Now this is not strictly allowed on this site but...

Kiwi Kranker

I am in the unique position of having to buy my own bike back from my own company at the current market value. I need to do this properly and not 'guess' so that its all legit for the tax man :evil: . In effect I need to work out what my bike is worth to the average person.

Why am I doing this?

So my company can buy another bike of course

Having looked at eBay there are none of my bikes on there to work out what it is worth.

Any ideas how to work out what a 2007 Scott Ransom 10 would be worth in todays market? What other sites should I check?

NB I am not asking for 'what it is worth'!!

Cheers for any advice

supersonic

This on the cycle to work scheme? Usually a nominal 5% of market value as recommended by them.

But it is the companies bike!

Kiwi Kranker

Unfortuantely its not on the cycle to work scheme as my company is structured in a way that it would be too difficult

Not sure what you mean by the 5% nominal market value? 5% of what? What it was new or what it is when I find a few for sale?

I cant take the p1ss too badly here in case I am ever audited!!

supersonic

That was the guide for the C2W scheme - the employer should offer the bike at the end of the repayment period at 5% of the RRP.

supermonkey

supersonic wrote:

That was the guide for the C2W scheme - the employer should offer the bike at the end of the repayment period at 5% of the RRP.

+1

fenboy369

Yep 5%. Tell them that I'd buy it for a fiver though, and if enough of us say that then thats the market value!

nicklouse

supersonic wrote:

That was the guide for the C2W scheme - the employer should offer the bike at the end of the repayment period at 5% of the RRP.

If i got this right it should be 5% of the RRP when it was put in the scheme not the RRP now or the value now.

teulk

Last year i had to pay 3% of the RRP or £20 plus vat or which was the highest - turned out i paid the latter. Check your C2W as scheme as it will be in there.

supersonic

I think technically your employer doesn't have to give it you at all with C2W! They would be right barstards though.

Kiwi Kranker

Right, from what I gather then if I sell myself the bike at 5% of what I paid then it is line with the current 'cycle legislation' more or less.

Seems fair to me!

I will look at this further in depth but short of ten people flogging their ransom 10s on eBay its a good start.

The only problem is that it is for a 'dark side' bike .........please dont reject me but I am thinking of one of these



http://www.planet-x-warehouse.co.uk/

nicklouse

more of a cycle to work bike than the ransom

ThanksBye

Seems a bargin, full dura-ace and cabron for 1.4k

AntG

I've just opted not to go with my company's cycle to work scheme as they set the market value rate at 15%!!

I sent them loads of evidence of other organisations putting it at 3-5%, but they were having none of it saying that our accountants said that would not be acceptable...

would generally agree with everyone else here though on the 5% figure - just something think about if you are concerned about auditors! :shock:

supersonic

nicklouse wrote:

more of a cycle to work bike than the ransom

Hw works in a quarry!

Mr Wu

Kiwi Kranker wrote:

Unfortuantely its not on the cycle to work scheme as my company is structured in a way that it would be too difficult

Not sure what you mean by the 5% nominal market value? 5% of what? What it was new or what it is when I find a few for sale?

I cant take the p1ss too badly here in case I am ever audited!!

Are you a backbencher MP politician type then......?

Kiwi Kranker

Mr Wu wrote:

Kiwi Kranker wrote:

Unfortuantely its not on the cycle to work scheme as my company is structured in a way that it would be too difficult

Not sure what you mean by the 5% nominal market value? 5% of what? What it was new or what it is when I find a few for sale?

I cant take the p1ss too badly here in case I am ever audited!!

Are you a backbencher MP politician type then......?

If I was I guess it would be a Scott Genius Ltd for me then that I said was my second bike that I rented out to my brother while claiming a tax break and also the cost of the bike back....twice.

yoohoo999

Can I just point out that if your company has bought an asset then as a director you must sell it for it's true market value.

The CTW scheme is not the "rule" as to how much a bike is worth after 1 year of use.

Think about it this way:

Under CTW your company effectively buys an asset and then recovers all of the money it spent on this asset by deducting the cost of the loan from the employee's monthly salary (no issues for directors here) - there's a no net loss/no net gain situation for the company which is the whole point of the scheme - it has a neutral overall effect on the company's book

In you situation, your company simply purchased an asset and has received no return on this investment and as such it is a capital asset which will depreciate as normal like any other asset (ie computers/furniture etc)

You better hope no one is looking at your books if you sell an asset which is worth, for example £1,000, to yourself for £50.

