Cyclescheme bicycle condition assessment

[Bromptonaut]

Mods - can we get all the threads on this into one place. The recent guidance from HMRC mandating valuation at the point of sale has rather put the cat amongst the pigeons. It would be very useful to have both user experience and the knowledge of those such as Norm and Chris KH who have employer involvement together.

I'd suggest either a sticky in Commuting or a sub-forum.

 

[sadjack]

What happens if you don't take up the offer, can you get a new bike every year and just pay the monthly payments?

Strikes me that if you declined the option then the bike would simply belong to the company..... and what would they do with it?

Cunobelin has a good point. Depends if you want to keep the bike or not and if your employer's scheme keeps rolling on.

I'd quite like a new bike every year.

 

[Jezston]

I've read all the threads on this and I still don't understand how it works - and neither do my employers - most of the answers I've read have lead to more questions, and some of the answers I've read the admin staff where I work who run the scheme disagree with.

Someone who does understand all this could really do with writing us some kind of guide, with references.

 

[Matty]

More thumbs down for the 'scheme'. I don't think it offers anything like the saving headline figures. Won't be using it again next year, I can save much more by getting a 'last year' model off t'internet.

 

[peteoc]

I beg to differ, the cyclescheme does work as it did for me last year! I've been through it once and currently going through it for the 2nd time.

Matty, yes you can save money by getting last years model off the net, but if you find somewhere that supplies last years model that also is part of the scheme then you save even more!

Jezston - what questions do you actually have? I'll answer them where possible.

 

[HLaB]

I beg to differ, the cyclescheme does work as it did for me last year! I've been through it once and currently going through it for the 2nd time.

Matty, yes you can save money by getting last years model off the net, but if you find somewhere that supplies last years model that also is part of the scheme then you save even more!

Jezston - what questions do you actually have? I'll answer them where possible.

Undoubtedly the scheme did work in the past when you paid a 'fair market value' at the end (say 5%) but its these recent developments over 'full market value' that have got me worried. I would quite like to hear Dubman's and others recent experience to hopefully put my worries to bed.

 

[Jezston]

Cheers, I shall try to remember what they were. Off the top of my head:

1. General confusion around the different ways of running the scheme - doing it yourself, using cyclescheme.co.uk, and schemes run by specific shops -e.g. Evans and Halfords - whats the difference?

2. Norm mentioned something in him running it himself that suggested the monthly repayments didn't have to actually pay off the value of the bike itself - this came from some of the demo calculations he presented in an earlier topic (which I can't find). How does that work?

3. Who actually owns the bike while it's on scheme? If it isn't mine, how comes it has to be my insurance that covers it? Mine got nicked and the one I'm currently riding is an insurance replacement - who does this bike belong to now? How would the assessment at the end of the term work if it isn't the same bike you started with? What if your bike was knackered and battered then got nicked and one week before it's due to be valued you are given a brand new shiny bike?

4. On a similar note to the above, what happens if bits get damaged and replaced, perhaps with totally different parts to the original spec, or you modify and/or 'upgrade' the bike yourself during the hire period? How does that affect the valuation?

 

[fossyant]

My scheme finished in May, and I paid the 5% final Fee - but can't be sure how this will change for the future.

 

[adscrim]

My understanding of it: -

1. No difference, same as using different shops to buy the same product. Each shop may have different arrangements but you get the same thing in the end (at least you're supposed to).

2. I'm guessing that this is in relation to the VAT saving. C2W include an element of VAT saving which, were it your employer buying the bike, would be reclaimed through the regular VAT return process. As such, the total value of deductions made from salary would factor in the VAT already reclaimed.

3. Your employer owns the bike. I suspect the necessity for you to insure it is scheme specific. That is not the say that other schemes wouldn't also require it. If the bike is stolen or damaged and susbequently repaired, I suspect your agreement include a requirement for you to inform your employer and or the scheme operator. The HMRC requirement is that the transfer of the bike/equipment must be a full market value to avoid tax arising in respect of benefits in kind.

I would think that the full market value would be in relation to the original item. Had your insurer replaced a bike then it was at cost to you. As such the market value would be in relation to the stolen bike which you obviously no longer have and as such wouldn't want to pay for.
Due to the insurance being a condition of your scheme, the new item would continue to be property of the employer and full market value would be required on transfer.

4. Again, I suspect damage should be reported to the owner of the bike. It would make sense to me that any expense incurred due to keeping the bike available for cycling to work should be removed from the final transfer price.

The HMRC guidance is, I think, deliberately vague. They know that entrants to the scheme will be getting a benefit in relation the reduce cost to them of the goods but have to publish guidance that is in line with other employee benefits and tax rules. Such as the agreement of a final transfer price at the end of the hire agreement effectively changing the agreement to 'hire-purchase' leaving it subject to full taxation requirements. It wouldn't surprise me if the scheme operators are thte ones pushing out the new 'rules'. It's seems entirely possible that they see it as a way to increase profit in relation the the schemes.

This is of course my take on it and I could be entirely wrong.

