400bhp
Guru
Why, as an employer would you do that though, given that you do not have to buy the bike at the end of the agreement?
Southampton City Council scrap C2W!
- Thread starter downfader
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Why, as an employer would you do that though, given that you do not have to buy the bike at the end of the agreement?
400bhp
Guru
My employer has been pretty good, probably because it was me who informed them of the change in HMRC guidelines. 
They decided to go down the "pay 12 monthly instalments" but set the loan agreement over 4 years so that the final value fee was 7%.
I argued that I would prefer to buy and importantly own the bike after 12 months as IMO the depreciation and wear and tear costs over an additional 3 years were greater than 18% (25-7).
My current thinking is I'd rather sell a bike after 12 months and get a new one on the C2W scheme. This may change over time dependent upon the inflationary pressures on new bikes at the £1k end of the market.
I'm lucky in that I'm a higher rate tax payer so get a good tax/NI saving.
They decided to go down the "pay 12 monthly instalments" but set the loan agreement over 4 years so that the final value fee was 7%.
I argued that I would prefer to buy and importantly own the bike after 12 months as IMO the depreciation and wear and tear costs over an additional 3 years were greater than 18% (25-7).
My current thinking is I'd rather sell a bike after 12 months and get a new one on the C2W scheme. This may change over time dependent upon the inflationary pressures on new bikes at the £1k end of the market.
I'm lucky in that I'm a higher rate tax payer so get a good tax/NI saving.
The employer saves as much as the employee, reclaiming the VAT (16.7% of the cost) and saving employers NI ( 13.8%) on the salary sacrificed, they make 30% doing nothing. Add the guaranteed 75% of the purchase price which the employee pays in rental payments and they are already in profit.
On top of that, if the employee doesn't want to buy the bike, the employer could probably make more than the 25% (probably at least 50%, possibly even higher) of the purchase price sticking it on ebay at the end of the rental period, so they'd be better off if the employee doesn't buy the bike.
I'd buy into a scheme which guaranteed 130% payback over the rental period.
OP
OP
downfader
extimus uero philosophus
- Location
- 'ampsheeeer
400bhp
Guru
You think employers are going to take the time and the trouble to sell bikes on Fleabay
Some employers, such as mine, have actually bought into your suggestion-I pay 90% of the 100% I borrow, plus the final instalment fee. 90% is more realistic target/sweetner.
pshore
Well-Known Member
- Location
- Last contour N of Cambridge
I have made a decision.
I have not actually paid my final value fee yet. I had a lengthy discussion with someone from CycleScheme and yes they are keeping the additional 20% of final value fee if I choose that option (but they are not encouraging people to do the one year option)
I could roll over and do the 4 year rental option but, because I want to own my bike, I am going to argue: that I should pay less for hire given that my employers business model was to cover the loss in capital value of the bike. I shall send them a cheque for 5% and if they cash it, it is a done deal (apart from tax which my employer can deal with).
edit: forgot to say, I will also give them the option of me paying the final value at 5% and I will be liable for the tax. They said computer-says-no to that one.
If they want to argue, I think I might be able to call on the Financial Ombudsman or something like that. I think it could well be a case of mis-selling.
I have not actually paid my final value fee yet. I had a lengthy discussion with someone from CycleScheme and yes they are keeping the additional 20% of final value fee if I choose that option (but they are not encouraging people to do the one year option)
I could roll over and do the 4 year rental option but, because I want to own my bike, I am going to argue: that I should pay less for hire given that my employers business model was to cover the loss in capital value of the bike. I shall send them a cheque for 5% and if they cash it, it is a done deal (apart from tax which my employer can deal with).
edit: forgot to say, I will also give them the option of me paying the final value at 5% and I will be liable for the tax. They said computer-says-no to that one.
If they want to argue, I think I might be able to call on the Financial Ombudsman or something like that. I think it could well be a case of mis-selling.