If you run your own company i'm presuming you have a lawyer or accountant you can speak to about this? To be honest, in the real world, it's quite easy to depreciate a bicycle on paper to an almost negligble amount, but it has to be done correctly.

If your company was placed into administration you would be in some SERIOUS shit if you had sold assets to yourself at less than true market value.

Make sure this is done properly by your accountant so you have a nice audit trail. This is not a sale at arms length and therefore should be treated with caution.

I know it's only a bike and it's hardly worth HRMC bothering their arse about, but administration could see you in real trouble if they look at the books.

(i'm a lawyer btw)

supermonkey

Agree with the above. Except for there is a net gain to the company under CTW because the company (as well as the employee) doesn't pay any tax on that portion of the employees wage.

Kiwi Kranker

Cheers for that Yoohoo. I am well aware that I cant take the p1ss that is why it was a serious question at the beginning. IT is not under a CTW scheme at all and it needs to be legit. My simple problem is that I cant find anywhere to get an accurate value of my bike as there are just not many for sale.

I was going to sell it to myself for around 10% of its purchased vaule which is still a fair amount for a two year old bike but an accurate reflection of its value who knows? My accountant suggested eBay and other trading sites for fair value and to document it but they are just not out there for sale to get this info!

I sincerely hope I dont go into administration to say the least (not looking at all likely......touch wood)

yoohoo999

SuperMonkey wrote:

Agree with the above. Except for there is a net gain to the company under CTW because the company (as well as the employee) doesn't pay any tax on that portion of the employees wage.

the firm i work for writes down any gain as "administrative" costs as a result of running the scheme (ie HR costs, loss of earnings of cash in bank due to restricted cashflow), so we tend to end up (or so i'm led to believe ) in a fairly neutral position.

yoohoo999

Kiwi Kranker wrote:

Cheers for that Yoohoo. I am well aware that I cant take the p1ss that is why it was a serious question at the beginning. IT is not under a CTW scheme at all and it needs to be legit. My simple problem is that I cant find anywhere to get an accurate value of my bike as there are just not many for sale.

I was going to sell it to myself for around 10% of its purchased vaule which is still a fair amount for a two year old bike but an accurate reflection of its value who knows? My accountant suggested eBay and other trading sites for fair value and to document it but they are just not out there for sale to get this info!

I sincerely hope I dont go into administration to say the least (not looking at all likely......touch wood)

yeah, i hope you avoid administration too mate, but these days you never know. I just wouldn't want someone looking far enough back to see sales of assets to a director at undervalue and start asking questions.

if the bike is 2 years old is resale value will be negligible using traditional write down methods (although i don't profess to to know the mechanics of them, best check with your accountant).

I think at a rough guess, 10% sounds reasonable. But it's worth checking how far off ebay ones are. Also, you can factor in the adminstrative costs of sale.

supermonkey

I've been having a think about this and really it doesn't matter whether the bike was purchased on a CTW scheme or not, the fair market value after a given time will be the same.

CTW is a lease agreement. If a company purchases an asset and then makes its money back on this asset by leasing it out, it doesn't make the asset worth any more or less just because the company has already made it's money back.

Larok

So that's a two year old bike, with the 2009 model retailing at 3.4k.

I would have thought 1.5k was very excusable? Maybe 1k would satisfy?

a frame sold for £600 below, so perhaps the 1k seems fair?

http://cgi.ebay.co.uk/SCOTT-RANSOM-10-C ... 1|294%3A50

Kiwi Kranker

Larok wrote:

So that's a two year old bike, with the 2009 model retailing at 3.4k.

I would have thought 1.5k was very excusable? Maybe 1k would satisfy?

Seen this?
http://cgi.ebay.co.uk/Scott-Ransom-10_W ... 1|294%3A50

Heck I was hoping for around £300!!!! If that goes for £2k then I will happily retreat from selling my bike to myself as that is just plain not worth it in my opinion.

I am also quite sure that everyone who sells a bike says 'hasnt been ridden very often or much or it has only done 12 miles!!'

Larok

I wish I could buy a 2 year old 6.5 inch carbon full sus for £300!!

Maybe ebay it and put the money back in the company till.

BTW I changed the link to the frame only from a past sale above as the whole bike hadn't sold

yoohoo999

SuperMonkey wrote:

I've been having a think about this and really it doesn't matter whether the bike was purchased on a CTW scheme or not, the fair market value after a given time will be the same.

CTW is a lease agreement. If a company purchases an asset and then makes its money back on this asset by leasing it out, it doesn't make the asset worth any more or less just because the company has already made it's money back.

