New HMRC guidance on transfer fee Cycle to Work

[anyuser]

I just came across this guidance document on the HMRC website:

http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

It seems that you may have to pay up to 25% at the end of 12 months to own the bicycle now. My company's scheme still says around 3%.

At 25% it doesn't seem worth joining the scheme any more, or am I missing something?

I had my heart set on one of the new Whyte Urban range......

Any thoughts?

 

[DrSquirrel]

I just came across this guidance document on the HMRC website:

http://www.hmrc.gov....l/eim21667a.htm

It seems that you may have to pay up to 25% at the end of 12 months to own the bicycle now. My company's scheme still says around 3%.

At 25% it doesn't seem worth joining the scheme any more, or am I missing something?

I had my heart set on one of the new Whyte Urban range......

Any thoughts?

HMRC aren't out to encourage people to cycle to work, so i'm not surprised (they never like losing any tax money ).

Considering the scheme, and YOUR COMPANY are not allowed to say they will (only suggest) they will sell you the bike otherwise it's a Hire Purchase and outside of the rules.

Government needs to make Hire Purchase allowable, with a fixed payment at the end (nothing).

Anyway, 25% will at least give you some saving - and unless you are buying a bike for the sake of it it's still better than full price.

Though it does day up to, at least if there is some kind of cap we shouldn't need to worry - hopefully this includes the valuation system Cat A - D etc in which you can get it lower. Hopefully.



The other alternative is for your company to hire it to you, for FREE, for as long as possible. eg. So if you leave after 3 years it will be easier to get a lower % for it.

 

[anyuser]

HMRC aren't out to encourage people to cycle to work, so i'm not surprised (they never like losing any tax money ).

Considering the scheme, and YOUR COMPANY are not allowed to say they will (only suggest) they will sell you the bike otherwise it's a Hire Purchase and outside of the rules.

Government needs to make Hire Purchase allowable, with a fixed payment at the end (nothing).

Anyway, 25% will at least give you some saving - and unless you are buying a bike for the sake of it it's still better than full price.

Though it does day up to, at least if there is some kind of cap we shouldn't need to worry - hopefully this includes the valuation system Cat A - D etc in which you can get it lower. Hopefully.



The other alternative is for your company to hire it to you, for FREE, for as long as possible. eg. So if you leave after 3 years it will be easier to get a lower % for it.

I read it that the 25% transfer fee (for bikes over £400) at 12 months would be the rate that HMRC would see as reasonable and anything lower would have to be justified. In expect my company will fall into line and the 3% example they give will become a 25% example.

So on the £1000 bike I was waiting for I would end up paying £502 over the 12 months (according to the Cyclescheme calculator) and then the transfer fee of approx £250. Total £752, so saving £248 or 24.8%. I reckon that I can save £248 or more by shopping around in the sales and avoid the Cycle to Work scheme altogether. Either that or my trusty 12 year old Gary Fisher commuter will have to last a bit longer since my budget approval at home was agreed on a £500 saving!!!!

 

[DrSquirrel]

I read it that the 25% transfer fee (for bikes over £400) at 12 months would be the rate that HMRC would see as reasonable and anything lower would have to be justified. In expect my company will fall into line and the 3% example they give will become a 25% example.

So on the £1000 bike I was waiting for I would end up paying £502 over the 12 months (according to the Cyclescheme calculator) and then the transfer fee of approx £250. Total £752, so saving £248 or 24.8%. I reckon that I can save £248 or more by shopping around in the sales and avoid the Cycle to Work scheme altogether. Either that or my trusty 12 year old Gary Fisher commuter will have to last a bit longer since my budget approval at home was agreed on a £500 saving!!!!

The irony here is, the money you give goes to the company, obviously you pay tax on that - otherwise HMRC "wouldnt care".

I still think you are worrying about "worst case", just get a Cat D quote, and/or try and keep it under company name for as long as possible. Post back here though when its actually up with your experiences (also is this a 3rd party scheme or direct?).

