Fair Market Value - Cyclescheme.

dsmiff

The cycle scheme for my first bike is coming to an end and I have been asked for 10% of the original value to buy back the bike.

I have tried to get information out of HR, but they have just told us that is what their tax advisors have told them.

As I work for a Bank, you can not claim back VAT, so taking everything into account(inc admin fee), I will have only saved 15% off the full retail price (hence why I'm not too impressed about the 10%)

From reading other sites, I was expecting a value of 3% - 5% (the scap value of the bike).

I would just like to know what others have been charged.

davelakers

My last bike was bought through the Halfords scheme. Worth £600 I paid through a salary sacrifice and final payment was £21.

I think I ended up paying £375 for the bike.

RC21

My employer is charging 2.5% - They say that they were advised by Cyclescheme that this was the minimum fair value they could charge, but it has to be after a year has passed because it's based on deprecation of the value of the bike (although your bike won't be 97.5% less value than when you bought it a year ago)

Contact Cyclescheme to see what they advise.

itisaboutthebike

Hi
I have now left the company (IBM) where I got my cyclescheme voucher.

Can they ask me for whatever % to buy the bike back ?

And I left the company part way through paying, so I didn't get the full value of the tax benefit.

Where do I stand in all this ?

Sorry for hijecking the thread !

gkerr4

call their bluff - tel them they can have it back and ask for a date when you can arrange to return the bike.

I'm assuming you went for the max £1000 voucher and therefore are being asked for £100?

they are trying it on - some arse in accounting will think they can get a few quid in to cover the admin cost or something.

calculas

My company (also a bank) runs this through Halfords and they only asked for £10 (I took the £1000 voucher)

I think the rules are that they can ask for the fair market value but in reality the revenue are only looking for a token payment.

I was also told that if you don't pay by a certain date then the amount is added to your P11d and the revenue will get the money in the end.

dsmiff

Thanks for the replies so far.

I’ll speak with the head of our benefits dept and see where that gets me. I've already sent several e-mails; I will take this as far as I can. End of the day if they say 10% then there is not much I can do.

I'm tempted to buy a cheap bike from ebay and give them that back - I spent the rest of my vouchers on accessories

kai maguire

I was wondering where you get the figure of 15% from? far as i was aware if you pay normal tax and NI you save 43% because you pay before tax. Also if you get working tax credit your p60 will be less, so in theroy you get more tax credit?

dsmiff

Got vouchers for £1000.

Company adds 10% admin fee - £100

Total £1100

Actual bike price £899 (could not add to voucher to get the bike I wanted so had to choose another).

Can not claim back vat (so no savings there)

Cost to me after tax (40%) - £660
Add on 10% buy back fee £100 (paid after tax)

Grand total cost to me £760. Saving of approx 15% on a bike that was not my first choice.

OK I'm stuck with a load of vouchers to spend on accessories that I don't need from Halfords.

kai maguire

gosh!!
10% admin fee plus 10% buy back, the spirit of goodwill seems to have disappeared from your place of work!! How can they justified 10% adimin. surely the whole point of the scheme is to get poeple cycle to work and not the company to make money? Where i work my boss see it as a way of keeping me happy and therefore in theroy i work better. i payed no vat and only £2 buy back (on £1000).

kai maguire

The more i think about this, the more annoyed i getting. They taking 20%, What mean spirit W@"nkers they are.

andrewgturnbull

Hi there.

No - it's worse than that - they'll be saving the employer's national insurance contributions on your deductions too. Which is about another 11% I think.

Cheers, Andy

gkerr4

dsmiff wrote:

Got vouchers for £1000.

Company adds 10% admin fee - £100

Total £1100

Actual bike price £899 (could not add to voucher to get the bike I wanted so had to choose another).

Can not claim back vat (so no savings there)

Cost to me after tax (40%) - £660
Add on 10% buy back fee £100 (paid after tax)

Grand total cost to me £760. Saving of approx 15% on a bike that was not my first choice.

OK I'm stuck with a load of vouchers to spend on accessories that I don't need from Halfords.

your employer sounds well dodgy - charging 10% admin fee? for what? - was their employers NIC savings not enough for them?

also- you employer CAN claim the vat back (and will have) - they just haven't passed those savings back to you (only public service bodies can't claim VAT back - not banks!)

and now they want 10% of the initial cost as a final payment??

you want to be looking for another job!!

Slow Downcp

It's 2.5% for all bikes bought through the scheme I run for the company I work for - plus the employee get's the VAT saving, so 40% tax payers save roughly 50%, whilst 20% tax payers save 40%.

