New HMRC guidance on transfer fee Cycle to Work

[Bromptonaut]

Thanks to the OP for flagging this. My employer, a large govt department, has insisted on a shop valuation right from the point the scheme was introduced in 2008. Apparently our inspector had always been a stickler. He made clear in set up discussions that he was unlikely to sign off 'month 13' payments as representing market value.

However, once leases finished it became apparent that LBS's were reluctant to commit to a written value for reasons of liability. The original supplier (Wheelies) would not assist with either.

The matrix valuations look reasonable to me and I can now see exactly what my Brompton M6R will cost at any point in the next half decade.

There is however a possible silver linnig to this cloud. The wording of HMRC's document mentions the transfer of the bike to the employee. This would create a tax liability as a benfit in kind for which the employee would be liable but that would only be the basic (or higher rate) tax on the market value rather than the full sum.

If the employer's business case for the scheme took account of income from purchased bikes, or they were in the Cyclescheme set up where the bike reverts to the supplier who has an incentive to make money, this won't work. However if the employer has no interest in the income and, as may well be the case in govt, banking staff's cash/cheques incurs a significant processing cost then it may be a 'win/win'.

 

[GrumpyGregry]

Problem for us would be why would justifying to non-schemem members why our employer would choose to give certain employees a £200 (£250 less what we pay now; £50 to transfer) benefit in kind out of the goodness of their hearts. Esp when a significant propotion of scheme bikes have not ever graced the workplace.

My lever(s) will be

a) the scheme members here told the employer (via HR & Finance) about the change in the HMRC rules - openness, honesty and integrity.
b) the scheme members who 'fessed up cycle to work regulalry rather than (over) filling up the already crowded car park thus saving us money on car park expansion.
c) a certain aitch arr department contains some of the scheme members who have never ever ridden their cycles to work sfaik.

 

[actonblue]

My repayments are over 18 months so what valuation would HMRC expect after this period of time?

 

[Downward]

• • a photograph of the cycle demonstrating its condition along with a description of any important aspects of its condition that are not evident from photographic evidence, Easy enough to find a picture of an old bike - I mean how will HMRC know what model Trek it is from pics of the chain,brakes,tyres etc ?!!
  • broad details of the extent of usage of the cycle (which can vary considerably even between cycles that meet the “qualifying journeys” main use condition for exemption), and Screw that my bike is cleaned as it lives in the house but that's at a cost to me to maintain it over say a person who has just left their bike untouched. If mine wasn't touched in 1 year it would look like crap and needing parts replacing.
    
  • contemporaneous evidence of the amount for which that type of cycle in that sort of condition would have realised in a private sale and in a sale to a cycle retailer. Subjective to say the least.
    

 

[Peter10]

Where I work they charge the full 25% regardless. I enquired recently about C2W and they basically said that if I buy a £1000 bike and pay £75 a month (£900) I would then have to pay another £250 (25% )to buy the bike, so a total of £1150 for a £1000 bike. It would have been cheaper to get a 0% finance a few local shops are offering at the moment.

 

[mcshroom]

Well I've just priced my bike up as about £450 for a £500 bike on that table. I sort of expected it to be £500 with all the rumours around when I joined the scheme so I assumed that the C2W would just be an interest free credit.

Annoying that they set the limit at £500 though. If they'd done that before the bike was purchased I'd have had it knocked down to £499.99 and saved £40.

Also our company information still said "usually around 5% of the purchase price', so I think quite a few people are not going to be happy when an extra £200 is asked for at the end.

 

[Norm]

Where I work they charge the full 25% regardless. I enquired recently about C2W and they basically said that if I buy a £1000 bike and pay £75 a month (£900) I would then have to pay another £250 (25% )to buy the bike, so a total of £1150 for a £1000 bike. It would have been cheaper to get a 0% finance a few local shops are offering at the moment.

Only you wouldn't pay £75 per month any more than you buy the £1000 bike.

You'd sacrifice salary of £75 a month, which would cost you around £40 a month (depending on personal tax circumstances) so the total price you would pay for the rental and subsequent purchase of a bike which your employer paid £1000 to buy would be £480 + £250, which is £730. Not a bad deal when you include the interest free loan.