Sadly - your company cannot agree a % like the wife

 

[anyuser]

The irony here is, the money you give goes to the company, obviously you pay tax on that - otherwise HMRC "wouldnt care".

I still think you are worrying about "worst case", just get a Cat D quote, and/or try and keep it under company name for as long as possible. Post back here though when its actually up with your experiences (also is this a 3rd party scheme or direct?).

Sadly - your company cannot agree a % like the wife

Yes, I think you are right. The company scheme is with cyclescheme. The bike I am looking at isn't available until Sept so will probably still get it then and see what happens in 12 months. The company may not even notice the guidance before then.

 

[DrSquirrel]

Do you know if yoru company has transfered ownership to cyclescheme? otherwise you will get a buy or pay to dispose option.

Also, if ownership has been transfered (people are talking about being billed by cyclescheme which means ownership must have been transfered) then you have no option for "free hire".


I would ask your company for free hire if you cannot get your 3% (which surprises me as I thought the minimum was 5%)

 

[anyuser]

Do you know if yoru company has transfered ownership to cyclescheme? otherwise you will get a buy or pay to dispose option.

Also, if ownership has been transfered (people are talking about being billed by cyclescheme which means ownership must have been transfered) then you have no option for "free hire".


I would ask your company for free hire if you cannot get your 3% (which surprises me as I thought the minimum was 5%)

HR say they own the bike and the final payment is made to the company so it does not look like they have transferred ownership. The benefits portal still gives the example of 3% but I am guessing they do not update it very often.

 

[dodgy]

Are the rules (or at least the enforcement of the rules) being retrospectively applied to all on the scheme? I bought my bike last November/December.

 

[Shadow]

I just came across this guidance document on the HMRC website:

I hope you were looking for something specific on the HMRC site and not there for fun!!!!

 

[anyuser]

I hope you were looking for something specific on the HMRC site and not there for fun!!!!

I was certainly not there for fun

, just researching the Cycle to Work as I had heard about the final payments going up and I am close to ordering my vouchers. I will probably order in Sept as the bike I fancy is only available then.

 

[fossyant]

Well, if that's been published by HMRC, you can bet that valuation will come in, which makes the scheme no use to employees of organisations that can't claim VAT back, and not much benefit to those who can discount the VAT.....

Also note the remarks about high value or bespoke bikes........

 

[JoysOfSight]

Well, the good news is that they are still massively undervaluing most bikes - I'd happily take most £1000 scheme bikes, especially if lightly used, for £250 and then sell on eBay at a healthy profit

On the other hand, it is a lot more than the token £30-50 that people have been paying so far!

They've also formalised what they will require if you propose to pay less than £250 - I imagine that (for example) a lot of people with dodgy BB / headset / hub bearings will be able to try deducting the cost of servicing/replacing them, etc.

 

[fossyant]

Hold on.... you've already paid for a fair amount of it..

My case - over 12 months I paid £696 for the bike (£1000 but no VAT relief)
Final Purchase £58 - TOTAL £754 for a £1000 bike - which is OK and I lost over £100/£150 in bike business travel miles

If that was £696 plus £250 = £946. Not much point

 

[anyuser]

Hold on.... you've already paid for a fair amount of it..

My case - over 12 months I paid £696 for the bike (£1000 but no VAT relief)
Final Purchase £58 - TOTAL £754 for a £1000 bike - which is OK and I lost over £100/£150 in bike business travel miles

If that was £696 plus £250 = £946. Not much point

Also you can save more than that at most London cycle shops if you are an LCC member. 10% discount is often given on new bikes.

 

[jack the lad]

Hold on.... you've already paid for a fair amount of it..

My case - over 12 months I paid £696 for the bike (£1000 but no VAT relief)
Final Purchase £58 - TOTAL £754 for a £1000 bike - which is OK and I lost over £100/£150 in bike business travel miles

If that was £696 plus £250 = £946. Not much point

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.