What does the Fair Market Value mean?
DonDaddyD
Posts: 12,689
When you enter the bike to work scheme, what do they mean by:
"Pay the Fair Market Value" at the end of the 12 month agreement to actually own the bike.
After 12 months of paying, albeit, a reduced amount for the bike. What would the Fair Market Value be? Wouldn't paying a lump sum be like paying the tax back at the end of the 12 months?
"Pay the Fair Market Value" at the end of the 12 month agreement to actually own the bike.
After 12 months of paying, albeit, a reduced amount for the bike. What would the Fair Market Value be? Wouldn't paying a lump sum be like paying the tax back at the end of the 12 months?
Food Chain number = 4
A true scalp is not only overtaking someone but leaving them stopped at a set of lights. As you, who have clearly beaten the lights, pummels nothing but the open air ahead. ~ 'DondaddyD'. Player of the Unspoken Game
A true scalp is not only overtaking someone but leaving them stopped at a set of lights. As you, who have clearly beaten the lights, pummels nothing but the open air ahead. ~ 'DondaddyD'. Player of the Unspoken Game
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DonDaddyD wrote:When you enter the bike to work scheme, what do they mean by:
"Pay the Fair Market Value" at the end of the 12 month agreement to actually own the bike.
After 12 months of paying, albeit, a reduced amount for the bike. What would the Fair Market Value be? Wouldn't paying a lump sum be like paying the tax back at the end of the 12 months?
Isn't the b2w scheme a similar mechanic to HP? You rent it for a period then effectively buy the 'used' bike at the fair value at time of purchase? With the prices in b2w adjusted so that the total paid is discounted by the tax amount?
*This post was brought to you by someone who has no experience of the scheme*0 -
As little as 2.5% according to the HMRC guidelines. Let me see if I can find evidence - if not there are several bikeradar threads that discuss this.0
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When I used the scheme I wasn't charged anything at the end of the period. My employer simply split the outstanding amount into 12 equal payments.
It's meant to work as jen j says but I think ultimately it's up to your employer as they effectively own the bike uo tp the end of hire period.pain is temporary, the glory of beating your mates to the top of the hill lasts forever.....................
Revised FCN - 20 -
It was 10% of the purchase price for me
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Jen etc are correct
Your employer owns the bike until you pay your 12 instalments and then sells it to you at a Fair Market Value
I was looking at McConvey Cycles (in Belfast) web site yesterday they mention 3%
So really its a nominal value“New York has the haircuts, London has the trousers, but Belfast has the reason!0 -
Its has to be a value that the revenue will accept as "fair" otherwise there are tax implications. I thought they considered 5% to be fair but companies can charge more if they want.0
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My company were doing it for £1. Now increased to 10% this year - however, they have no way of disposing or collecting said bike - so I am gonna try and call their bluff a bit! They have to collect it from my house and dispose of it - No one that I know of in the company has asked for this, so I doubt it has been considered. Mine is over 18 months too - guarenteed the bike will be f*cked by then anyway!0
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However seeing as it's the property of the company they could probably make you return it at any time and charge you for any damage to their property. It would be considered gross negligence by most companies if you trash their equipment and could lead to being sacked. However this is theoretical and you may just get away with it, but on the flip side you could be charged with theft.gtvlusso wrote:Mine is over 18 months too - guarenteed the bike will be f*cked by then anyway!0 -
Our company is 2.5%, which is a little low to be honest as there could be a benefit in kind charge as a result. I can't see the revenue ever questioning it though.Carlsberg don't make cycle clothing, but if they did it would probably still not be as good as Assos0
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From my research a lot of organisations simply charge you an extra month of your monthly installments - but it is generally down to the company. If you get your bike specialised then the market value goes down... an aquaintance has one leg noticably shorter than the other (accident years ago) and as a result the pedals are custom made for him - thus the market value for sell on is non-existant!Pain is only weakness leaving the body0
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Strictly speaking, for taxable purposes the "Fair Market Value" is the price at which that item would under normal circumstances be expected to sell for in a fair market. So how much would a 1 year old bike be likely to sell for if you put it in eBay, or advertised it in your LBS. Personally I think this would be around 40 - 50% of the new price!
