Cycle to Work Scheme - Rip Off.

[Paul Walters]

Cycle to Work Scheme, Cycle Solutions and City and County of Swansea.



Just thought I’d let you out there know of a development here….. myself and a colleague have taken advantage of the Cycle to Work Scheme being offered by Cycle Solutions and administered by the HR department of City and County of Swansea. He bought a bike (Scott P4) and I bought some Hope Vision 4 lights. It is the second time I have used the scheme, and was very pleased with the savings I made in the original tranche in 2008.



My colleague has now reached the end of his “hire” term and has received a letter from our employer telling him that he has two options:- give the bike back to the “owner” a company called LHE (who no-one here has ever heard of), or to buy it from them at 21% of the original purchase value, unless he can provide documentary proof that the bike is worth less.



This would be fine of course except that when the scheme was rolled out and presentations given to staff, we were told that the final purchase price would be “no more than the monthly salary sacrifice”. And this statement is still included on the internal email system, and visible for all to see. My colleague was having £27 pcm deducted from his salary, but is now faced with a bill of over £90 if he wants to keep the bike.



I will also have to pay the increased final price on my lights and so challenged this position on the basis that the increased charge does not form part of my contract with my employer, and that any increases imposed by HMRC on current schemes cannot be retrospectively applied to earlier agreements.



The response I got however was that since HMRC has threatened to fine any organisation that doesn’t comply with their new regime, they have no option but to pass on the extra costs to the individual, and further, that there is nothing in the contract to say what the final charge will be. My suggestion that we have therefore been mis-sold the scheme since we were not made aware of this at the time of the roll out was met with a blank rebuttal.



My question is, is this legal ? It certainly isn’t ethical.

 

[Rebel Ian]

"They have no option"

Yes, they do.....they can choose to pay the difference and that's the stance I'd take with them.

 

[gaz]

Read the scheme in fine print, it probably says something like 'subject to change with no notice to you' in there.
The scheme rules did change last year.

 

[jethro10]

If it was me, I'd be a bit more pragmatic here.

Is the saving of a few tens of pounds worth pissing of the company that pays my wages in this economic climate?
It's not like you haven't had a good deal at the taxpayers expense already now is it?

Basically it's down to how you think your company will react if you push the point.

Jeff

 

[Chris.IOW]

"They have no option"

Yes, they do.....they can choose to pay the difference and that's the stance I'd take with them.

It's not quite that simple as they would then be providing you with a taxable benefit which you would pay tax and NI on. Alright this would still not be as much as the value they are asking you to pay.

I understand the scheme was changed to the final payment having to represent the fair value of the bike (or something along those lines).

There will be something in the fine print to allow the change I would imagine.

 

[evilclive]

My colleague has now reached the end of his “hire” term and has received a letter from our employer telling him that he has two options:- give the bike back to the “owner” a company called LHE (who no-one here has ever heard of), or to buy it from them at 21% of the original purchase value, unless he can provide documentary proof that the bike is worth less.

The rules did change last year, which means transferring ownership to you at the end of the year became rather more expensive. Cyclescheme's response to this was to transfer ownership to another company (equiv of LHE?), who then transfer ownership to the employee four years later for a rather smaller fee due to the increased age of the bike.

I've seen a lot of confusion caused by this - could the same be happening here? Is the transfer to LHE only for a limited number of years?

 

[Bromptonaut]

This has been discussed here before and there are other people including Norm & Chris KH with a more detailed knowledge than mine.

There could have been an indication of what the price might be if the employer agreed to sell the goods at the end of the hire period. Any undertaking to do so would make the lease hire purchase and invalidate the tax concessions. Any price agreed after the end of the lease had to represent 'market value'

What has happened subsequently, though it's been clear over a year now, is that HMRC have 'clamped down' & insisted that market value is a realistic figure. Frankly the idea that the market value of a year old Brompton for example was £35 or £40 was risible. Some Inspectors were refusing to agree the 'one month' approach and a review was instituted. HMRC's revised approach was to impose a table of values which it would accept - a user would need to justify any lower figure. The table they use is here http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm. The bike referrred to in the OP is presumably in the more expensive cost band and around 18months old.

In the OP's position I'd be asking for the option to extend the lease, on a no charge basis, for a further 2 years. The version of Cyclescheme used here charges a deposit at the end of year one equal to the table value at 36months. That will be refunded if the bike is returned but otherwise ownership transfers to the hirer at the end of the third year. As well as being adminstratively neat this avoids complications if the employee leaves their post.

