C2W Scheme – new Market Valuation guidelines published.

If it's just guidance, then it can be ignored no?

not by you

backhander – Member

I don't think it can. You've signed a contract detailing terms and conditions. This cannot be changed without your permission.

As was mentioned earlier in the thread, your contract said nothing about the size final value payment, just that there would (may) be one – indeed by law the contract must NOT indicate the final value payment, otherwise it's an HP scheme and thus not eligible for tax relief

It will hit the bike shops very hard as a lot of people will not now bother with it.

nbt – correct.

The overall benefit is still there but over a longer period if employers extend contracts. It is still more of a tax incentive than most businesses get so if bike shops fail to take advantage of it I think they should probably be looking at themselves.

bye bye CTW.

No employer will want to be stuck with the bikes.
As suggested before

[*]£1000 bike leased from the company for 12 months [/*]
[*]it's then transferred in to your name for £0 – £whatever they want[/*]
[*]If it's less than 25% (£250) then you'll pay Tax and NI on the difference[/*]
[*]If the company is seeing the benefit of the scheme then it's probably in their interests to charge you £0 or £1 and let you square things up with the tax man for the benefit you've received from your lovely, friendly employer.[/*]
[*]They're not stuck with a bike no one wants,[/*] [*]the tax man gets what he's due[/*] [*]you'll still pay <£100 as a final payment, which in the big scheme of things isn't that much of a hardship.[/*]
You save £££ on a bike
You're fitter and off work less
You pay your tax
You think more of your employer as they've been nice to you
The bike shops continue to sell more bikes
The economy booms and we cycle our way out of recession 😀
Oh, and even the tree huggers will be happy.

See! Everyone's still a winner. You'll just end up a few tens of pounds more out of pocket.
Right, I have to go and have meetings at work! I'm administering the scheme at the mo and have 40+ people wanting bikes already with another 15 days to go for ordering the vouchers. There could be a few very unhappy people if things don't turn out well! (not to mention those who's existing loan period ends in 5 days time! 😮

cue a tax guru to come and rubbish my approach 😀

The trouble is, whilst companies could be nice and:
a) still charge a trivial amount at the end of the scheme and let you pay tax on the "benefit"
b) extend the loan period so the official valuation is less
both of those options result in more hassle for the company. Given the way these things seem to be administered I can see a lot (most?) companies taking the low hassle approach and charging 25% at the end of the scheme.

ararcer has it right IMO. As I said in an earlier post, most employers won't want the added hassle of advising HMRC of sale price, adding to P11D etc when they can just go with the guide figs. Not many HR decision makers ride bikes and therefore probably think it's still a good deal (generalistion of course, but I think most likley scenario)

But would they potentially want to be left with the bikes because people did not want to pay?

But would they potentially want to be left with the bikes because people did not want to pay?

No but I would think they would then just offer them for sale to anyone in the company to get rid of them

This was in Fridays Guardian–>
Bad news for the Cycle to Work scheme

But would they potentially want to be left with the bikes because people did not want to pay?

No – as others have mentioned, they'll just make the disposal fee (what you have to pay if you don't want to keep the bike) almost if not the same as the final purchase price.

The annoying thing is that the scheme will probably now only be worthwhile for those on higher rate of tax working for places that have the credit license so they can get incredibly expensive bikes on it, ie those that don't need the discount anyway.

I would be interested to hear from HMRC if you could just carry on renting the bike indefinitely for a peppercorn sum until it's effectively worthless.

grum – the provision of bicycle for commuting by an employee is not a taxable benefit in kind so the answer is yes. From the tax perspective, you are not paying for rent for it, you have sacrificed salary – not the same thing for tax purposes.

aracer – they could do that for new agreements but not for existing ones – if they are getting 25% on termination then they only need to get 75% through salary sacrifice – it is not that difficult is it?

aracer – they could do that for new agreements but not for existing ones

If you've not actually finished your agreement and paid the final charge they can do what they like – final valuation/disposal fee can't be pre-arranged.

If the disposal fee is not contracted you are under no obligation to pay it. A disposal fee may be able to be included in the terms providing the cycle as it does not involve the sale to the user.

If the disposal fee is not contracted you are under no obligation to pay it.

It is contracted – it's just that the amount isn't specified.

The contract must have a method for determining it – what does it say?

mefty – Member

The contract must have a method for determining it – what does it say?

Off the top of my head, mine says that if you choose not to purchase the bike a fee equal to the monthly salary deduction (i.e. 1/12th of the original price) will be charged. That fee is not tax-free unlike the other payments, either. I might be wrong though and I don't think I have the contract here with me, will have a look though.

What if you've finished your agreement, been quoted a transfer of ownership price, agreed to it but they've still not taken the money? Can they still move the goal posts now?

