Cyclescheme - avoiding the tax man!

Gareth

Ok been looking into this to save an absolute packet on a new bike.

http://www.cyclescheme.co.uk/

Anyone done this already?

Matteeboy

Yep.

Own the company that did it so wife and I are both employer and employee (Director).

It was pretty simple to do and we saved a fair few quid.

gk141054

OP, who do you work for...

You can only get on that scheme if your employer chooses to implement it and trying to get my company to implement it is like trying to get blood out of a stone, only harder!

If you can get on the scheme though, its very good....

Use this page to work out the savings... http://www.cyclescheme.co.uk/employee,c ... 9d1d5104a4

Quick calculation showed that (for example) a £500 bike would cost £285 (£23.76 a month for a year)

Gareth

I'm worried about the words hire period. Do you actually own the bike? Or do you have to give it back at the end?

Took this from their FAQ

Who actually owns the bike?
The bike and goods remain the property of your employer until the hire period finishes.
If your employer buys the bikes using external finance then the finance company will own the bikes during the hire period and not your employer.
Either way, at the end of the hire period you may be given the opportunity to buy the bikes for a fair market value (plus VAT)..

This taken fro the Department of Transport website

8) Can the employee keep the cycle at the end of the loan period?
There should be no automatic entitlement for the employee to take ownership of the cycle and cyclists' safety equipment at the end of the loan period. If the loan agreement (technically a hire agreement under the Consumer Credit Act 1974 (CCA)) allows for ownership of the cycle and cyclists' safety equipment to pass to the employee upon the exercise of an option, the doing of any other specified act by either party to the agreement, or the happening of any other specified event, the resulting agreement is likely to be hire purchase in which case the tax exemption available for a loaned cycle may not be available.

However, at the end of the loan period, the employer may choose to give the employee the option to purchase the equipment. Typically this would be offered at substantially less than the original value of the equipment, but to prevent a taxable benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the fair market value of the equipment. No tax relief is available to the employee for the purchase so, where the price is recovered from salary, it must be deducted from their net salary. VAT will also be payable on the purchase price by the employee on the supply by the leasing company or the employer as owner of the equipment.

Alternatively, the employer may wish to allow their employees to continue to use the cycles and cyclists' safety equipment you have supplied after the initial loan period has ended, without transferring ownership. As long as the employee continues to meet the conditions of the tax exemption (see section 4 above) no tax charge will arise.

For fuller guidance on transfer of ownership, you may wish to refer to the HMRC website http://www.hmrc.gov.uk/news/comps-and-bikes.htm

WTF? I'm confused!

heez29

technically you're hiring it but the chances are he'll give you the bike at the end

Matteeboy

They have to sell it back to you at the end for a "nominal sum" - any more than £20 for that sum and you're being ripped off.

Gareth

Just spoke to my accounts department, and they said according to the law/rules regarding this scheme, they'd have to sell it to me at fair market trade which is described as 50% the original value.

So by the looks of it, the company I work for will do it, but by the book,

Steve_F

Gareth wrote:

sell it to me at fair market trade which is described as 50% the original value

I got a bike through this kind of scheme last year and 50% is way above anything I've heard quoted. If I get a bill for that at the end I'd probably end up paying over retail for the original bike.

5% sounds a bit more like what I heard???

I've been that impressed by what I'm paying that I've ordered a road bike this year but if I get hit with a 50% bill there's going to be a cancellation!

ride_whenever

speak to them again and ask if they are sure, because that is crap.

gk141054

Its certainly a grey area....

They are not allowed to state up front what the actual "nominal sum" will be because then it constitutes a hire purchase agreement and would incurr tax....

However 50% sounds like a joke to me!!!

Taken from the website of the company that run's my g/f's companies scheme

"What happens when I have finished the payments?

You may be able to start a new scheme with a more up to date bicycle, if your employer wishes to implement a new scheme.

• The bicycle and equipment can be returned or collected for a small collection fee.
• Your employer may have the opportunity to sell the bicycle and equipment at the end of the scheme at fair market value. Currently fair market value is estimated to be a nominal sum not exceeding the amount of one month’s salary sacrifice.

Matteeboy

If you get on with your company, they really shouldn't charge much.

They are already saving money as it is - any attempts to rip off the employee means the company needs leaving!

50% is a joke. A poor one.

Milkie

I setup this scheme for my work..