MacB
Lover of things that come in 3's
- Location
- Farnborough, Hampshire
By all means give it a go but I think you may be being a bit unrealistic here, don't forget you've got 5 seperate parties here:-
you
HMRC
the 'cycle to work scheme'
the company Cyclescheme
the bike shop
the ones doing the gouging are Cyclescheme the company and your bike shop. I understand your frustration based on your original calculations but the bit that really doesn't make any sense is your bike shop. They can make a sale at £1k, you want to use Cyclescheme so they up their price by 30%. For what exactly? did they give you an explanation for the huge jump?
In relation to the scheme in general I've said several times that the savings are dubious if you could do a cash deal instead. Unless you're a higher rate tax payer, or have a company that can go well above the £1k mark, you'll struggle to better a cash deal. Especially if you're looking at last years models discounted or lots of accessories being thrown in.
you
HMRC
the 'cycle to work scheme'
the company Cyclescheme
the bike shop
the ones doing the gouging are Cyclescheme the company and your bike shop. I understand your frustration based on your original calculations but the bit that really doesn't make any sense is your bike shop. They can make a sale at £1k, you want to use Cyclescheme so they up their price by 30%. For what exactly? did they give you an explanation for the huge jump?
In relation to the scheme in general I've said several times that the savings are dubious if you could do a cash deal instead. Unless you're a higher rate tax payer, or have a company that can go well above the £1k mark, you'll struggle to better a cash deal. Especially if you're looking at last years models discounted or lots of accessories being thrown in.
You might also be laughed at, pshore.
The regulations clearly say that you are signing up to a rental scheme and clearly say that the final purchase price must not be agreed in advance. If the purchase price was agreed in advance, that would make it a hire purchase, not a rental, and the whole thing would be taxable... you might want to think a bit before admitting that.
You are also responsible for your tax issues, not your employer.
Shame you didn't spend 10% as much time understanding the scheme before you signed up to it.
The regulations clearly say that you are signing up to a rental scheme and clearly say that the final purchase price must not be agreed in advance. If the purchase price was agreed in advance, that would make it a hire purchase, not a rental, and the whole thing would be taxable... you might want to think a bit before admitting that.
You are also responsible for your tax issues, not your employer.
Shame you didn't spend 10% as much time understanding the scheme before you signed up to it.
pshore
Well-Known Member
- Location
- Last contour N of Cambridge
Well, yes I can see that some peope think I am a bit nuts for chasing this one down.
Yep that's what I signed up to. We all know it was written up as a rental scheme but there is an expectation that you were purchasing the bike. I asked how many people had NOT been offered the bike at the end of the scheme and they said in 5 years ... none.
As to not knowing the final price, everybody knew it was 5% until the HMRC clarified the rules.
So, if it walks like a duck and quacks like a duck, it is a duck.
I don't believe I am asking for anything unreasonble here. The solution I propose does not put anyone out of pocket other than myself so long as I sort the tax element. My employer and Cycle Scheme get the right money as agreed for the bike and the rest is just a question of what proportion of the money is taxable.
Yes. I just think it is most easily sorted by adding and subtracting 20% from the relevant columns on my payslip.
Actually, I did read all the small print and knew the rules. I factored the risk of the final valuation being changed into my decision. Unfortunately I did not predict 5% going to 25%.
Yep that's what I signed up to. We all know it was written up as a rental scheme but there is an expectation that you were purchasing the bike. I asked how many people had NOT been offered the bike at the end of the scheme and they said in 5 years ... none.
As to not knowing the final price, everybody knew it was 5% until the HMRC clarified the rules.
So, if it walks like a duck and quacks like a duck, it is a duck.
I don't believe I am asking for anything unreasonble here. The solution I propose does not put anyone out of pocket other than myself so long as I sort the tax element. My employer and Cycle Scheme get the right money as agreed for the bike and the rest is just a question of what proportion of the money is taxable.
Yes. I just think it is most easily sorted by adding and subtracting 20% from the relevant columns on my payslip.
Shame you didn't spend 10% as much time understanding the scheme before you signed up to it.
