Warning about C2W

cgarossi

I've just had our accountant come to me regarding the Cycle to Work scheme.

Our company has just had a VAT inspection and the issue of C2W came up.

When I signed up for C2W last year I was under the impression that I would be paying for the bike over the course of a year and would have to pay a small payment at the end of the year to keep the bike.

I have just found out this is not exactly the case. The bike belongs to the company and I have only been 'leasing' the bike for the period of 12 months. This means any payments I make via my pay packet do not count toward any of the bikes actual cost. So therefore I have just been hiring it, while I have been given the impression that I was paying it off like a credit agreement.

The leasing still comes under the Credit Act 1974, however the user of the bike has no rights over it what so ever. So its like taking out a contract for hiring of a vehicle over 12 months.

This has knocked me for six somewhat. Should I chose to leave the company OR decide I want to keep the bike I must request that a fair market value be placed on the bike so that I can buy it. The company for which I work for can decide, for what ever reason, that they don't want to sell it to me and can request the bike back at any time, even after the 12 months have expired. Also, a fair market value is determined by an independent valuer who may give an approximate value which could be higher or lower than the bikes actual worth.

This has all be checked via the DFT website and the VAT office, and it appears that my company and myself have been misled.

My advise is to double check what you are getting yourself into. Luckily, the company I work for are sound and are ok with me to us the bike and are not interested in trying to get me to buy it.

Anonymous

I think this fact is fairly well-known, any final payment is very small so i don't think there's much need for anyone to worry.

supersonic

Yep, all true! I point this out everytime someone thinks they are getting a bike for cheap - it ain't yours!

Always read the details ;-)

Saying that, your company should have known that.

cgarossi

Thats just it. The final payment isn't (bike retail value - what you paid) its what ever the bike is worth. The company must have it valued in order to give you a price. This could end up being more than you paid in the first place.

nicklouse

remember they guy who was trying to sell "his" newly acquired C2W bike!

cgarossi

supersonic wrote:

Yep, all true! I point this out everytime someone thinks they are getting a bike for cheap - it ain't yours!

Always read the details ;-)

Saying that, your company should have known that.

Well yeah they should of. Which is why I had a rant infront of the account about 30 mins ago. I have been misled.

ashleymp777

That's correct - my company drafts the communications regarding C2W and as M.Cole pointed out this is well know and is always mentioned.

The final payment should would out to somewhere between 5 - 10% of the value of the voucher.

bails87

Wasn't the final payment recomended by HMRC around 5% of the original price or market value. So if you used the full £1k voucher, you'd be paying £50.

Anonymous

No, in practice it never is though isn't it. I think you're being a little alarmist.

Anonymous

bails87 wrote:

Wasn't the final payment recomended by HMRC around 5% of the original price or market value. So if you used the full £1k voucher, you'd be paying £50.

Exactly bails. Hardly extortion is it!

cgarossi

At the end of the day its down to the company you work for, and wether or not they are assholes.

Luckily mine isn't.

Just thought i would give a warning to everyone who is considering C2W.

bails87

I agree that it's a well known fact and will be in the C2W documentation. You must have read it before you agreed to join the scheme? You said your company was 'sound' so surely they'll charge you a nominal fee and transfer ownership to you at the end of the 12 months.

ashleymp777

Unless he works for Cadbury's! Then he is buggered! ;-)

El Capitano

Hmmm, thanks for the head's up. I'll contact the guys here who administer this and find out :evil:

bails87

ashleymp777 wrote:

Unless he works for Cadbury's! Then he is buggered! ;-)

Oompa loompas don't need bikes, they live at work, so there's no commute

cgarossi

I read everything. The nominal fee is fine.

My points are:

1. I was led to beleive the payments I made count toward the bike cost. They don't.
2. The final payment is what ever the bike is worth at the end of the lease period. Its NOT a percentage of the lease cost.
3. The bike NEVER belongs to you unless it is sold to you by the company which is VAT chargable.
4. The total cost of leasing the bike plus any payment at the end (should you wish to pay it) can be more than the bikes retail value.

This has all been verified by a man in a knitted tank top and round glasses named Tim. He's from the VAT office.

Anonymous

While we're at it - more info here

bails87

1, 3 and 4 I knew about.

It's just the valuation of the bike that's different to what I thought. As far as I was aware, the HMRC reccomended charging a fair market price for the bike. If the price was set before then it became a hire-purchase arrangement and so wasn't eligible for the tax break. They suggested 5% as a reasonable starting point for estimating market value, after a year of daily use. You are commuting on it after all

Keep any parts that you replace, that way, when valuation day rolls around, you can take off the upgrades and put the bent seatpost, snapped rear mech and mangled wheels back on. Won't be worth much then will it :P

cgarossi

Who owns the bike

Until the hire period is finished, the employer owns the bike



This is wrong. Even after the 12 month agreement, you do not own the bike. You must purchase it from your company for its approximate value, which is VAT chargable or give the bike back.

cgarossi

Look it might sound alarmist but this is just a warning to those who think they are getting a bike for a knock down cost. It may end up being that way, but it could come back and bite you on the ass.

Like I said, just a warning.

El Capitano

Hmm, this has just opened up a bit of a can of worms...

On our intranet page, and I've printed off a copy, just in case, it definitely says "buy a bike" whereas the C2W site says hire.

