The Death of Cycle to Work?

[Rhythm Thief]

I can't imagine ever buying a new bike under any circumstances. Where's the fun in that?

 

[Browser]

If the HMRC are going to enforce the rules as they have always been implemented, all that is required is to change the scheme rules so that you don't pay the full purchase price as rental.

Wouldn't thsi fall foul of the whole it's-hire-not-purchase business which is contained within the current rules i.e. they can't discuss or fix the Fair Market Value before or during the hire period as this would constitute it being a sale and render it inelegible for the tax & NI exemption? To make sure you were getting the bike at the purchase price by reducing the monthly payments you'd need to know the transfer fee.
Does anyone have examples of what participating companies have been charging up until now?

 

[Norm]

Great, now someone who admits they didn't read their own scheme's rules is telling me about the Cycle to Work regs.

Wouldn't thsi fall foul of the whole it's-hire-not-purchase business which is contained within the current rules...

WTF was that about, Browser? I was talking about reducing the amount paid in the rentals, not fixing the final payment price. Methinks it's some of the large print as well as the small that you are missing.

Does your employer use Cyclescheme? Have they made an agreement with Cyclescheme to buy the bikes at the end of the hire period? Are you always such a pessimist or are you making a special effort with this one?

 

[Riverman]

Supposing this is a major change, any ideas when it's likely to come into force?

A short time after the next general election?

 

[gb155]

Supposing this is a major change, any ideas when it's likely to come into force?

A short time after the next general election?

dammm you beat me to it, lol

 

[Browser]

Great, now someone who admits they didn't read their own scheme's rules is telling me about the Cycle to Work regs.

No, not telling you Norm, discussing, there's a difference, hence me saying "wouldn't this" rather than "this would" at the beginning of the post . Believe me, I don't usually try to tell anyone about any regs anywhere, as my grasp of them is generally tenuous at best. Believe me, I wish I was different, I only hope involvement in this scheme helps to make me so!

WTF was that about, Browser? I was talking about reducing the amount paid in the rentals, not fixing the final payment price. Methinks it's some of the large print as well as the small that you are missing.

I was under the impression what was under discussion was the fact that, if HMRC were going to strictly enforce the existing regs, the end cost of the bike to the cycleschemer could increase substantially, as many scheme operators (employers) had up until now only charged a nominal fee to transfer ownership of the bicycle from the hirer to the hiree. Payment of 'Fair Market Value' would obviously increase this, so my impresion was that you were suggesting the sum total of the amounts paid per month should be made be less than the total purchase cost of the bike/value of the Cyclescheme voucher, so that when said FMV was paid to transfer ownership, this would bring thr total paid up to the full purchase price. Or have I grasped copmpletely the wrong end of the wooden plant support?

Does your employer use Cyclescheme?

Yes.

Have they made an agreement with Cyclescheme to buy the bikes at the end of the hire period?

Without checking the agreement, which is in PDF form at work (to be rectified tonight) I don't know but I believe it said words to the effect "the hirer may wish to transfer ownership at the end of the hire term" and then went on to state that this would be an entirely separate agreement than the salary sacrifice one set up for the 'hire' of the bike, i.e. 'don't blame us if you pay half as much again at the end'.

Are you always such a pessimist or are you making a special effort with this one?

YES!!!! And it's not pessimism, it's pragmatic realism , combined with abiding by the Murphys Law school of thought. You tend to get less disappointed by life that way

 

[Downward]

To asses the Fair Market Value they would have to hire someone qualified enough to do this and it would be interesting to see how this person would go about his job !

I know if someone said to me we are looking to inspect your bike I'd say I can do Sunday evenings only and lets face it this job would be a 9-5 job. Other choice inspect it at work - Sorry I am on my other bike today !

 

[Browser]

I'd make sure I scheduled it for when I was on night shifts.

 

[gb155]

I'd make sure I scheduled it for when I was on night shifts.

id start working night shifts lol

 

[Norm]

YES!!!! And it's not pessimism, it's pragmatic realism , combined with abiding by the Murphys Law school of thought. You tend to get less disappointed by life that way

Indeed... life sucks when the worst you can be is right.

I was under the impression what was under discussion was the fact that, if HMRC were going to strictly enforce the existing regs, the end cost of the bike to the cycleschemer could increase substantially, as many scheme operators (employers) had up until now only charged a nominal fee to transfer ownership of the bicycle from the hirer to the hiree.

Ah, could have been me misunderstanding your point because I was reading before drinking my first coffee on a Sunday morning.

