So I was wondering if anyone has handed back their bike after the 12 month lease to then be given it by their employer as a taxable benefit?
We run our scheme ourselves so no cycle scheme or whatever and my employers has agreed in principle to do it.
How is it done?
How do you get taxed do you just pay income tax or do you pay national insurance contributions to?
I believe that the benefit is the fair market resale value of the bike. Say this is £800, you're taxed on this at your marginal rate, it'd go on your P11D like any other benefit. I don't think NI comes into it.
I'm not an accountant, this might all be b0ll0cks.
There are guidelines from the HRMC on what the transfer value would be at the end of 1 year, 18 months etc. The schemes I've been on transfered ownership to me and I've paid the income tax based on the final value. If the company retains ownership long enough the transfer value would be zero.
Hire it to them for a nominal fee for a futher x years, thereby reducing its value to bugger all. Then there is bugger all tax to pay on the benefit.
We have used www.cyclescheme.co.uk for quite a few years, we have never had anyone wanting to hand a bike back - probably as I know we could could charge something officially to hand over ownership based on value but we never have, we just sign over to the employee as a kind of incentive/bonus and they get to keep it - I'm not 100% if this is what we should be doing though. The scheme isn't as good these days since you don't get the VAT saving like you used to when originally set up, if you have the cash you can often get a better deal from discounts advertised on-line or by lbs (usually last years stock) but it is handy if you don't have the cash and want to spread repayment.
Well using the HMRC value chart which states the disposable value is
12 months 25%
18 months 21%
2 years 17%
3 years 12%
4 years 7%
My original plan was to extend the lease for 3 years with a 7% deposit which I would then just not get refunded at the end of the lease period in return for the bike.
But if I only have to pay 20% income tax on 25% of the original value by having it as a taxable benefit then I would only being pay 5% and take ownership immediately.
That's what my employer does. They give me the bike, which is seen as a taxable benefit. HMRC estimate my bike to be worth 25% of its £1000 price tag, £250, on which I must pay 40% tax. In order to recoup that £100, HMRC adjusts my tax code, so I pay the final valuation tax over 12 months. Win.
When we had our own limited company I just bought a bike and charged it to the company. No taxable benefit as the company 'owns' the asset.
Written off after 2 years (as per laptops and other 'tools').