Thewaylander

The final charge is down to the company's discretion, so most companies will chare a nominal smalll fee and give you your bike.

other wise they are totally free to axe you hard for what ever they feel is reasonable. i was going to try and implement this at my company work place, and its been held up( i work in finance so can garentee my final costs is not silly

Anonymous

It's not wrong - at the end of the hire period you either pay the employer a nominal fee, or they waive the fee. Then you own the bike.

The paying/waiving of the fee signals the end of the period of hire.

cgarossi

They can't waive the fee legally. They MUST sell you it at a fair value. ie what the bike is worth at the time.

So if you have just bought a desirable bike, it may still have a large value attached to it. If the company charges you a tenner for the bike, it will be investigated. This would be tax evasion.

bannedbiker

My company are a bunch of knobs, and my C2W ends around july, I'm getting a tad worried now!
I knew that the bike belongs to the company and that i was hiring it from them, but i was led to believe that i would definitely be offered the bike at the end of the 12 months for a reasonable cost which was normally around 10% of the voucher value. I also knew that my payments therefore weren't going towards paying the bike off. Cuz of that, the idea of the lease payments and the final payment to buy it from the company adding up to more than the bike's worth never crossed my mind.

Kanya

cgarossi wrote:

I read everything. The nominal fee is fine.

My points are:

1. I was led to beleive the payments I made count toward the bike cost. They don't.
2. The final payment is what ever the bike is worth at the end of the lease period. Its NOT a percentage of the lease cost.
3. The bike NEVER belongs to you unless it is sold to you by the company which is VAT chargable.
4. The total cost of leasing the bike plus any payment at the end (should you wish to pay it) can be more than the bikes retail value.

This has all been verified by a man in a knitted tank top and round glasses named Tim. He's from the VAT office.

I work for a company that administers Flexible Employee benefits, and 99% of people that sign up to C2W have a system in place ie a webpage that you log into to select any benefits.

Considering the fact that each flexible benefit site has full documentation attached to it which can be accessed online, plus the fact you would have received more documentation if you had selected the scheme to ensure you still wished to go ahead AND the fact there's a cut off date any selections must be made by...I think this is more down to you not reading the small print.

I look after about 50 odd schemes of this nature, and each and everytime this query arises, its down to the employee NOT the employer who is at fault. You'd even have gotten documentation in a hard copy to sign and send off to the supplier ie Halfords (this was probably sent via your HR)

You won't pay more than 5% if anything. I've yet to hear of an employer keep the bike, and I've seen a few thousand select it over the last year.

Be thankful you got this benefit, it's about to go the same way as the bus pass benefit....ie pulled as the government cant track that its used to cycle to work for the majority of its purpose.

Quit crying. You got a bike tax free and will pay next to sweet FA for it, after you've used it for a year. You really think your employer will retain it, whack it on ebay and turn a profit?

Again, you had more than 1 chance to read the info I would wager - and it's clearly marked of the T & C's

Monkeypump

I don't think anyone has been misled here.

Your company has all the documentation, which is not written in particularly difficult language. You should have signed an agreement before entering into the scheme, and therefore should have read the conditions. If they weren't clear at the time, you should have sought guidance.

In reality, very few (if any) companies will get an independent valuation on every bike they supply through the scheme, so the 5% 'fair market value' payment in order to own the bike was issued as a good-guidance start point.

As pointed out above, some companies are more reasonable than others, but as Supersonic says, this isn't a no-strings-way of getting a cheap bike. It IS a great scheme if you operate within its constraints though.

cat_with_no_tail

This is something which has been discussed on these forums many times before. I've yet to hear of a case where an employer has valued the bike upon completion of the 12 month lease at more than around 5% of it's initial value.

Thing is, most employers take the scheme on based on the understanding that at the end of the lease period, they'll pretty much give the bike away regardless of what the scheme says they CAN do. What would an employer want with a load of grubby, used mountain bikes anyway, they'd have to get valuers in, then agree a final price with you etc etc. Then it's even more hassle for them if you DONT take the bike off them Much easier for them to stick a nominal sum on it so you can take it off their hands

Of course, your employer could be a dlck about it if they wanted to, but why would they?

In short, I'd not worry too much about it.

cgarossi

I read it. Three times over.

You miss the point I was trying to make. But hey ho.

The point is, the last payment is very open ended. 5% is not limited or restricted. It is still down to the companies discretion, while at he begining of the agreement I was led to believe this was fact. It is a recommended value but still not set in stone. You would expect agreements to be clear for both parties, but to leave it open and at the discretion of the employer creates uncertainty. Like I said, im lucky, my company is fine with the arrangement.

I'm not crying at all. If I am charged anything more than 5% I simply won't pay it.

Im not complaining, not moaning or crying or trying to have a dig at the C2W scheme. It's just heads up. :roll:

Anonymous

Ditto what Kanya says.

We're winners on this scheme.

TommyEss

It's not like the small print is even that small - if you look at the Cyclescheme website for example it's laid out in black and white.

Frankly, if you've been surprised by any of this you're a bit of an idiot. Do your research - it's not hard.

Yes, you need to purchase the bike at the end of the scheme if you want to keep it, and yes, you're worried how much they'll ask for it - but remember, the 5-10% of voucher value is almost always implemented - if HMRC think this is fair, then that's what most people are going with.

Remember, if your company hikes the price at the end, you're fully entitled to say "No thanks" - and then they're left with a bicycle to shift - a pretty useless asset on the balance sheet - so how likely is it do you think that they'll just want to get rid - i.e. sell it to you at a fair market value.

Also, remember fair market value is not the same as the maximum amount you could get for it flogging it on ebay!! It's much much less.