Yes, your understanding above is correct, that's what I was suggesting. The "nominal fee" has always been in breach of the regulations, Mr Taxman is just asking the hirers to confirm how they arrived at fair market value. If the scheme is set up to cover the bikes true value at the end of the rental period, the monthly deductions will be less but the purchase price will be higher. As the purchase is made out of taxed earnings, this will reduce (but not eliminate) the benefits of the scheme.

The problem comes in the transition, with peeps like yourself who have been paying the equivalent of the original purchase price through the rentals.

 

[Browser]

Ah, could have been me misunderstanding your point because I was reading before drinking my first coffee on a Sunday morning.

Probably not Norm, I'm never very coherent at four in the morning, so my posts from the same time are likely not to be either

Yes, your understanding above is correct, that's what I was suggesting. The "nominal fee" has always been in breach of the regulations, Mr Taxman is just asking the hirers to confirm how they arrived at fair market value. If the scheme is set up to cover the bikes true value at the end of the rental period, the monthly deductions will be less but the purchase price will be higher. As the purchase is made out of taxed earnings, this will reduce (but not eliminate) the benefits of the scheme.

The problem comes in the transition, with peeps like yourself who have been paying the equivalent of the original purchase price through the rentals.

The annoying thing is, I've not actually started paying yet, but my application for the certificate (voucher) has been accepted and, worse, I've given Fat Birds Don't Fly a £200 deposit from my credit card, which I strongly suspect won't be refundable, so hoist by myne own petard am I.
Re-reading the information, I strongly suspect that even those who've already got their bike and have been in the scheme for nigh on three years will get caught, as our agreement clearly states:

"The Selection may be transferred to you at the end of the term of this Hire Agreement for a nominal sum, equating to fair market value at that time (including VAT)."

How the hell Fair Market value can equate to a 'nominal sum' for a £900 bike is beyond me. One strongly suspects that much of this scheme's administration, including the addition of the above wording, was put in by non-cyclists with no clue as to a decent bicycles second-hand value.

 

[Debian]

Hmm...

This sounds like what my HR dept was trying to explain when they told me why they wouldn't implement the scheme.

Their argument boiled down to a) to difficult to administer, especially when it came down to assessing fair market value at the end of the contract and they thought it wasn't a sensible scheme because hirers would end up paying more than the full RRP of the bike once the final transfer payment was taken into account.

Makes more sense now.

I do think there should be more control of the use of the bike. If taxpayers are contributing to others purchasing bikes on a cycle to work scheme then the bike so purchased should be used to.... errr..... cycle to work and any private use of the bike should be treated as a benefit in kind and taxed accordingly.

 

[Riding in Circles]

Unfortunately it will only be a matter of time before the tax man kills the benefits of the scheme, it is the way of things, Mr. taxman only turns a blind eye for so long and does not like the idea of people getting fringe benefits.

 

[PK99]

HMRC where always money grabbing but they appear to be focused on closing every loophole they can find and HMRC view is the C2W scheme as just that, another tax avoidance scheme.

It matters not that the scheme promotes health, helps the enviroment, ensures that small business can survive HMRC are only concerned in recovering the revenue lost.

Our Dir of Finance has already suspended the scheme until further notice and given the HMRC's proposal I have to support his action.

no doubt HMRC will have a breakdown of the types and numbers of bikes bough on the scheme.
Carbon fibre race machines vs commuters

The objective of the scheme was to encourage new cycle commuters, not finance the weekend cycling of regular cyclists. My observation of the people i kow who have bought on the scheme is that the vast majority fall into the latter category.

My LBS encouraged me to finance a new van nicholas through the scheme - as self employed the tax benefits are apparently even better. I work from home.

 

[GrasB]

The scheme reportedly is to make cycling into work financially attractive. If the scheme is set up so long term the person is likely to be worse off then the scheme should be scrapped upfront.

I think trying to stop people buying 2 grand weekend bikes is pointless & also since C2W was available in our department via personnel there has been an increase in rather nice high end hybrids & decent road bikes in the bike sheds. So a lot of those carbon road bikes from my POV are making it into work. I think it would be better to ask people to keep a log of which days they cycled in & say ask them to cycle in 1 day out of 5 (or around 50 days in the year for someone working a 5 day working week) as a minimum.

There is also the question of is what is the actual target of this scheme? I know of around 10 people who started cycling into work rather than driving because they could afford to buy a 'best bike'. Sure the bike purchased on the C2W scheme never made it to their work place but the bike they previously used at weekends does, surely that's mission accomplished?