New HMRC guidance on transfer fee Cycle to Work

[fossyant]

If, for tax reasons, there has to be a substantial charge for the bike at the end of the hire period this should be reflected in a lower hire charge otherwise you are paying your employer in full for the bike via the hire charge (you lose 100% of the wages) and then paying again on top of that. Schemes should be redesigned so that the overall cost is pretty much the same as it is now and, if they don't, it is either unfair or pointless or both.

Problem is it's a lease with no right of ownership at the end - if there was, it would be classed as a benefit in kind - so no allowance should or could be made for a 'buy back'. I have a feeling the scheme won't be with us long.

For me it was a useful way of getting a new bike for work which passed the 'missus seal of approval'

 

[fossyant]

This issue has been picked up by one of our Senior Finance Managers already.......... - may even mean a tax liability for me. We've now got to look into the issue PDQ

 

[fossyant]

The grape vine at work has picked up on this - real bummer !

 

[fossyant]

I wonder if I can deduct the new rear wheel, 2 x chains, 1 x sprocket, 1 x tyre and 1 x bar tape of my tax bill - adds up to about £200

 

[fossyant]

Oh and here is what happens if you've paid the nominal 5 or 10%

http://www.hmrc.gov.uk/manuals/eimanual/EIM21667.htm

 

[LOGAN 5]

Our company is just about to launch the Bike2Work Scheme. I rang this firm up and was told that the buy back would only be around £20 for a £1000 bike after 12 months and unlike Cyclescheme they don't make money from the sale only in the initial purchase via some kind of commission fee from the retailer. Don't really understand how they can charge this when the HMRC is saying something entirely different as is Cyclescheme with their final ratings codes etc which again Bike2Work don't use.

 

[fossyant]

You will find everyone has to fall in line with HMRC's guidance - what the Tax Man Says...Goes

I'd get your employers to check PDQ before you sign up.

 

[jack the lad]

The answer seems to be to have longer hire periods, but that increases the risk for scheme providers and make more work to deal with staff who leave. I guess more employers will just not bother because of the hassle.

I'm waiting for a voucher now - should I cancel? It might still be the cheapest way of buying a new bike, but if the savings are less than when I applied, I'm not sure I can afford a new bike any more!

 

[adscrim]

The HMRC guidance is not saying the x% has to be charged on transfer, it says that the employee should be taxed on the advised percentage less the costs of transfer. They don't care how much you pay for it, just that you are taxed appropriately.

Of course, that's not to say that some scheme providers/employers won't just say "tax man says x, we're charging x".

 

[anyuser]

I am still going to apply. I should still save almost 25% of the bike cost even after paying the 25% final value fee, assuming the company charges me that in 12 months time. I can only probably save 10% by using cash in a shop using my LCC card.

And, as adscrim says, if they charge me the lower rate of 3% I will only have to pay tax on the difference.

 

[DrSquirrel]

Considering cyclescheme only pays the shop 90%, there is a chance the shop will give YOU a 10% discount.

(some places will only cover 90% of your voucher for this reasons, overs will only sell at RRP etc).

Considering your company is using cyclescheme, I would avoid imo.


You talked about "HR said they own the bike", yet you are about to order new vouchers? new as in a second set?

 

[anyuser]

Considering cyclescheme only pays the shop 90%, there is a chance the shop will give YOU a 10% discount.

(some places will only cover 90% of your voucher for this reasons, overs will only sell at RRP etc).

Considering your company is using cyclescheme, I would avoid imo.


You talked about "HR said they own the bike", yet you are about to order new vouchers? new as in a second set?

I am not in the scheme yet, haven't ordered my voucher yet. I should have said HR said they would own the bike.

 

[JoysOfSight]

Schemes should be redesigned so that the overall cost is pretty much the same as it is now and, if they don't, it is either unfair or pointless or both.

Even if you paid back a full £1000 on a £1000 bike, it would hardly be unfair or pointless.

Imagine if bike to work had never happened, but instead the government had set up a mechanism whereby you can buy a bike over 12 or 18 monthly payments, arranged via work and deducted automatically from your salary, *interest free*.

That would still be a good deal, and it's why my better half is about to take up a £1000 Cyclescheme voucher, even though she might end up paying £250 to take ownership after paying £6-700 through the salary sacrifice. She can't afford to lay down a grand up front, but still wants a decent bike.

In that respect, there is still value in the scheme. I might even argue that it's a better use of my tax money, subsidising interest-free loans to employees who can't afford to pay all at once, VS people who want *another* Planet X carbon TT frame for a tiny fraction of market value.

(I should disclose that I have had a bike through Cyclescheme, myself. And yes, it was an extravagance at the taxpayers' expense!)

 

[mark i]

I think that it is a real shame. The problem comes when the bike is very well maintained, or holds it's value well. Say you bought a brompton folder, they hold value well, so if you lease the bike at cost - tax over 12 months, then pay the fair market value you could pay more than the cost of the bike. You have to factor in an effective 12 month loan, but there are less variables when you buy from the start. You are also more likely to get a discount from the bike shop at an appropriate time of year if you do not use cycle scheme.

 

[JoysOfSight]

The problem comes when the bike is very well maintained, or holds it's value well. Say you bought a brompton folder, they hold value well, so if you lease the bike at cost - tax over 12 months, then pay the fair market value you could pay more than the cost of the bike.

No, at least in that respect there's nothing to worry about. HMRC have said that they will accept a valuation of 25% no questions asked, so you will never end up paying more than RRP.

However, it's a good point that you will get a better deal than RRP anyway by shopping around. If you can afford to buy up-front, I suppose it's possible that you might be better outside the scheme.

But then, is it a big loss if only people who can't afford to buy a bike up front are getting a handout? My soon-to-be father in law has a free bus pass and gets a good deal of money through the winter fuel allowance. He's still working as a surgeon in the NHS!