New HMRC guidance on transfer fee Cycle to Work

[Martok]

Well my 12 months is up on my bike from CycleScheme and I've just had an email from them with the options (as my employer has transferred the ownership of the bike to them).

The total value of the bike (Trek 7200) and equipment was £734.91 (the bike was £399).

CycleScheme are quoting me 3 options:

• Return the bike and equipment to them (at my own cost)
• Extend the use period for another 30 months for a one-off cost £51.44 (after that time they will offer the bike at market value)
• Purchase the equipment for £183.73

Needless to say I am shocked at the figures quoted!

I seem to recall, and this appears to be backed up by searches on the Internet, that when I took out the scheme in September last year the CycleScheme website was quoting the market value to be around 5% of the total paid for the bike and equipment.

The new figures seem to have been derived from here:


http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

and apply to anyone in the scheme where the initial 'Hire Period' ended after 6th August 2010 - see http://www.cyclescheme.co.uk/employer,intro.htm



So, my question is, can CycleScheme change what they are to offer for market value on bikes through the scheme for those already on it? Is this legal? I'd certainly have thought twice about taking out the scheme if I had known what they would offer me now (and I'm glad that i have bought my Secteur Elite not using the scheme).

If I'm stuffed with this then I'll likely go for the extended hire option as that will be cheaper in the long-run, though I'm stuck with the bike until the end of this. However I'll argue over the figures before I pay, especially as my cycle helmet is part of the equipment and as it states on the HMRC website "Where used regularly for commuting and/or travel between workplaces, safety equipment worn by the cyclist is likely to have a market value that is lower than the table percentages for a cycle and cycle-based safety equipment."

 

[dellzeqq]

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 think this is a very important point. The people who bundle the schemes together are making the big money - they insist on a 10% rebate from the shop. Most bike shops would rather give the 10% discount to the person that's going to ride the thing, and if the financial benefit of being in the scheme are minimal then I'd imagine that most purchasers would rather have a bike that is theirs, rather than one that belongs to their employers.

 

[GrumpyGregry]

The rules have changed mid scheme period for many of us. Such is the way with HMRC, it isn't down to an employer or to a scheme administrator. VAT goes up in january, income tax rates may change, blame the govt. not the employer.

sfaik cyclescheme don't own the bike during the scheme but I guess your employer can do as they please with it when the hire period ends, and what you've suggested gives cycescheme the chance to make more bunce!

Originally at my workplace we were to be offered a choice of

a) pay the 25%
b) retain a repayment period of 12 months but extend the hire period to 24- or 36-months with the appropriate reduction to resale value applied at the end of that 24- or 36-month period
c) pay the 5% and get the remaining 20% as a taxable benefit-in-kind which is declared via P11D

I talked all three over with the HMRC auditor who was in recently. As the most senior person at our place on the scheme I more or less veto-ed c) Why the heck should one group of employees get a benefit-in-kind for no good reason and incur extra expensive admin for finance as they/I would not be otherwise getting P11D's raised?

So we've gone with a) or b) at the individual scheme members choice for this year. New starters will be offered the same choice, and we are about to have a big big push to reduce motor vehicle commuting, given we are a 15 min walk from a mainline railway station, as part of a greening the org. agenda.

It is now simply a 0% finance scheme as far as I am concerned. There is no other financial benefit/saving to be had (as we don't get the VAT element off the price of the bike).

Come May if I can walk into an LBS and get a tidy Brompton or other quality folder (next on the list) for £1000 with a 10% discount off list and 0% finance then I may buy that way. Don't think it is likely many such deals will be available.

I don't have huge sympathy with bike shops getting stiffed for 10%. First these are often sales they would not otherwise have made, and second my sources (2 x owners of local independent shops) tell me they still make a profit on selling 'last years' bikes at a discount considerably higher than 10% so they aren't sobbing into their beer about the scheme.

 

[redjedi]

Well my 12 months is up on my bike from CycleScheme and I've just had an email from them with the options (as my employer has transferred the ownership of the bike to them).

The total value of the bike (Trek 7200) and equipment was £734.91 (the bike was £399).

CycleScheme are quoting me 3 options:

• Return the bike and equipment to them (at my own cost)
• Extend the use period for another 30 months for a one-off cost £51.44 (after that time they will offer the bike at market value)
• Purchase the equipment for £183.73

Needless to say I am shocked at the figures quoted!

I seem to recall, and this appears to be backed up by searches on the Internet, that when I took out the scheme in September last year the CycleScheme website was quoting the market value to be around 5% of the total paid for the bike and equipment.

