See this is where I get stuck - 'Cyclescheme' charge 10%, which would make it fair that the LBS charged you £1100 for it (although I'd have thought they should charge you less as the scheme is getting them the sale which without it would mean no sale), but the LBS added on a whopping 30%.
I think your LBS took you for a ride, so to speak. I think they are the culprit in your story, not the taxman.
Given that the capital cost of the bike in your two comparisons was different by £300, and £200 of that was down to your LBS, I find it hard to understand why you blame the scheme for your LBS taking £200 profit. If they hadn't done that, your rentals would have been lower, your final payment would have been lower and the benefit which you saw would have been considerable.Well yes, I think the bike shop perhaps did make a little more, but I don't care how much they make. It was about how much it would cost me. In this particular case I was going to buy the bike - scheme or no scheme.
Oh, I love this misconception.I still put the majority of the blame on the tax man for changing the rules.
IMO, you are blaming the scheme because you were soft on your LBS.
Oh, I love this misconception.
The taxman has not changed the rules.
It has always been a requirement that the bikes are sold at the end of the rental contract at fair market value, and any difference between the sale value and the fair market value is a taxable benefit. That's what the rules were at inception, that's what they are now.
People had been taking the **** in saying that a bike lost 95% of it's new price in 12 months, HMRC have only clarified what they considered to be a fair market value. TBH, I still think that allowing 75% depreciation in 12 months is pretty good.
Yup, I said all that, I just put an "and" where there should have been an "or".The bikes have to be VALUED at fair market value. They do not have to be sold at this value which is where the taxable benefit arises. If the bike is sold at the fair market value then the scheme rules apply and no tax is due. As you rightly say, should be the bike be sold at a value below the fair market value, tax is payable on the difference between the fair market value and the sale price. In most cases (those where the scheme was limited to £1k) the value of tax payable would never exceed ca £100.
"EIM21667 - Particular benefits: bicycles: transfer of bicycle to employee
If a cycle is transferred to an employee at a nominal value (say 5 to 10% of the original retail price), then if the market value is higher, the employee will be taxable on the difference. See EIM21667a for details of an optional simplified approach to valuing cycles sold after the end of a loan/ salary sacrifice period. "
I think criticism of the scheme is fair enough. It was an almightly fiddle putting the scheme through the budget at the time.
The fair market valuation was always a joke because it was smaller than it should be. But on the flip side, the hire payments are inflated. They didn't change the hire payments part to compensate.
http://www.dailyecho...il_bike_scheme/
Its a sad loss. It never even got off the ground and they scrapped it. Perhaps the Councillers/Executives should take less of our money to faciliate something that is dreadfully needed. After all parking is massively at a premium, as is space on the roads during peak times.
How are the hire payments inflated? The hire payments should be the cost (possibly less VAT) spread over the life of the agreement, taken from gross salary resulting in a reduction in the amount of tax and NI you pay. If you are not seeing a benefit then it's the fault of the scheme operators, not the tax man.
If we take the case where the bike may be able to be purchased after one year.
Originally, this was a scheme written up so your employer can cover their costs with a final value fee at 5%.
You pay 100% of the value of the bike over one year. At the end of the year the bike is worth 5% of the value. In the business model, the amount of money recovered is 105%.
The final value rules were then clarified so in the worst case the bike is worth 25% at the end of one year. In your employers business model, they are only recovering their costs +5% so they now only need 80% of the value to still recover 105% (85% capital + 25% fv).
In my opinion, the original hire charges are now over priced and there is a case for saying you have overpaid. You have paid 125% and should be paying 105% (if you are allowed to purchase). Unfortunately you agreed to a hire fee at a fixed price and therefore your employer (or CycleScheme or taxman) makes an unintended profit.
For brand new C2W schemes, the 125% model is still what's offered isn't it ? Or are employers now asking for loan payments worth 80% of the value of the bike ?
Something I've been recommending here for about a year is that employers should review the level of hire payments.But on the flip side, the hire payments are inflated. They didn't change the hire payments part to compensate.
Nope, custom and practice has set it that way to the extent that very few (just me and pshore, apparently) question them. Set the rental payments to cover 75% rather than 100% and Robert is your father's brother.How are the hire payments inflated? The hire payments should be the cost (possibly less VAT) spread over the life of the agreement