It is really confussing the way they describe it...

Bascially you hire the bike from the business, until the end of the term... Then you have the option to buy it...

The way I've set it up, is at the end of the hire term the bike is sold to hire'ee for 10% of the current market value.

This money that the company gets for the bike (10% of CMV) is then spent on cycling stuff for the business, such as bicycle lockup points, shed, and things.

As for 50% of FMV, that isn't right, I think they read it wrong! As 50% of FMV is probably going to be well over the monthly salary sacrifice, and it can't be sold for more than a months salary sacrifice.

daniel_b

If they want 50% of the value for the bike at the end of the year, then I would give it back to them - you've only 'hired' it, and at the end of the period you are entitled to buy it or give it back.

On principle I would give it back, and then buy a new one from elsewhere.

Chaka Ping

My firm charged me 10% at the end of the scheme. That was £100.

It was more than I was expecting, but I still got a £1k bike for £600, so I haven't kicked up a fuss.

Baz C

gk141054 wrote:

OP, who do you work for...

You can only get on that scheme if your employer chooses to implement it and trying to get my company to implement it is like trying to get blood out of a stone, only harder!

If you can get on the scheme though, its very good....

Use this page to work out the savings... http://www.cyclescheme.co.uk/employee,c ... 9d1d5104a4

Quick calculation showed that (for example) a £500 bike would cost £285 (£23.76 a month for a year)

I would check that again if i was you mate , i'm waiting for my voucher to come through and £500 bike is costing me £345

gk141054

@ Baz C..

No need to check again mate, my figures are correct! Use the caluclator and see for yourself...

I can see that your company probably isn't reclaiming the VAT on the purchase which makes the £500 bike £335...

JCJC

.... also depends if you are a higher rate tax payer or not. i.e. 40% saving or 20% (what used to be 22%) less nominal value at the end of the term

bighit_bandit

hey guys,just joined.just reading the posts on the cyclescheme.my agreements just come through and the spec enduro and accs' for £1800 comes out at 1055 and £88 a month.it said on my paper work that at the end of the hire period they sell it to you for a fair market value,not exceeding £10 :shock:

bighit_bandit

hey guys,just joined.just reading the posts on the cyclescheme.my agreements just come through and the spec enduro and accs' for £1800 comes out at 1055 and £88 a month.it said on my paper work that at the end of the hire period they sell it to you for a fair market value,not exceeding £10 :shock:

chilledsandwich

Just to clear something else up as well, the maximum allowed under the C2W scheme is £1000, and you are not allowed to ask for a £1200 bike and top-up the rest for example. Your company can do more than this, up to £3000 iirc, but they have to basically become a credit lender and will need a license which will cost the company £335 and take about 6 weeks to come through.

Also, although I'm pretty sure that it doesn't have to all be done on RRP, the C2W scheme does cost the bike shop you get it from 10% of the total cost, so don't expect any special deals.

The bike is leased to you by your employer and you pay straight out of your pay packet so it remains their property. The value of the nominal payment at the end is set by the employer and there is no limit in place. If the bike is stolen whilst in your possession, your employer can demand the full outstanding amount from you. There is also no automatic right to the bike at the end of the scheme. You have to pay the "nominal fee" because otherwise it is hire purchase which you cannot be exempted from tax for.

Also, if you are in a position to claim travel expenses, you cannot do so if you use a bike which is currently loaned to you by the company.

It is an amazing scheme and so many people are using it and saving a lot of money on it. There have been cases of people abusing it but I hope that people will take it seriously and do it by the book so that the scheme isn't withdrawn like the Dell computer one was and potentially millions of would be bikers miss out.

gk141054

How did people abuse the Dell computer scheme?

GK

supermonkey

Isn't there a tax or legal requirement that says if your employer is going to sell you an asset then it needs to sell it to you for a certain amount? Like a certain percentage of the RRP based on how old the asset is? I know the various cycle schemes don't specify one but what about the tax rules? Fair market value is a very dubious term. If the RRP of a bike is £1000, fair market value is still going to be a few hundred quid after a year. If I'm going to pay £500-600 in rental payments I really wouldn't want to be paying another £300 to buy the bike at the end. Yet this is probably quite a fair estimate of the true market value, is it not? AFAIK, normally a company's assets devalue at a certain rate based on a formula and this affects their balance sheet. Does this not apply in this case?