Most schemes presume that the FMV will be around 5% or less of the original purchase price, but IMHO this has no basis in law, is based purely on HMRC guidelines for the Home Computer Initiative (fast devaluing equipment rented over 3 years) and would be hard to prove without a very tame LBS.
Having said that it is EXTREMELY unlikely that the HMRC will be seen knocking on doors of employers asking about cycle to work schemes - it's just not worth the hassle for them.
You should not see anything in writing about what the actual FMV is going to be at the start of the agreement because:
a) How are they expected to know the condition or value of the bike 1 year hence.
b) Stating a final purchase price makes it a hire purchase agreement and all tax benefits are lost in a blink!
One final note of caution. In this current economic situation it is possible that people will lose jobs or employers will call in receivers. In the latter case the receiver will be duty bound to maximise the monies it can obtain for the company assets, which may include the bike that has been sat in your garage for the last 11 months.
YMMV - Rufus.0 -
The tax benefits can also, theoretically, be lost if the company advertises that it will guarantee you the opportunity to buy the bike at the end - at whatever price. This would also make it an HP scheme.
We're operating on the 5% value although I do have a table of values based on the bike condition if anyone's particularly interested.0 -
JGS wrote:
However seeing as it's the property of the company they could probably make you return it at any time and charge you for any damage to their property. It would be considered gross negligence by most companies if you trash their equipment and could lead to being sacked. However this is theoretical and you may just get away with it, but on the flip side you could be charged with theft.gtvlusso wrote:Mine is over 18 months too - guarenteed the bike will be f*cked by then anyway!
It will be f*cked because it gets used everyday for at least 20 miles + - And I must say, that you are talking rubbish. It won't lead anyone to anyone being sacked!! Most companies are not gonna give a frig about a bicycle.
None of my colleagues that took the company car option have been sacked for having accidents....0 -
Thanks guys, I think I'm going to ask the people that manage the cycle scheme what they usually charge (the percentage) for "Fair Market Value".
I also need to decide if in Feb I'm willing to commit to another 12months of employment with my current employer. That's why I didn't take up the scheme the first, second and third time round.... (the irony)Food Chain number = 4
A true scalp is not only overtaking someone but leaving them stopped at a set of lights. As you, who have clearly beaten the lights, pummels nothing but the open air ahead. ~ 'DondaddyD'. Player of the Unspoken Game0 -
gtvlusso wrote:It will be f*cked because it gets used everyday for at least 20 miles + - And I must say, that you are talking rubbish. It won't lead anyone to anyone being sacked!! Most companies are not gonna give a frig about a bicycle.
None of my colleagues that took the company car option have been sacked for having accidents....
Your post made it sound as though you were deliberately treating it badly, and deliberatly trashing company property can result in being sacked. As you meant that it would be trashed because you ride 20 miles a day, that is a different matter.
As for companies "not giving a frig" about a bicycle, what planet do you live on? You are assuming that the company won't treat the bike as an asset or an investment, in this case they certainly would give a frig if something that potentially cost them £1000 gets damaged or lost.0 -
JGS wrote:gtvlusso wrote:It will be f*cked because it gets used everyday for at least 20 miles + - And I must say, that you are talking rubbish. It won't lead anyone to anyone being sacked!! Most companies are not gonna give a frig about a bicycle.
None of my colleagues that took the company car option have been sacked for having accidents....
Your post made it sound as though you were deliberately treating it badly, and deliberatly trashing company property can result in being sacked. As you meant that it would be trashed because you ride 20 miles a day, that is a different matter.
As for companies "not giving a frig" about a bicycle, what planet do you live on? You are assuming that the company won't treat the bike as an asset or an investment, in this case they certainly would give a frig if something that potentially cost them £1000 gets damaged or lost.