 

[Norm]

It is such a shame that people don't read the regs before signing up.

You'd think that people would prefer to know the rulesi in advance than to whinge after the event.

And the rules were not changed in any way, shape or form last year. Nothing has been retrospectively applied and trying to say that the final price was agreed in advance will get the whole scheme disallowed. I guess that wouldn't go down well with your colleagues.

The C2W regs are only a dozen pages and are on the DfT's website, as they have been all along. Have a read before you make yourself look silly.

 

[jack the lad]

I have a bike through Cyclescheme. The original deal was to pay 12 'hire' instalments for the first year. Then I had the option to buy the bike for 5% of the purchase price. This is the scheme that has been deemed to be a taxable benefit as the bike will, in fact be worth more than 5%, so it is beng transferred to me at an undervalue.

Cyclescheme have, therefore, changed the scheme so that I will have the option to hire the bike for another 4 years for a one-off payment equivalent to 5% of the purchase price. At the end of that period the bike can then be transferred to me free of charge. The Inland Revenue are satisfied that this is not a taxable benefit as the bike is by then deemed to be worthless.

The net result is that I pay no more and no less. I will own the bike in 5 years rather than 1, but this seems to me to make no appreciable difference to how I use it. I would, therefore, suggest that if your employer has a different solution which costs you more than you expected, you should put this solution to them as one that appears to comply with the original expections and with tax rules.

My employer and Cyclescheme have had to spend quite a bit of time and expense faffing around finding the right words to redefine an existing relationship, for no-one's benefit. I suspect that there is internal rivalry in the IR between the departments responsible for promoting public policy through tax concessions and the departments responsible for closing tax loopholes. This one is a small victory to some @rse in the Inland Revenue who gets their kicks from nit-picking.

 

[Tim Bennet.]

What are you whining about? Some people don't even get the chance to have other peoples' taxes subsidise our hobby.

The C2W scheme has been as enthusiastically 'exploited' as any other tax loop hole. It's hard to stomach all the moralising about other people's tax fiddles when we collectively (cyclists) have shown no less restraint in wangling every last ounce of benefit from what has been an (overly) generous concession.

 

[jack the lad]

It is undoudbtedly a rather silly waste of taxpayer's money to have the left hand giving a concession and the right hand undermining it. They are not closing any loophole, it is just an exercise in semantics. If they think it is over-generous or is being exploited, just close it to new entrants or redefine it within stricter limits.

 

[400bhp]

It is such a shame that people don't read the regs before signing up.

You'd think that people would prefer to know the rulesi in advance than to whinge after the event.

And the rules were not changed in any way, shape or form last year. Nothing has been retrospectively applied and trying to say that the final price was agreed in advance will get the whole scheme disallowed. I guess that wouldn't go down well with your colleagues.

The C2W regs are only a dozen pages and are on the DfT's website, as they have been all along. Have a read before you make yourself look silly.

Spot on.

Mis-sold

 

[2Loose]

It is such a shame that people don't read the regs before signing up.

You'd think that people would prefer to know the rulesi in advance than to whinge after the event.

And the rules were not changed in any way, shape or form last year. Nothing has been retrospectively applied and trying to say that the final price was agreed in advance will get the whole scheme disallowed. I guess that wouldn't go down well with your colleagues.

The C2W regs are only a dozen pages and are on the DfT's website, as they have been all along. Have a read before you make yourself look silly.

Very true, although most of the mis-selling has been at the employers end, rather than at HMRC. Unfortunately, a lot of the companies are back pedalling and blaming the changes on HMRC, rather than their own misinterpretation.

LHE are asking 21% of the value as a final payment, but blaming HMRC.
HMRC only really want the tax payable on that 21% (which would be about a months salary sacrifice)...but I am guessing that LHE aren't setup to process only the taxable amount and therefore ... profit!

 

[smokeysmoo]

My employer won't even entertain the C2W scheme. If yours does, and you have exploited it succesfully - keep peddling and keep smiling as you're one of the lucky ones

 

[Bman]

Well, when it comes down to it, I'm sure I can make my bike look cheaper/less appealing than it is.

Bit of duct tape/mud on the frame. Maybe pop a spoke and tube or two. Liberal coating of WD-40 on the chain and leave it outside for a week.

That should do it. I should save more money by doing this, then replacing a few spokes, tubes and a chain, than paying the full "Market Value" of the bike in one year.

Oh, I get a new chain out of this too. It'll probably have stretched by then anyway....