It does sound like your employer's taking the pi55.

aracer

By the sounds of that you've been well and truly ripped off. I'd be very tempted if I was you to tell them they can have the bike back, then get the cheapest thing you can on ebay to give them if they call your bluff. No way should they be charging a 10% admin fee, let alone the 10% final payment at the end - as others have said, they save enough on the NI and VAT to be quids in anyway.

Though you have done slightly better than you think, as you'll have also saved NI contributions on your payments (and if you earn enough for that to be only worth 1%, then I'm afraid sympathy will be limited from me :roll: )

daniel_b

Out of principle, with regards to the admin fee, buyback percentage and the fact they are saving money from you taking part, I would give them the bike back.

It's still their property isn't it, you have merely been leasing it from them.

Appears that they want to have their cake and eat it, and have forgotten the aim of the scheme,

Dan

poprad

Hope this doesn't move too far away from dsmiff's point, but...it strikes me that for the employer to be fair and to be seen not to be making a turn on the deal, they should (in addition) not claim back the whole amount of the bike (minus vat) through salary sacrifice, but they should allow for the final value.

So, if they intend to charge you 10% of the initial value of the bike to buy it from them, the amount of salary sacrifice should be reduced by 10%. As far as I can see they don't have to recover the full amount (in fact, they could lease it back to you for nothing) through salary sacrifice and it seems only fair that they should reduce the sacrifice by the buy back price.

Could the people who know about/administer these schemes tell me if this makes sense?

Thanks, Tim

top_bhoy

Easy to suggest 'giving the bike back' but what, after paying 760 quid over 12 months for it, what does the owner get out of it? Swapping it for a cheap bike which wasn't bought on the scheme sounds like tax eveasion to me. I'm surprised that some people who castigate others for avoiding import duties can advocate such practice. Maybe proposing to buy a cheap bike as a substitute counts as being a tax dodging accessory.

If more haggling doesn't succeed, I think the OP simply needs to bite the bullet, pay the 10% and never go near the scheme again with his current employer. I never thought it was that great a scheme anyway, once the reduced pension payments were taken into account, having to pay full rrp of the bike, pay a residual price at the end and whatever admin costs were added in. 'Free' credit I guess was a main point.

thexvw

I think the whole scheme needs a rethink. The idea is great, but yet again over complicated and vague rules make things difficult. Why should what company you work for affect if you can claim back the VAT ?. Why should higher banded tax payers pay less than lower ?. Why can't minimum wage earners use the scheme at all, surely they should get the most help ?

If the government is so keen to reduce car use, why not just take VAT off bikes altogether? We pay enough "green tax" on petrol to easily cover this. Why not provide a fixed percentage discount off bikes used for commuting with just a simple letter from your place of work authorising it ?. Ok, I accept this may result in some misuse, but probably no more than it is now anyway and it would still be getting people out of their cars and doing some exercise wouldn't it ?.

Why does it have to be so complicated ?

aracer

Top_Bhoy wrote:

Swapping it for a cheap bike which wasn't bought on the scheme sounds like tax eveasion to me. I'm surprised that some people who castigate others for avoiding import duties can advocate such practice. Maybe proposing to buy a cheap bike as a substitute counts as being a tax dodging accessory.

Nothing to do with tax evasion - the tax bit is already done with by the time you get to paying a final value or giving the bike back. The only organisation you're "diddling" is the company running the scheme, since it is them who own the bike - the taxman doesn't care at that point. From the sounds of things said company deserves whatever it gets, and if anything it is them doing tax evasion, since they get to make reduced NI contributions as well as claim back the VAT (which they're not then passing on - they could whatever they might say), in return for which they're supposed to follow the rules of the scheme. I'm not totally convinced given this 10% admin charge and 10% final value that they are actually following the rules, as both are far more than I've seen elsewhere (either that or what their tax advisors actually told them is that 10% is the maximum they could charge without losing their savings).

top_bhoy

If there is no interest in the residual value from the taxman, from what has been spoken of so far, why is it stipulated that a residual value is payable at the end of the contract? It does seem that the taxman has some interest - even if its a nominal value.

If an old bike is handed in which isn't the same make, year , model as that declared on the scheme and the work checks and finds out - I'd think you'd be toast, certainly marked on the record as being dishonest. Is it worth the hassles?

gkerr4

Top_Bhoy wrote:

If there is no interest in the residual value from the taxman, from what has been spoken of so far, why is it stipulated that a residual value is payable at the end of the contract? It does seem that the taxman has some interest - even if its a nominal value.