The new figures seem to have been derived from here:


http://www.hmrc.gov....l/EIM21667a.htm

and apply to anyone in the scheme where the initial 'Hire Period' ended after 6th August 2010 - see http://www.cyclesche...loyer,intro.htm



So, my question is, can CycleScheme change what they are to offer for market value on bikes through the scheme for those already on it? Is this legal? I'd certainly have thought twice about taking out the scheme if I had known what they would offer me now (and I'm glad that i have bought my Secteur Elite not using the scheme).

If I'm stuffed with this then I'll likely go for the extended hire option as that will be cheaper in the long-run, though I'm stuck with the bike until the end of this. However I'll argue over the figures before I pay, especially as my cycle helmet is part of the equipment and as it states on the HMRC website "Where used regularly for commuting and/or travel between workplaces, safety equipment worn by the cyclist is likely to have a market value that is lower than the table percentages for a cycle and cycle-based safety equipment."

I'm not too keen on this new method for working out fair market value.

But if your employer is working by the new regulations (which I think they are allowed to do), then they should only be working out the final payment based on the cost of the bike and safety equipment attached to the bike (ie lights)

In calculating the original price of the cycle, include safety equipment fitted to the cycle (such as lights and bells) but not safety equipment which would be worn by the cyclist (such as helmets or reflective clothing). Where used regularly for commuting and/or travel between workplaces, safety equipment worn by the cyclist is likely to have a market value that is lower than the table percentages for a cycle and cycle-based safety equipment.

How much was the bike plus lights? If it's less than £500, then you are eligible for the 18% bracket not the 25% they are quoting.

If you're over the £500 value (or even if you're not), then you could take the extra 31 month lease and pay the 7% value of bike plus lights only, which is what they've offered you. Based on a £400 bike only that would be £28.
After the 30 month period the market value of the bike would fall into the 4 year old category (rounded up*) and be charged at 3 or 7%.

This document has some interesting information on it. Click here for PDF.

This says that at the end of the 12 month hire agreement the ownership transfers back to (or stays with) CycleScheme. You can either pay the market price of the bike to take ownership or extend the hire agreement for another 31 months. This will take the age of the bike up to 3 years 7 months (* which is rounded up to 4 years).
You only have to pay a ‘Continuation Deposit’ in order to continue the use for another 31 months. No other payments are to be made during this period.
After the 31 months you can return the bike and get your ‘Continuation Deposit’ back or pay the market price (3/7%) and also get your deposit back.

So based on your £400 bike. You pay 7% deposit (not sure where they get that 7% from) to use the bike for a further 31 months, then you pay 3% (£12) to take ownership and also get your deposit back.

I think I understood that document correctly, it doesn't say how much the deposit should be, but it does seem to make the whole scheme a better deal, as long as your prepared to wait the extra 31 months. Although all you really have to do is inform CycleScheme if you change address or employment.

 

[TheBoyBilly]

I'm with Greg on considering the scheme as nothing more than a 0% loan, although maybe you can come out of the deal slightly better off than that. As for me, my next bike is a Sportive machine to do charity rides and, if I can, the occasional FNRttC which look to be a hoot. I have applied for a 0% interest Credit Card and may even go for a 2010 Secteur Elite which will save me another £200 (is that the model you bought Martok?) I had dreams of Bassos, Giants, Pinerellos etc, but I will save my money for now, get into the Sportive scene proper and then decide whether I need more than the Secteur...probably not.

Bill

 

[Norm]

So, my question is, can CycleScheme change what they are to offer for market value on bikes through the scheme for those already on it? Is this legal? I'd certainly have thought twice about taking out the scheme if I had known what they would offer me now (and I'm glad that i have bought my Secteur Elite not using the scheme).

Martok, read what Redjedi wrote, he's pretty much spot on.

The rules have changed mid scheme period for many of us. Such is the way with HMRC, it isn't down to an employer or to a scheme administrator. VAT goes up in january, income tax rates may change, blame the govt. not the employer.

As was said in another C2W thread recently, blame the person who signs a contract without knowing what they were signing.

The rules have not changed.

The requirements have always been that the bike should be sold at market value or any difference between the market value and the amount paid is a taxable benefit. The requirements now are that the bike should be sold at market value (with guidelines provided) and any difference between the market value and the amount paid is a taxable benefit. Not much of a change, then. The guidelines were only provided because people were taking the piss saying a bike lost 95% of its value in 12 months.

 

[GrumpyGregry]

Martok, read what Redjedi wrote, he's pretty much spot on.

As was said in another C2W thread recently, blame the person who signs a contract without knowing what they were signing.

The rules have not changed.

The requirements have always been that the bike should be sold at market value or any difference between the market value and the amount paid is a taxable benefit. The requirements now are that the bike should be sold at market value (with guidelines provided) and any difference between the market value and the amount paid is a taxable benefit. Not much of a change, then. The guidelines were only provided because people were taking the piss saying a bike lost 95% of its value in 12 months.

