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:

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.

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

Well apart from the fact that as mentioned it's less hassle for your company to charge you the 25% than it is for them to fill in all the forms so that the taxman charges you for the BIK. Hence as evidenced by this thread, that's exactly what a lot of companies will do.

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

Making the scheme not particularly good value when you can typically negotiate a 10% discount by not going through the scheme (more if you're willing to shop around and/or go for last year's model in the sale). Not to mention that whilst the poor employee who's actually paying the money has only saved 6%, Cyclescheme (or Halfords, Evans etc.) has made 10%, whilst the employer is now making a whacking 25%+ profit.

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 **** 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.

Cyclescheme response to HMRC new rules, 6th August, maybe not relevant to everyone…

Although that evidence is tiny.

Well have you seen any evidence of a company who aren't going to charge 25% following this new advice (ones where the scheme is administered by people who are cyclists don't count, as most aren't)?

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.

That would be the impression you get from a forum like this. Most people buying a bike on the scheme don't come on here though – all the info I've seen suggests that the majority are using the scheme for its intended purpose.

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 (snigger….)