If an old bike is handed in which isn't the same make, year , model as that declared on the scheme and the work checks and finds out - I'd think you'd be toast, certainly marked on the record as being dishonest. Is it worth the hassles?

the residual value payment takes it off the books of the company leasing te bike. Technically it is theirs and they can't give it away (from an accounting pov) so they need to make a nominal charge.

top_bhoy

On the face of it then, poor old dsmiff looks to be getting shafted at every turn by his company!!!

dsmiff

They have extended the deadline to 10 o’clock tomorrow to let them know what we want to do with the bikes.

It looks like I'm going to have to accept the 10% for now. I do commute daily as well so it's not like I'm abusing the scheme

Have sent them another e-mail (the 6th - for what good that does), they keep quoting HRMC’s rules. Have told them I believe they are very wrong on this. They have also said they have escalated my(our) concerns (I'm still waiting to know who to).

Will also let our Halfords account manager know.

Then I will stop comfortable in the knowledge that I have done all that I can. But in the end, I have just rolled over for them, guess that’s what get’s you on in this game!

caw35slr

dsmiff wrote:

I'm stuck with a load of vouchers to spend on accessories that I don't need from Halfords.

Er, eBay?

gkerr4

dsmiff wrote:

They have extended the deadline to 10 o’clock tomorrow to let them know what we want to do with the bikes.

It looks like I'm going to have to accept the 10% for now. I do commute daily as well so it's not like I'm abusing the scheme

Have sent them another e-mail (the 6th - for what good that does), they keep quoting HRMC’s rules. Have told them I believe they are very wrong on this. They have also said they have escalated my(our) concerns (I'm still waiting to know who to).

Will also let our Halfords account manager know.

Then I will stop comfortable in the knowledge that I have done all that I can. But in the end, I have just rolled over for them, guess that’s what get’s you on in this game!

honestly - i'd make out that you are going to return the bike.

you work for a bank - what are they going to do with it? - it will be the single most effective way of escalating your point - can you imagine the conversation in HR?

aracer

dsmiff wrote:

they keep quoting HRMC’s rules.

Well actually they're obviously not - they're simply saying that it is HMRC rules. I'd suggest asking them to actually quote the HMRC rule which says they have to charge 10% (pointing out that most companies charge far less).

Also worth pointing out what Poprad mentioned - that they've not discounted the payments to allow for the residual value they still own at the end. Effectively they're charging you 10% interest, which I'm not convinced is allowed under the scheme - if anything they're breaking the rules rather than sticking to them.

killiekosmos

dsmiff wrote:

Got vouchers for £1000.

Company adds 10% admin fee - £100

Total £1100

.

How can a BANK!!!! justify this fee? Surely the admin costs are the same for a £200 bike as for a £1000 bike? Does someone not run the scheme for your company?

I'd suggest to your bosses that you think the £100 fee is nor related to the actual cost and you intend contacting OFT about it.

andrewgturnbull

killiekosmos wrote:

dsmiff wrote:

Got vouchers for £1000.

Company adds 10% admin fee - £100

Total £1100

.

How can a BANK!!!! justify this fee? Surely the admin costs are the same for a £200 bike as for a £1000 bike? Does someone not run the scheme for your company?

I'd suggest to your bosses that you think the £100 fee is nor related to the actual cost and you intend contacting OFT about it.

Bank charges? Isn't that how the industry works?

DA_BURB

HMRC guidance actually says "If ownership of the bicycle is transferred to an employee after a period of use as a benefit, the cost of the benefit is the market value at the date of transfer." They do not sttae that it should be 10% (it will depend on the goods, the market etc), so this figure has been estimated by your employer or their advisor.

the Cyclescheme FAQs, suggest 5% - note: "It's your employer's choice whether they opt to sell you the bike at the end of the hire period. If you choose to become the owner of the goods, you may be offered the opportunity to pay the Fair Market Value for them from your net salary. Your employer needs to assess each bike separately as to its worth but in our experience the market shows values to be around 5% of the original value. If you choose not to buy the bike you will be charged the equivalent of the Fair Market Value to dispose of the goods, probably to a charity.

The fair market value cannot be stated before or during the scheme as this could be considered a benefit in kind as hire-purchase does not warrant any tax-relief"

Alos, not charging any fee at the end would create liability as a benefit in kind.

lfoggy

My employer didn't charge anything at the end of the scheme and they weren't interested in having the bike back either.....probably illegal I realise but I wasn't going to argue !