Cyclescheme bicycle condition assessment

[GrasB]

I don't think anyone has suggested they should value them on the basis of the absolute maximal achievable sale price. A reasonable definition of 'market value' is the value that can be achieved by selling it in the short term. ebay or what second hand dealers are selling them for would provide some guidance.

Most certainly NOT! As bikes much over £250 second hand dealers aren't shifting quickly, around here at least. They are set up to store a large number of bikes securely have insurance etc. Those costs don't change regardless of the bikes value so they'll be more willing to hold into a bike & charge more.

Ebay isn't a great indicator for a business either as you've got to look into collection & storage costs etc.

 

[Joseph]

Most certainly NOT! As bikes much over £250 second hand dealers aren't shifting quickly, around here at least. They are set up to store a large number of bikes securely have insurance etc. Those costs don't change regardless of the bikes value so they'll be more willing to hold into a bike & charge more.

Ebay isn't a great indicator for a business either as you've got to look into collection & storage costs etc.

ebay is exactly the kind of indicator HMRC will look for when deciding the "value" of the "benefit" obtained by gaining ownership of the bike - ie. how much would it cost you to buy the same bike in the same condition today?

If cyclescheme sell the bike to you for less than that, then that's up to them - but tax is due on the difference between the market value and what you pay cyclescheme / your employer.

 

[Norm]

After talking to Cyclescheme many times (we are tendering for new Cycle 2 work scheme) there is no way they are going to start charging full market value for the bikes at the end of the loan scheme because as they say they wouldn't last 18 months.

Well if they're not then there's tax to be paid on the difference between full market value and what the bike gets sold to you for and the under-value transaction will have to be reported as a benefit on the employees P11D.... (assuming ownership is transferred to the employee at the end of the lease period)

More to the point, if you don't pay a fair market value, HMRC can come and tax you on the difference between what you paid and a fair market value - iirc this would also result in a fine for the company if they failed to report it on the P11D.

This is an interesting point (to the nerds ), because cyclescheme is a third party.

If your employer outsources ownership of the bikes to cyclescheme, they can, in theory, sell them on for any price without tax implications. It could be argued that it's no different to going to your LBS and picking up a Billy Bargain. As long as the transaction between your employer and cyclescheme could be shown to have happened at arm's length - so there should be no contractual requirement for cyclescheme to sell the bikes cheaply.

 

[Joseph]

This is an interesting point (to the nerds ), because cyclescheme is a third party.

If your employer outsources ownership of the bikes to cyclescheme, they can, in theory, sell them on for any price without tax implications. It could be argued that it's no different to going to your LBS and picking up a Billy Bargain. As long as the transaction between your employer and cyclescheme could be shown to have happened at arm's length - so there should be no contractual requirement for cyclescheme to sell the bikes cheaply.

That is indeed an angle I hadn't considered - so the contract change that started this thread could be a cunning move by cyclescheme to try and avoid a tax nasty.

The question then is - is that tax evasion, or tax avoidance? One is legal, one isn't (and could well result in a nasty tax bill)

 

[spen666]

...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!

By making a payment in the manner you have so done, the purchase is outside the C2W scheme and not eligible for tax savings

 

[Downward]

That is indeed an angle I hadn't considered - so the contract change that started this thread could be a cunning move by cyclescheme to try and avoid a tax nasty.

The question then is - is that tax evasion, or tax avoidance? One is legal, one isn't (and could well result in a nasty tax bill)

But Cyclescheme do take ownership of the bikes from the employee.

I posted last year when I had an invoice from Cyclescheme asking me for £40 to take ownership of my bike.

Thus Cyclescheme actually making 15% per sale of a bike via Cyclescheme.

If now they follow HMRC and charge full Market Value then it will be more like 40%. Then how many of your average employees are going to pay 120% of the actual cost of the bike ? Word will get around pretty quick that the scheme will cost you more than the bike costs.

 

[Norm]

But Cyclescheme do take ownership of the bikes from the employee.

Not necessarily. I think (although it could be considered hearsay, it certainly isn't scientific) that most companies which use cyclescheme retain the ownership themselves.

 

[Downward]

Not necessarily. I think (although it could be considered hearsay, it certainly isn't scientific) that most companies which use cyclescheme retain the ownership themselves.

Well our company don't and we are going under the framework that was awarded to Cyclescheme to provide the cycle to work agreement that runs through the public sector.