Nbt – that soundslike a contracted payment so it can't be changed, you may however get a tax charge on the difference between IR rates and what you pay.

Onza – I don't think your employer can change the price as it has been agreed, however you could have a tax charge in line with what I have said above.

Strictly speaking, there has been no change in law, HMRC has published their view of existing law, arguably whoever came up with the low values was overegging the scheme (don't know who this was and it may have been done with the tacit agreement of HMRC) – how many of you would sell a 1 year bike for 25% of cost – let alone less – however, it is no fault of the users that their high expectations have not been met.

mefty – Member

Nbt – that soundslike a contracted payment so it can't be changed, you may however get a tax charge on the difference between IR rates and what you pay.

yes, but that's for disposal if I choose not to buy it. Disposal payments would not be subject to the "minimum value" recommendations.

If I buy it, the payment CANNOT be fixed in advance, as mentioned several times further up

how many of you would sell a 1 year bike for 25% of cost

The 2nd hand value is not the value you could sell the bike for on ebay is it?

i thought it was what the bike was worth to the company. Selling bikes on ebay is not worth a companies time or effort, they'd probably have to sell them to an imtermediary company who'd tidy them up and sell them on for a profit, hence they are worth a lot less.

Much like old work computers or office furniture, this stuff goes for a fraction of the price it would fetch if sold by an individual.

To anyone asking if this will be applied retrospecively, I'd be almost certain it will. If you are still in your hire period, your company are unable to specify how much the final payment would be, as this would form a contractual agreement and be seen as a benefit in kind (and therefore taxable). Any agreement to buy the bicycle can only be made once the hire period comes to an end and must be separate from the hire agreement.

To anyone asking if this will be applied retrospecively

You mean agreements currently running, or at the very worst, those completed this tax year – for the tax implications.

Just read this on Bikeradar…

Unfortunately for commuters, another major change to the Cycle to Work scheme may be on the horizon. A recent European Court of Justice ruling means that VAT is now payable on retail vouchers bought via salary sacrifice schemes – such as the vouchers given to employees to pay for their Cycle to Work bikes.

This ruling hasn't yet been implemented in the UK, but if it is, businesses will no longer be able to recover VAT on the bikes (and are sure to pass the extra expense onto their workers) and may even be faced with some backpayments.

Figures from Halfords suggest that in just over 10 years, 400,000 people from over 25,000 firms have joined the Cycle to Work scheme.

Interesting.

nbt – you are right I was just assuming your employer would probably be inclined to sell it to you for the same or similar amount as the disposal value as they don't want to be left with the bike – should have stated but was in a rush.

Re: market value – it is always a theoretical concept as in the absence of an attempt to set something in the "open market" how can you be sure, the theory is that there is a willing seller and buyer, I would regard a willing seller to mean someone who explored a few avenues of sale including ebay – which plenty of businesses use to sell old equipment so HH I disagee.

Bikechain – that does not look good, will not effect most public sector users but will be bad for businesses. Had a very quick look at the decision and it would appear that the salary sacrifice is causing the problem – not the voucher so restructuring the typical arrangements to get round this appears tricky.

We've just had this from my employer

As you may be aware, the HMRC have published new regulations around the buy back value of all bikes purchased under the cycle to work scheme.

To view a copy of the updates please visit http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm).

Cyclescheme has been developing and testing a simplified 'Condition Assessment' (CA) process. The aim of this process is to provide evidence of the condition and value of the bike at the time of offer of sale.

Cyclescheme will be phasing in the Condition Assessment process by applying it to all vouchers 'requested' after Thursday 30th September 2010. Vouchers 'requested' prior to this date will be subject to the existing Cyclescheme market value process.

As my previous employer was a Bank, they could not recover VAT anyway. As a result, we didn't get the VAT saving on our vouchers. However, we were allowed to get the equivalent value in goods (this was all through Halfords).

Mine ends in November so it'll be interesting to see what happens, not happy if I end up being charged 25% though as I think this makes the whole scheme very borderline!!

Whats a little odd is the suggestion that if you are responsible and look after the bike then you could be charged more than someone who rags it around and knocks heck out of it and can therefore claim it isn't worth as much as the HMRC guidance states. Completely stupid if thats the way it pans out!!

I think that my company (which does get mentioned in the articles in the press – sorry everyone) is one of the test subjects for the new Condition Assessment that trickydisco's employer mentions.

We've had to take our bikes back to our lbs to be "independently" assessed for their condition, which ranged from Cat A (never been ridden) to Cat D (ridden constantly with minimal maintenance).

If you look into the guidance a bit more, there is a section that says that a lower-than-fmv final payment can be used if justified. I understand that Cyclescheme used to get people to self-assess, but an assessment by the lbs may well be Cyclescheme's attempt make a lower payment more justifiable/accountable.