 

[peteoc]

1 - I believe all the schemes are relatively the same however I can only offer advice on using the cyclescheme. Looking at Evans it appears to be the same as the cyclescheme however you're obviously limited to only using Evans.

2 - Again i'm not sure how it can be done by yourself, unless you possibly have a company? As far as I'm aware the following applies in the example:

Bike costs £800, your work will pay the £800 to the cyclescheme.
You then pay your work back that £800 monthly from your pay (salary sacrifice) before tax/NI - this is where you save money. Your company in theory also saves money as they won't be paying the company contribution NI on the salary you're left with.

3 - This is where it's a grey area, your work own the bike however you have to provide insurance for it. In theory you should have advised your work that the bike you had was nicked, which in return your insurance company should have paid the money to your work. This would have ended your cyclescheme contract and you'd have to start another 1. I'm currently riding my 2nd bike after the 1st was written off, I've not told my work
The end of term valuation is really down to your company, they're not able to simply write the bike off and give it to you, there has to be some sort of transaction which is why my work charge me £25 and invoice me for it.

4 - You're required to maintain the bike, if you're required to get the bike valued then you simply explain the fact that you've upgraded it. However I know quite a few people that have taken part in the scheme and never actually had to have the bike valued at the end.

 

[LOGAN 5]

...and where does it leave anybody who paid cash to the retailer for a more expensive bike above the £1000 voucher when it comes to valuing it at "Full Market Value" For example, a £2000 bike (having paid £1000 in cash direct to the retailer) would probably be worth around £800 after a year which would be a silly amount to have to pay back after the monthly payments and the initial payment to the bike shop!

 

[mark i]

I may be missing something.... If you over the year you pay the cost of the bike minus the taxation that you would have paid on your wages, then at the end to pay for the bike you pay the "fair market value" the following statements follow.

You saved the amount you would have been taxed, if the market value of the bike is greater than this you pay more then the value of the bike.

Example.

I buy a bike for £500. I am taxed overall at say 30% so I save 30% of 500 = £150.
i.e. I do pay £350.

If the fair market value of the bike is less than £150 I save money, if it is more than £150 I would have been better off buying outside of cycle to work. Surely this latter position cannot happen?

When my wife used her cycle to work scheme the final payment was another monthly payment (i.e. 13 monthly payments total gives ownership of the bike.)

 

[MartinC]

It sounds like Cyclescheme or the Revenue are getting exercised about market values at the end of the scheme. In the past it was a bit of a fiddle - the scheme allowed you to buy a bike (usually at full retail price) and pay for it over 1 or 2 years out of tax free income. I assumed the Government expected this - it was an incentive to get people to help the UK's traffic problems

If the scheme is now going to be regulated as it seems then the employer (or Cyclescheme) is going to make a profit - you'll get charged the full price of the bike in rental charges and the employer will then get the full residual value of the bike at the end. First of all no employee in their right mind is going to pay this much to rent a bike and the employer will need to pay the tax on the profit they make from this rental scheme.

I might be cynical but it seems like Cyclescheme have spotted an opportunity to make a few bob here by solving the employers admin problems with this and charging the employee the market value of the bike. Or it could be the Revenue just want to make the scheme so unattractive that no-one uses it. Or both - maybe Cyclescheme can see it's demise and want to make what they can while they can.

I got a bike on the scheme a few years back. My employer runs the scheme through Halfords. Their appears to be no mechanism in place to handle the end of the agreement. I finished paying a year or two ago, no-ones asked (or will ask) for the bike back or a transfer fee. If they do the they'll owe me money - I've been storing and maintaining their bike for quite a while now and I'd have to charge for that.

 

[adscrim]

HMRC don't really care about the value used to transfer the asset. The care about the tax in relation the asset transfer - from the HMRC website

If a cycle is transferred to an employee at a nominal value (say 5 to 10% of the original retail price), then if the market value is higher, the employee will be taxable on the difference.

This says to me that the employer can transfer the asset at whatever value they choose providing the tax on the full market value is collect. This seems the contradict the implementation guidance provide on the DfT website.

 

[Kestevan]

Someone pointed out on here a while back that the only way that the scheme works if the "full market value" clause is enforced is if the employer charges less than the bikes purchase price and then sells on at the end.

I.E for a £1000 bike where you will pay say £720 after the NI deductions.

As it has been run up to now:
£1000 over 12mths at £60 p/m plus 5% final payment = £790 - Good.

or with the "enforced" final value payment
£1000 over 12mths at £60 p/m plus "full market value" of say £500 = 1220 - Not Good

or, as it probably should be where the monthly payments dont cover the total cost.
£1000 over 12mths at £22 p/m pluss "full market value" of £500 = £764.

The last one wouldn't work quite like that though, as you would not save nearly as much on the NI contributions with the smaller payments. You should still save the VAT value though. Problem with that method though, is it doesn't allow you to spread the payments as much because of the large final payment.

I think the main reason for the changes is that the taxman has realised just how much public money it's costing to provide £1000 carbon fibre toys to people (my employer isn't running a scheme - can you tell)