 

[rushandy]

I work in the public sector (police staff) and from the FAQs our HR department have provided us with it looks as though the employer retains ownership at the end of the scheme.

 

[Bromptonaut]

OK just for devilment let's look down the telescope the other way.

As posted above I'm a civil servant with a year old C2W Brompton M6R. I'm presently letting it depreciate while still on HMG's books. Lets say in two years time it's market value is assessed at £200. What's to stop the employer giving it to me and putting £200 on the P11D. I pay the £40 tax on that (I'm taxed at basic rate) and everybody's happy.

Or am I missing something????

 

[Joseph]

OK just for devilment let's look down the telescope the other way.

As posted above I'm a civil servant with a year old C2W Brompton M6R. I'm presently letting it depreciate while still on HMG's books. Lets say in two years time it's market value is assessed at £200. What's to stop the employer giving it to me and putting £200 on the P11D. I pay the £40 tax on that (I'm taxed at basic rate) and everybody's happy.

Or am I missing something????

No, I think you've got it. Your employer will also have to pay employers national insurance contributions on the £200. The NI system is tortuous, but I believe it'd be 12.8% - so £25.60.

So, as long as £200 is a fair market value, your employer is happy to gift the bike, sort out the paperwork and pay the NI, and you're happy paying the tax, then everything is sorted and the tax man will be happy they've had their piece of the cake.

Of course, I believe current trends require that we now get all upset about the government considering giving a civil servant a 200 quid brompton for nothing and have a quick rant about our tax dollars being wasted Though I can't say I see any problem with it, seems like one of the better uses of taxpayer's money.

Joseph

 

[2Loose]

Errrm, having just completed my 12 months payments and awaiting for news of a final payment amountvaluation...<drum roll> my bike was stolen last night <boo hiss>.
Couldn't happen at a worse time (if any times are better than others) of course.

The insurance company will deal with the claim but does anyone have a clue as to how on earth CycleScheme will deal with final valuation now? At this stage in the process I am awaiting news of what the replacement will be, but with the insurance excess to pay potentially on top of a 'final valuation' on a bike I no longer have...I think it may be a bit awkward. Obviously I'll let you all know how things progress as I feel 'in a grey area' with this stuff. Not exactly happy at the moment either as you can imagine.

 

[gb155]

Not necessarily. I think (although it could be considered hearsay, it certainly isn't scientific) that most companies which use cyclescheme retain the ownership themselves.

Yeah mine do (Local Authority)

 

[g00se]

Errrm, having just completed my 12 months payments and awaiting for news of a final payment amountvaluation...<drum roll> my bike was stolen last night <boo hiss>.
Couldn't happen at a worse time (if any times are better than others) of course.

The insurance company will deal with the claim but does anyone have a clue as to how on earth CycleScheme will deal with final valuation now? At this stage in the process I am awaiting news of what the replacement will be, but with the insurance excess to pay potentially on top of a 'final valuation' on a bike I no longer have...I think it may be a bit awkward. Obviously I'll let you all know how things progress as I feel 'in a grey area' with this stuff. Not exactly happy at the moment either as you can imagine.

The cyclescheme website says:

"If the bike is stolen the employee will be liable for any outstanding monies without any tax exemptions, so it's very important that employees insure the bikes."

(by the way, that's why you must have decent insurance including new for old).

Officially, it sounds like you won't have to pay a final valuation.

 

[ramses]

I e-mailed them a little while ago (couple of weeks) and this is what I got in response:

Dear Richard,

Further to your email regarding Cyclescheme, I would like to advise you that once the hire agreement has elapsed (12 months from the date in which you have redeemed the voucher at a bike store) you will be contacted by your employer or Cyclescheme depending on who your employer is. You will then be offered the chance to transfer ownership of the bike to yourself in the form of a final Fair Market Value payment. Historically, this value has tended to be around 5% (+ VAT) the original cost of the bike and accessories. The 12 months hire agreement is a hire agreement (as opposed to a hire purchase agreement which typically has interest) paid by payments from your gross salary so instead of the attached tax and NICs going to central government it is actually being used to pay for your bike. On top of this, you potentially also made VAT savings which once again depends on who your employer is.

I trust to have answered your question fully with the above information, but if you require any further guidance, please visit our website at www.cyclescheme.co.uk where you will find in-depth details and FAQs regarding many more aspects of the scheme.

Best wishes from the team at Cyclescheme!