We're due to have our final payments confirmed this week so fingers crossed.

mine ends in september, and thankfully the legal team are cyclists so will be looking to make this work for everyone. Best solution for me is to pay a nominal "purchase" price, and then take the tax hit as a BIK.

In all honesty, if HR departments don't take this route they will be dealing with some peed off staff, as the new guidance suggests that the more they charge as a "purchase" price at the end, the more it costs the employee, which wasn't clearly defined at the outset of the scheme.

Muttley – that's an interesting way of doing it, but that will heavily penalise those that look after their bikes. Mine does about 400 miles a month commuting, mostly in the dry and I've looked after it well, with full maintenance and servicing, and it could pass as an almost new bike. That's because I enjoy riding a bike and don't want some shitter under me that's not fun to ride and will be wearing itself away with grinding paste. To be penalised for that compared with some scumbag who just rides their bike round the park in all weathers isn't right as we all entered the scheme on the same basis, and the condition of the bike at the end was never a factor. Hell, if it is, mine might well have a frame destroying crash that renders it value less.

pk – we did query it being a tad unfair on those who'd looked after their bikes. Apparently to account for this the lbs' were briefed to assess the condition of the bikes' original parts, so if anything had been replaced it would be assessed as being unserviceable/poor condition.

…or if you've got some old worn out bits just swap them on before the inspection. Of course this could be seen as tax evasion and I couldn't possibly condone that 😉

This has been sent to work, things perhaps dont look quite so bad.

Cyclescheme Response to HMRC EIM Updates EIM 21667/21667a

16 August 2010

First and foremost, don’t panic!

Contrary to initial reactions to the publication of the updates, Cyclecheme 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. (To view a copy of the updates please visit http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm).

According to the updates, employers charging ‘disposal values’ lower than those described in the Valuation Table will be required to catalogue evidence of each bike’s condition and value at the time of offer of sale.
Cyclescheme has developed a simplified 'Condition Assessment' (CA) process in response to the guidance that was published by HMRC in December 2009.
The process provides the required evidence of the condition and value of the bike at the time of offer of sale.
It is only in the absence of any evidence, employers need refer to HMRC’s Valuation Table for acceptable ‘disposal values’ as an ‘administrative easement’.
Cyclescheme performs this free service for the majority of our clients whereby we handle the transfer of ownership of equipment to scheme participants at the end of the hire period.
This service relieves employers of considerable administrative burden at the end of the hire period.
As part of our service we contact all scheme participants near the end of their hire period and they report on the condition of the bike using our simple and comprehensive Bicycle Condition Guide.
Scheme participants can complete this process online via the Cyclescheme Extranet.
The condition categories have been established using our own extensive industry experience, consultation with our Independent Bicycle Dealer network, and a resultant ‘Store Survey’.
The condition assessment is based on 4 condition categories, A, B, C & D.
Once the condition has been ascertained Cyclescheme sends the participant an invoice for the market value.
In accordance with HMRC guidance contained in EIM 21667a, Cyclescheme’s condition assessment process provides 'contemporaneous evidence of the amount for which that type of cycle in that sort of condition would have realised in a private sale'.
In short, using our fully automated process negates the need to use HMRC's Valuation Table.
Appreciating that the market value invoices may exceed current participant expectations and in order to maintain the scheme's economic attractiveness, participants may be given the option to extend the hire period with Cyclescheme.
If the hire period is extended Cyclescheme will contact the employee and may offer ownership of the bicycle at the market value (MV). The market value cannot be stated prior to the end of this period but should be less than the valuation arrived at for bikes in categories A, B and C in the condition assessment.
Cyclescheme will be phasing in the Condition Assessment process by applying it to all vouchers ‘requested’ after Thursday 30th September 2010.
Vouchers ‘requested’ prior to this date will be subject to the existing Cyclescheme market value process.

To request further details of our new Condition Assessment process please email us on info@cyclescheme.co.uk with the subject line ‘HMRC EIM Updates’, and please include the employer name and the following information;

Our administrator is recommending not to transfer ownership until years 3 or 4

Nose, that's just the problem – my bike would be valued by a shop at between 1k and £1200 as it's an £1800 bike that I've used since beginning of April as that's when it arrived. And it's been well maintained and kept mint by me.

So, does that make it 25% as it's an "a" grade or does it take the full and fair Market value? Given that I've already paid the £1800 value, albeit pre-tax, so say, £1100 after tax, chucking another £1k just to buy the bike makes it £2.1k and 117% of the true cost, and 130% of what I would have paid after factoring in my club discount.

That would be shit.

Toons, that's reasonable but until ownership is transferred you cannot take part in another cycle to work scheme as you won't be deemed to have finished the current one.

Pk-ripper how many bikes do you want?