Actually, I did read all the small print and knew the rules. I factored the risk of the final valuation being changed into my decision. Unfortunately I did not predict 5% going to 25%.
Poacher
Gravitationally challenged member
- Location
- Nottingham
Regardless of the legalistic nit-picking, I'm with pshore on this. The original blurb which persuaded me to enter the scheme stated that the final payment to transfer ownership after 18 months was anticipated to be 5% of the Letter of Collection value or £20, whichever was the lesser amount, plus VAT. I've now been presented with a demand for £210 + VAT = £252. Bit of a difference from £20 + VAT. I'd be quite prepared to shell out the £20 + VAT, and pay 20% income tax on the difference between this and the FMV, but my employer is currently refusing to allow me to exercise this perfectly legal option.
Could their actions be regarded in court as "obtaining money under false pretences"? That's certainly what it feels like to me.
Could their actions be regarded in court as "obtaining money under false pretences"? That's certainly what it feels like to me.
pshore
Well-Known Member
- Location
- Last contour N of Cambridge
I know there is a contract, but they are not always binding.
Remember all those people from the 80's and 90's who were sold endowment mortgages ? The way it was sold was that you would pay a fixed amount each month. I looked at the small print which said at any point in time they could ask you to pay any amount in. Sounds familiar doesn't it ?
Those people duped eventually got their money back even though there was a contract which stated everything.
The real problem here is that we are not being offered a fair choice to gain ownership. All three options (hand back, purchase at 120%, extend rental for 109%) are to the advantage of Cycle Scheme. From nearly going out of business, Cycle Scheme have now increased their profit margin. A nice move don't you think.
Remember all those people from the 80's and 90's who were sold endowment mortgages ? The way it was sold was that you would pay a fixed amount each month. I looked at the small print which said at any point in time they could ask you to pay any amount in. Sounds familiar doesn't it ?
Those people duped eventually got their money back even though there was a contract which stated everything.
The real problem here is that we are not being offered a fair choice to gain ownership. All three options (hand back, purchase at 120%, extend rental for 109%) are to the advantage of Cycle Scheme. From nearly going out of business, Cycle Scheme have now increased their profit margin. A nice move don't you think.
suecsi
Active Member
- Location
- Feltham, Middlesex
Wonder how it would work in the following situation:-
- Employee is made redundant part way through the first 12 months
In theory, you lose all the tax savings etc and the remaining payments have to be deducted from your final salary.
However, rather than spread the payments over 12 months, the company deducted the full net value of the bike and accessories less £1 in month 1. You have a one off Tax and NI saving. So only the £1 will have to be deducted from final salary. I think the company knew things might end sometime this year.
The theory was that the bike would be handed over at the end of the 12 months for the nominal sum of £1 - that was before HMRC changed things.
Our payroll department have asserted that as far as they are concerned, the employee has then paid for the bike and that's that. Not sure what will happen when everybody spreads to the winds after redundancy and then a year after they got the bike, get a demand from the HMRC for 25% of the value or 7% to not own it for another 4 years.
- Employee is made redundant part way through the first 12 months
In theory, you lose all the tax savings etc and the remaining payments have to be deducted from your final salary.
However, rather than spread the payments over 12 months, the company deducted the full net value of the bike and accessories less £1 in month 1. You have a one off Tax and NI saving. So only the £1 will have to be deducted from final salary. I think the company knew things might end sometime this year.
The theory was that the bike would be handed over at the end of the 12 months for the nominal sum of £1 - that was before HMRC changed things.
Our payroll department have asserted that as far as they are concerned, the employee has then paid for the bike and that's that. Not sure what will happen when everybody spreads to the winds after redundancy and then a year after they got the bike, get a demand from the HMRC for 25% of the value or 7% to not own it for another 4 years.
This looks to me like someone else coming to realise that the issue is with CycleScam rather than the C2W regs.
pshore
Well-Known Member
- Location
- Last contour N of Cambridge
Yep, I thank you and other contributors for helping me get my head straight on this. I'm going to write the letter this week and post it. I'll let you know what happens.