Cycle to Work Scheme Leaver

[carolonabike]

Hi, I'm looking for some advice and I'm hoping someone can advise me from a payroll point of view since this is not something I've come across before.

One of our cycle to work members is leaving to take up a job abroad. He's only paid 6 monthly installments.

I have the implementation guidance from the Dept of Transport and I know about calculating the residual value. What I'm wondering is what other folks have done in practice. Am I correct in thinking that if we (as employers) decided not to charge him the residual value he would be only be liable for tax on the balance? He doesn't want to take the bike with him but he does want to buy it so he can sell it and make back some money.

He's quite happy whatever we decide to do but I want to keep his liability down as far as possible.

 

[2Loose]

It is a very big GUESS, but I believe it is the tax on the balance that matters to the authorities.

 

[buggi]

To quote Jack Sparrow... i think the stuff on calculating the residual value is like pirate law... it's more like a guideline

 

[Bman]

Doesnt the bike actually belong to the company, until the employee buys it for "fair market value"?

If thats the case, cant the employee just hand over the bike to the employer to sell do whatever they want with it (unless the employer wants to fleece the employee for the rest of the hire period, which, I think, they can do)?

 

[Norm]

He has signed up to a rental agreement, he should (by law) make all of the payments.

The valuation is a separate issue.

 

[Wigsie]

When I left my firm 2 months before the end of the C2W scheme they charged me the last 2 installments (without the tax/NI relief) then they 'sold' the bike to me for £1.00.

 

[Norm]

... then they 'sold' the bike to me for £1.00.

Potentially the best possible solution as long as you have left the company at the time of the sale and the sale price is not part of your negotiations when leaving the company.

As I see it, that has become a third party transaction rather than a reward of employment and is just as likely to be subject to an income tax charge as getting a bargain on ebay or at the local car boot.

IMO, and written on that basis that anyone should take proper legal advice before following the random scribblings of a know-nothing on the internerd.

 

[mr_cellophane]

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.

Which I think means;
1 - He has to pay the rest of the money
2 - It comes from his pay after tax, not before.

 

[carolonabike]

Doesnt the bike actually belong to the company, until the employee buys it for "fair market value"?

Yes indeed, he has no problem with making the remaining payments and I'll deduct those from his final months salary. He wants to buy the bike in order to sell it and recoup some of the cost since he can't take it with him (he's off to Dubai). So, I'm looking for a solution which doesn't cost him too much while the company doesn't lose out either.

 

[Norm]

So, I'm looking for a solution which doesn't cost him too much while the company doesn't lose out either.

Well, the answer has been posted then. He has to make all the payments, he's signed a legally binding contract to do so and the outstanding payments must be taken from taxed salary. I'd strongly advise anyone not to let an employee who resigns to avoid any legal obligations, as your staff may be able to claim this sets a precedent and they can walk away from any agreement.

After the chap has paid up and left, agree sell him the bike for a quid.

 

[Soltydog]

probably depends on the terms of the individual. Under the scheme run by my employer, anyone leaving before the final payment has to pay the FULL price of the bike before any deductions

 

[carolonabike]

Thanks folks,

Plenty of food for thought.

 

[HLaB]

Maybe more food for thought, the bottom of Cycleschemes FAQs.