That's correct in principle, but the whole point of CTW is to make bike affordable to employees.

So if the company purchases the bike for £1000 and then receives £1000 in loan repayments from the employee, but at the end of the scheme the market value is still actually around £500 (which isn't unreasonable for a 1 year old commuter bike), then it's not particularly appealing to the employee and there wouldn't be much uptake on the scheme, so the generally the company offers ownership for a de minimis amount of 5%.

In real terms, we all know that the market value of a bike isn't going to be 5% of it's purchase price after only 12 months.

On the other hand - forget about the CTW scheme and bikes altogether.

If a company purchases a Ferarri 355 for £129,000, then after one year sells the Ferrari to a director of the company for £6,450 (despite it's market value being perhaps £100,000) then there is clearly an issue - particularly if that company then gets into any financial difficulty.

Under the terms of the lease agreement under CTW it is explicit that there may be an option to purchase at 5% - at which point the company will have recovered the lease costs.

Using the Ferrari example, there is no lease agreement, the directors simply must act in good faith and in the interests of the company in disposing the car.

If the same director had entered into a lease agreement with the company for the Ferrari and had paid the entire cost back, then ownership could pass for a de minimis figure.

I think the key is the use of the term "market value". I think it's used incorrectly in the CTW scheme.

It should simply state "5% of the purchase cost of the bike". Reference to market value is misleading.

supermonkey

yoohoo999 wrote:

I think the key is the use of the term "market value". I think it's used incorrectly in the CTW scheme.

It should simply state "5% of the purchase cost of the bike". Reference to market value is misleading.

Totally agree with that, which was kind of my point: Market value can't be different based on whether the bike was purchased through CTW or not.

As you say, I think the term market value as the CTW operators use it is definitely misleading. Those schemes run for either 6, 12 or 24 months yet they always place fair market value at 5% of the purchase price at the end of the scheme? Obviously a 6 month old bike is not going to be worth the same as a 2 year old bike.

yoohoo999

yeah, i think we were hitting the same point but from different angles!

Like you say, market value is market value. It can never really be a fixed figure across a variable timescale.

And the very use of the term "market value" suggests that in its true sense it can never be a predetermined figure or viewed in isloation of the market itself (which in essence, is exactly what often happens under the CTW!)

On a slightly different theme, SuperMonkey, what's your take on the condition that the "bike cannot be upgraded" during the term of the lease agreement?

For my own selfish purposes, I have taken it that the bike itself (as a model for example) cannot be upgraded for a better model.

However, I have upgraded many parts on the bike, which technically creates considerable issues in relation to ownership. What consitutes the bike? (and therefore what exactly is it my firm owns?)

They would argue that it is the sum of all the parts that make the bike, and by upgrading them I am breaching the terms of the lease.

However, if that's their approach..........what happens when your tyres need replacing and you decide to put on some nice expensive ones.............have you "upgraded" the bike and are therefore in breach of the terms of the lease?

I don't imagine many companies are bothered about this at all, but it does make you wonder how shakey the legal framework we have all signed up to actually is.

I for one don't think it's clear at all, and for that reason I'm reckon we are in a pretty good position to argue the toss if things didn't swing in our favour.

deffler

If you have been advised to look at prices on an auction site then instead of looking for the same bike currently for sale on Ebay, search for past sales of the same bike to get an idea of what they been going for.

As somebody said earlier, why dont you sell it on Ebay and put the cash back in the till or towards your new bike?

Rockhopper

I thought the figure if 5% was chosen becasue its accepted by the Inland Revenue as being a fair valuation. If the company were to give you the bike for free at the end of the period then it would be a taxable benefit.

Kiwi Kranker

deffler wrote:

If you have been advised to look at prices on an auction site then instead of looking for the same bike currently for sale on Ebay, search for past sales of the same bike to get an idea of what they been going for.

As somebody said earlier, why dont you sell it on Ebay and put the cash back in the till or towards your new bike?

Just to be clear I definitely want to keep the bike. It is my baby and I love it. However I have been trying to work out the most tax efficient and finacially efficient way to buy a road bike and that was through my company.

However if the outlay for buying my bike back is too much then it would be in my interest to leave the bike in my company until it is worthless and fund the road bike in a different way or just accept that I will take the hit. Once my ransom is written off I can then claim mileage of my roadbike for commuting as I own it and I am using it for work purposes.

Having said this if I sell myself my bike my company is still getting the money which by default still means I am getting some money too.