The Death of Cycle to Work?

[Downward]

Hi- We use Cyclescheme at the moment but I know we are looking at changing supplier - Would this be wise given the HMRC stance on the 5% valuation ??
Found this.
A number of the cycle scheme agreements we have seen suggest that at the end of the
hire agreement, the cycle can be sold to the employee for a notional amount. For
example, some documentation seems to imply that even £1,000 worth of cycles and
cycling equipment will have a negligible value after 18 months. This is misleading and
is certainly not a view shared by HMRC. So be warned: there are no special
arrangements or tax concessions covering this eventuality, and normal tax rules apply.
If the employee buys the cycle for less than its market value, the difference is liable to
tax and attracts employer’s Class 1A NICs. HMRC take the view that each cycle must
be valued at the time of sale.

 

[GrasB]

At which point the plug should be pulled as it's very likely you'll end up spending more money for your equipment long term than buying it straight out.

 

[2Loose]

I sense a boom in knackered drive train parts which will be swapped onto the bike just before valuation, then swapped out again afterwards in an attempt to get the valuation down.

 

[Jezston]

So what happens if, at the end of your scheme, they (whoever 'they' are) turn around and say they want more than you are prepared to pay? What then?

...

Also, in an earlier thread about cycle schemes, someone mentioned something about getting some kind of loan from your employer that may be more favourable in certain circumstances. Anyone know what I'm talking about?

 

[hillrep]

At the end of the hire period (usually 1 year) the bike still belongs to the employer. It is up to them to decide what to do with it, subject to HMRC rules.

I think one common option is to transfer ownership to the employee at a cost of something like one extra payment, or 5% of the initial price or whatever.

Another possibility which has also been employed in some places is for the payments to stop. The bike then still belongs to the employer, but you can continue to use it and the institutional memory will fade along with the bike's value....

The way the scheme is set up here is a real mess. If the rules are rigidly enforced then there is almost no incentive to buy a bike through the scheme.

 

[BenM]

turn around and say they want more than you are prepared to pay? What then?

Give them the bike back - I wouldn't want to, but if push came to shove...

B.

 

[Black knight]

What if the bike is stolen?

I know you have to pay your lease payments, but surely the loss of the bike should be covered by the owners insurance.

How would buying the (now non existant) bike go ahead in this case?

 

[summerdays]

Hmm... you could suddenly see a rise in 11 month old bikes being stolen depending on what the answer to your question was.

 

[dodgy]

1. Buy bike for £1000 on C2W scheme
2. Pay roughly £50 per month (depending on your tax band)
3. After 12 months, you've paid £600
4. You have the bike valued (properly) and it's worth £600
5. So employer asks for £600
6. Total cost of a £1000 bike = £1200

hahaha - brilliant This is one of the reasons why in real life it would never happen, though I stand to be corrected that it has happened to anyone.

 

[Downward]

1. Buy bike for £1000 on C2W scheme
2. Pay roughly £50 per month (depending on your tax band)
3. After 12 months, you've paid £600
4. You have the bike valued (properly) and it's worth £600
5. So employer asks for £600
6. Total cost of a £1000 bike = £1200

hahaha - brilliant This is one of the reasons why in real life it would never happen, though I stand to be corrected that it has happened to anyone.

Hmm Cue thousands of Bike Inspectors being trained up ala the Hips house buying thing !

But wait - New Goverment and Spending Cuts ! Can't see them employing anyone but can see them pulling the scheme.

 

[dodgy]

And CycleScheme is a private company isn't it? They had massive growth last year, one of the fastest in business as I understand it. They could go out of business overnight - what a precarious business model they have.

 

[DrSquirrel]

http://www.cyclechat.net/forums/newreply.php?do=newreply&p=1250051

Sorry if someone has already put this.

But reading the implementation guides, companies are not to say that the bike will be available for purchase at the end of the agreement, otherwise it will be considered hire purchase and attract usual taxes.

.... It would seem that our H&S officer is concerned about the amount of cycling related injuries.
Its hard to check his claims as our workforce are spread across around 20 locations. But I have to say I have not heard of any unusual increase in accident or injury.

I wonder if they even bother to look at car accident statistics?

Hrrmm, just read through the rules on the Cyclescheme webpage and the appropriate page of the hire agreement sent to me by my employer, and it does rather look like my nice, low-priced bike might turn out not to be after all, depending upon how good my employer decides to be after the hire period is up (on our scheme that's 36 months). Assuming I take good care of it, anyone got any idea how much a three-year-old Tifosi CK7 is likely to be worth?

Cyclescheme will be taking part of the costs.
And you don't *have* to buy it, if you had to buy it it would be a hire purchase scheme and out of the taxation benefit (which can include fines).
Cyclescheme(the company, from what I've heard) get around this by trying to charge a disposable fee.
Ask your company to loan it to you for free for the foreseeable future.

And CycleScheme is a private company isn't it? They had massive growth last year, one of the fastest in business as I understand it. They could go out of business overnight - what a precarious business model they have.

Yes it is - and I bet they love the fact that a lot of people cannot tell that - and they like to hide away the true costs to you, your employer and the shop.

 

[GrumpyGregry]

But surely

1. Buy bike for £1000 on C2W scheme
2. Pay roughly £50 per month (depending on your tax band)
3. After 12 months, you've paid £600
4. You have the bike valued (properly) and it's worth £600
5. So employer asks for £600
6. You walk away
7. You sign up for a new bike starting at 1 again
8. Employer wonders what the heck to do with all the old bikes they now own.

 

[BenM]

1. So employer asks for £600
2. You walk away
3. You sign up for a new bike starting at 1 again

That's what I was getting at earlier there is absolutely no compulsion on you to buy the bike.

B.

P.s. interesting that the BBS renumbers things when they are copied and pasted from the original post... sorry geek head on there for a moment

 

[dodgy]

But surely

1. Buy bike for £1000 on C2W scheme
2. Pay roughly £50 per month (depending on your tax band)
3. After 12 months, you've paid £600
4. You have the bike valued (properly) and it's worth £600
5. So employer asks for £600
6. You walk away
7. You sign up for a new bike starting at 1 again
8. Employer wonders what the heck to do with all the old bikes they now own.

Yes, but you'd be better off buying a bike for £600 in the first place on some kind of interest free deal then at least you've got the depreciated value at the end of it. In your example you're donating £600 worth of bicycle to your employer.