over 3 years. They have just discovered a great way to screw people out of more money whilst threatening them with Inland Revenue rulings.

ir bandito – there was no change in rules. what happened was that too many companies were taking the micky and the taxman clarified the guidence.

shandy – it was always the case it was a rental otherwise it would be a benfit in kind and taxable

That’s where it was fiddled a bit, and has been clamped down on by the Inland Revenue – people were claiming that a £1000 bike was worth £50 after 18 months, which is obviously ridiculous – so now they have more realistic fair market values you have to pay to get to keep the bike at the end of the rental period.

I kind of agree.

It raise the question of how / why are the lease “payments” effectively valuye of bike less tax savings and divided by 12?

If you were paying a nominal sum over the lease period and then a more appropriate (related to value) lump sum at the end if you wanted possession then OK. Otherwise why would anyone rent a Cotic Roadrat for 12 months at c£70 (IIRC) a month for 12 months. It just doesn’t make finaincial sense.

so I wonder what would happen if I didn’t pay anything?

shandy – it was always the case it was a rental otherwise it would be a benfit in kind and taxable

Nope.

This is the opening sentence from the Department of Transport guidelines for implementing the scheme.

To promote healthier journeys to work and to reduce environmental pollution, the 1999 Finance Act introduced an annual tax exemption, which allows employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit.

The whole intention of the scheme was to make the benefit tax free. The BIK rules only apply to a transfer of ownership of the bike as an asset.

I agree these “in the middle” companies are capitalising !!!

The tax man does not care if you pay market value for the bike. All they care is that you pay the tax on the benefit in kind on the fair market value of the bike. This is very different !!!

Shandy – reread you quote

which allows employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit.

TJ you said

it was a rental otherwise it would be a benefit in kind and taxable

The entire point of the legislation is that the use of the bike is a tax-free benefit. You can call it a loan or a rental or whatever makes you feel better but the scheme was specifically designed to exempt the use of bicycles from the BIK laws. That is still the case until the bike changes ownership.

The salary-sacrifice scheme was laid out purely to compensate the employer for their outlay. This is why the salary sacrifice payments are equal to the total outlay made by the employer. The schemes have taken advantage of this and turned it into an uncompetitive rental rate with a balloon payment on the end.

The people who are getting screwed out of this are employees of large organisations, particularly in the public sector. These employers won’t commit big capital outlays to running their own schemes. They have to get the third-party providers involved, who then screw the employees.

In the meantime any employers who can commit the capital for a year are free to run the scheme, and allow their employees to continue to use the bike for as long as they like – no administration fee and no inflated payment on the end of the scheme.

I bought one when CS first came out, the exact T&Cs may have been in the fine print but the CS people came round in person and “explained” the system to us. All very vague on the final payment and the fact it was a loan was played down. Fortunatley done and dusted before the change of rules, just one more month usual payment. Wouldn’t do it again.

The people who are getting screwed out of this are employees of large organisations,

…who enter into an undefined agreement of their own choosing, they are not being screwed

…who enter into an undefined agreement of their own choosing, they are not being screwed

missold then?