It sounds like your employer, Peter, has seen the light in not charging the full purchase price of the bike in rental payments. They are still getting more than their share of the tax benefits but I think they are more enlightened than anyone else I've seen reported.

If they were asking for a salary sacrifice of £62.50 per month, that would be getting towards the sort of solution which I mentioned on here several months ago.

 

[Downward]

After all the gubbings it's still going to be a 25% saving on your bike and a 12 month Interest free loan to boot. Ok so you may shop around for a deal but I have yet to see last years models being sold for 25% off on Interest Free.
Plus at least you do get the latest model although the prices seem to be increasing each year while the spec stays the same.

If anyone can find me a Trek 1.5 C 2010 model for £600 on Interest free then please let me know !

 

[Downward]

Well just had an Invoice from Cyclescheme for final payment to transfer ownership of bike to myself.

They have charged roughly the same amount as 1 monthly payment (£58.75 of a £1000 voucher)


That's my lot got 2 bike via the scheme and that's plenty for me.


The new paperwork from Cyclescheme now make no mention of transfer of ownership it's purely a 12 month hire agreement now.

 

[Bromptonaut]

Well just had an Invoice from Cyclescheme for final payment to transfer ownership of bike to myself.

They have charged roughly the same amount as 1 monthly payment (£58.75 of a £1000 voucher)


That's my lot got 2 bike via the scheme and that's plenty for me.


The new paperwork from Cyclescheme now make no mention of transfer of ownership it's purely a 12 month hire agreement now.

Given the new guidance you/your employer my find HMRC revisiting the deal @£58.75 and coming back for more!!

 

[Downward]

Given the new guidance you/your employer my find HMRC revisiting the deal @£58.75 and coming back for more!!

Not my problem Cyclescheme owned the bike and sold it to me.

 

[Bromptonaut]

Not my problem Cyclescheme owned the bike and sold it to me.

Hopefully nothing will come of it but if this was a C2W bike then, irrespective of the involvement of Cyclescheme, the transfer to the employee must be at market value. If it was not you have received a benefit in kind to the extent of the gap between your payment and the actual market value. You are taxable on that benefit. If HMRC call for the money it is your problem.

And in making that point I'm not trying to be combative or 'clever'; just pointing out the facts as they are on the ground.

 

[BentMikey]

Put £100 extra in your savings against the possibility that HMRC will ask for tax on benefit in kind, and forget about it.

 

[Norm]

Hopefully nothing will come of it but if this was a C2W bike then, irrespective of the involvement of Cyclescheme, the transfer to the employee must be at market value. If it was not you have received a benefit in kind to the extent of the gap between your payment and the actual market value. You are taxable on that benefit. If HMRC call for the money it is your problem.

And in making that point I'm not trying to be combative or 'clever'; just pointing out the facts as they are on the ground.

I'm not sure that the facts are like that, and the involvement of Cyclescheme cannot be discounted in this arrangement.

As Cyclescheme are a third party, they can set the prices as they wish. There is no contract nor obligation on them to sell at a particular price. The price which they charged Downward is not a benefit to Downward as an employee.

To put it slightly differently, as Downward's purchase was from Cyclescheme, it is no more a benefit of his employment than it would have been if he had negotiated a discount with his LBS.

 

[adscrim]

Hopefully nothing will come of it but if this was a C2W bike then, irrespective of the involvement of Cyclescheme, the transfer to the employee must be at market value. If it was not you have received a benefit in kind to the extent of the gap between your payment and the actual market value. You are taxable on that benefit. If HMRC call for the money it is your problem.

And in making that point I'm not trying to be combative or 'clever'; just pointing out the facts as they are on the ground.

That's not the case. The employee must be taxed in relation to the full market value at transfer, or the 25% (or whatever) that is now being mentioned. It is perfectly within the HMRC guidance for an employer to transfer the asset at £5 providing the employee pays tax and national insurance on the remainder up the to FV assesment - about £80 on £245. Total final payment being around £85 and substantially less that the £250.