Good call. My bads. The interpretation and guidance has changed but the rules themselves haven't. Though I'm not blaming anyone or complaining. I'm happy with the scheme as it is with its latest interpretations. My gripe, if I have one, is with those scheme members who have never, ever, used a scheme bike, or any other bicycle, for that matter, at any time to commute. Or who have bikes on the scheme with frames sized to suit a 6' 2" person when they are 5' 0" themselves. That really is a piss take par excellence.

NB My HMRC man did make coffee come out of my nose when he casually said.... "Of course, I suppose, there is nothing to stop the revenue from using this new interpretation retrospectively and assessing your liability for tax on any bikes for which you only paid 5% on in years gone by, but that would be somewhat harsh. Perfectly within the regualtions though."

 

[Norm]

NB My HMRC man did make coffee come out of my nose when he casually said.... "Of course, I suppose, there is nothing to stop the revenue from using this new interpretation retrospectively and assessing your liability for tax on any bikes for which you only paid 5% on in years gone by, but that would be somewhat harsh. Perfectly within the regualtions though."

I think it would make a few people take note of the exactitudes of the scheme regs. They can go back up to 7 years and, IMO, for the period before the guidance was issued, they'd be able to look at actual valuations of a 12 month old bike.

In other words, if someone paid a grand for a, for instance, Secteur Elite and, after 12 months, gave their employers £50 for it, HMRC could look at that any time over the next 7 years and say that a 12 month old Secteur Elite is worth £750, and look to recover tax on the £700 benefit.

That would make people sit up.

 

[GrumpyGregry]

I think it would make a few people take note of the exactitudes of the scheme regs. They can go back up to 7 years and, IMO, for the period before the guidance was issued, they'd be able to look at actual valuations of a 12 month old bike.

In other words, if someone paid a grand for a, for instance, Secteur Elite and, after 12 months, gave their employers £50 for it, HMRC could look at that any time over the next 7 years and say that a 12 month old Secteur Elite is worth £750, and look to recover tax on the £700 benefit.

That would make people sit up.

Indeed. Hence my coffee spurting everywhere. I'm on my third scheme bike at the moment. First one was £699, second one £1000, current one £1000. A large potential tax bill as I 'paid' only £50 each for the first two.

Though I'd argue if they did as you've suggested and go for 3/4 residual value, even if realistic they would be at odds with their own guidance and someone would be bound to appeal it.

It all begs questions though about input of your own dosh into the bike in the longer term normal wear and tear, etc.. Cyclesheme have been canny in their 'transfer the problem to us Mr Employer' by playing the H&S bugaboo over employers liability over a three year old bike though. Very cute.

 

[Martok]

After various communications with Cyclescheme, I've gone for the "Extend the use period for another 30 months for a one-off cost £51.44 (after that time they will offer the bike at market value)" option.

It turns out that this is all that I will pay. The figure of £51.44 is 7% of the value of the bike & equipment after 4 years (from the HMRC guidelines). Currently what I have paid is a continuation deposit which is refundable at the end if I didn't want to keep the bike. If I do (which I will, of course), then Cyclescheme offer me the bike for this price and therefore they keep the continuation deposit.

So, I'm fairly happy with the final cost I have paid, though as the bike isn't mine for another 30 months (it's Cyclescheme's now that my employer transferred it to them) I can't sell it until then, which is a pain. So it'll just have to sit next to my Secteur Elite gathering dust.

 

[magnatom]

I assume that if you go for the extended period of use then you can't sell the bike on?

 

[DrSquirrel]

I assume that if you go for the extended period of use then you can't sell the bike on?

It would be property of theirs still as it will be under hire.

The point is to buy it at a later date when the value truely is much lower.

 

[benb]

What would happen, hypothetically, if your scheme bike was stolen?
Obviously you'd still have to pay the lease amount, but what about at the end with the transfer of ownership?

 

[2Loose]

What would happen, hypothetically, if your scheme bike was stolen?
Obviously you'd still have to pay the lease amount, but what about at the end with the transfer of ownership?

Had this myself. Bike was stolen just after the 12th payment, before the settlement payment was made. Cyclescheme were informed and I was told 'oh thats a shame, nothing more to pay then'. Zilch, nada.

Even though the insurance more than covered it, I'd rather still have the bike though.

 

[Jezston]

The insurance replacement is a tricky thing. My bike was stolen 6 months into my scheme, along with the lights and lock it came with. These were replaced by MY insurer, not the companies or the scheme administrator nor HRMC.

If HRMC or anyone else wants me to pay fair market value on the bike they bought me, they can f*** off - it's been nicked.