Earth, no they won't....! They would give a frig about a £20,000 car or a $40,000 Sun Solaris server as they have some value - but they don't give a monkey's about C2W stuff - as proved by the vast amounts of colleagues that do C2W and have never cycled in (I even have a colleague that lives 250 miles away and is doing C2W - he commutes weekly by company car!). It is not business critical or business dependant and HR departments have got much better and more interesting things to do than sod about with C2W stuff. It is simply something they do for staff as a little benefit- as long as you pay your finance monthly, the company does not give a stuff about it - A bicycle immediatley de-values to virtually nothing as soon as you get it (below £1000 in value - most C2W will do) - it is not an asset a multi million pound international firm is gonna care about, as it is essentially worthless and more cost and hassle to sort out - it is chicken feed and would cost them more to try and retrive the bike
, part of your contract is that you insure the bike (no one does - except me, but I commute everyday, so I have liability insurance and theft insurance as I don't own a car - my wife does!).
After all, they would also have to get the lights, helmet, cycle pants and other crap I got on C2W too - And I really don't think that is worth the effort!
So don't worry about it and no-one is gonna get sacked - unless you simply stopped paying your finance - In which case you would more than likely get a few reminders to pay it, but, technically you can't stop, as it is out of your gross salary.....0 -
JGS wrote:gtvlusso wrote:It will be f*cked because it gets used everyday for at least 20 miles + - And I must say, that you are talking rubbish. It won't lead anyone to anyone being sacked!! Most companies are not gonna give a frig about a bicycle.
None of my colleagues that took the company car option have been sacked for having accidents....
Your post made it sound as though you were deliberately treating it badly, and deliberatly trashing company property can result in being sacked. As you meant that it would be trashed because you ride 20 miles a day, that is a different matter.
As for companies "not giving a frig" about a bicycle, what planet do you live on? You are assuming that the company won't treat the bike as an asset or an investment, in this case they certainly would give a frig if something that potentially cost them £1000 gets damaged or lost.
Our company don't give a toss about the bikes.One guy smashed up his £2k Cannondale within two months of owning it. We just carried on taking the payments. They're carried as a debtor on our balance sheet (employee loan), not a fixed assetTruth is, they'll never ask for the bikes back so they don't care.Carlsberg don't make cycle clothing, but if they did it would probably still not be as good as Assos0 -
Yeah, the notion that that you could loose your job if you don't look after a bike purchased through a cycle to work scheme is silly.
In conversation with the person that does the scheme (at my workplace), she said that the employee is responsible for all liability for the bike. So, if the bike is stolen, damaged, lost, purposely broken or accidentally damaged the staff member is liable for all repairs and replacements. As long as the staff member is employed by the company they will continue to pay for the bike (regardless of condition) via a salary sacrifice until the agreed amount is paid (which is all the company cares about - we didn't touch the subject of fair market value). The condition of the bike is the responsiblity of the employee who is using the bike.Food Chain number = 4
A true scalp is not only overtaking someone but leaving them stopped at a set of lights. As you, who have clearly beaten the lights, pummels nothing but the open air ahead. ~ 'DondaddyD'. Player of the Unspoken Game0 -
JGS wrote:gtvlusso wrote:It will be f*cked because it gets used everyday for at least 20 miles + - And I must say, that you are talking rubbish. It won't lead anyone to anyone being sacked!! Most companies are not gonna give a frig about a bicycle.
None of my colleagues that took the company car option have been sacked for having accidents....
Your post made it sound as though you were deliberately treating it badly, and deliberatly trashing company property can result in being sacked. As you meant that it would be trashed because you ride 20 miles a day, that is a different matter.
As for companies "not giving a frig" about a bicycle, what planet do you live on? You are assuming that the company won't treat the bike as an asset or an investment, in this case they certainly would give a frig if something that potentially cost them £1000 gets damaged or lost.
The company wont treat the bike as an asset because it is not an asset. It is a liability. An asset makes money or has some worth to a company. If they were to get the bike back the cost of trying to sell it would far outway the money they would make.0
