Warning about C2W

Kanya

And the part about the HMRC determining what the % payable is at the end re fair market value - this is normally 5% of the market value however some schemes/clients have chosen to only charge employees a fixed amount to transfer ownership (effectively the % of value)

I'm looking at a Halfords C2W scheme that only charges the ee £10 at the end of the term. They probably take the cost in house rather than charge the ee. It's really up to how the scheme was set up with your employer when it comes to this now.

But as I've said, the norm is usually 5% of the value.

cgarossi

Wow what an idiot I was... thanks guys :roll:

Monkeypump

cgarossi wrote:

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:

I think perhaps you're missing the point. The purchase price has to be open-ended - your employer cannot guarantee this amount prospectively as the scheme would then not be a lease arrangement.

And I suspect there is a clause in your contract that won't allow you to simply not pay it. :roll:

TommyEss

cgarossi wrote:

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:

The point is that from a tax perspective they cannot state a final selling price - it would then be viewed as a benefit in kind and taxable.

If you're company has misled you about this, then they're in the wrong - but it's not like you couldn't have found this out for yourself with very minimal web searching.

bannedbiker

Stupid question: Who's HMRC?! :oops:

cgarossi

Strange I am being targetted here.

I'm not trying to stop people using C2W. I've found it very beneficial.

But it is a fact that the bike belongs to the company while it's being paid and will continue to do so until it is sold to you at the end of the lease. And they can choose not to. This is fact.

With credit agreements, the bike DOES belong to you since you have borrow money via a credit company, and it would be the money you owe, not the bike.

So, for anyone who is uncertain about doing deals with their company this way, it might be better to seek a loan. In my opinion.

Kanya

Honestly, it takes a LONG time to get a flex ben's site implemented and each benefit added to it has to be completely checked by us, the client and HMRC before its offered to employees of the schemes

You can do the 12 months, when it comes to the part where they say pay 5% etc, you DO have the option to say "Thanks..but no thanks" hand the bike back to them and you could even just sign up to take the benefit again, getting a new voucher for up to £1000 for another bike.

The 12 months will coincide with your Flex Ben scheme renewal, ie you take the benefit Jan 09, Jan 10 is last payment. You can then select this benefit again, each and every year, leasing a bike, handing it back/paying the 5% and then getting a new bike again on another voucher.

If you need documentation regarding the Evans, Halfords etc, lemme know.

I may even administer your scheme for all we know lol

Anonymous

You're clearly being alarmist cgarossi. Why would a company even entertain the idea of implementing the scheme if they weren't going to sell it to you at the end of the lease?

It's an absurd logic IMO.

Kanya

You wouldnt be better getting a loan.

You save Tax and NI on the voucher eg a £1k bike is about £200 quid cheaper ie you pay back £800 instead of £1k.

You shouldnt take the voucher if:

You think you wont be at the company for 12 months or cant afford for the remaining months payments to be deducted from your last pay.

You cant afford it.

Yes the bike belongs to your company.

No they wont call you on a saturday and ask for a shot of it to go cross country with the kids.

cgarossi

Perhaps.

There are people out there who beleive the bike belongs to them though and also beleive that payments over the 12 months count toward purchasing the bike, which they don't.

A 5% payment at the end is just coincidental. The fact is 5% is a good deal, but it doesnt have to be that. Im just saying be carefull.

Anonymous

cgarossi wrote:

There are people out there who beleive the bike belongs to them though and also beleive that payments over the 12 months count toward purchasing the bike, which they don't.

How do you know? Anyone who reads the blurb knows what the deal is.

cgarossi

Ok... pendant.

There COULD be.

Monkeypump

cgarossi wrote:

Ok... pendant.

There COULD be.

There could be. But those people would be the ones who haven't read the T&Cs properly, or don't have the mental capacity to understand them and should ask for an explanation.

And some of those people will moan about it, without any good reason at all.

spin_to_win

The FVP ( Final value payment.) cannot be value till the end of the term - this is due to wear and tear on cycles differing this could cause a tax issue with "benefit in kind".
As to its value if you accept that the bike is a year old and old bikes are discounted on the web by as much as 40% ( £1000 bike for £599 ) then the bike is used/second hand making it worth half again ( £599 new £300 second hand.) The cycle will have in theory been used for 50% of your work journeys thus require a substantial service - labour,parts- probably a new drivechain and tyres etc this would work out about £150 - £35lab,£25chain,£35cass 2x£20 tyres £15cablekit the service parts reflect the quality of parts on the original cycle - other parts maybe reqired - front chainrings,bb thus a further £50-£60 could be ness. thus to value the cycle a simple formula of Original new value (£1000) - current new value (£599) - second hand value 50% (£300) - required service costs (£200) = FVP £100
As a guide

dodgy

Mark be up as another C2W scheme user, lots and lots of documentation made it vvvv clear that I don't technically own the bike, but it's just that, a technicality. I'm a member of a few bike forums and never once have I heard of anyone being stiffed at the end of the year's use of the bike. I reckon if had happened, it would have been posted about.

I do wonder if Kanya handles my companie's flexibile benefits :P Still haven't got my voucher :shock:

supersonic

I do actually think that a lot of people believe the scheme is not a hire of the bike and it is theirs.

Kanya

Not had one person claim that theyve been mis-sold a bike. Theyve all read the documentation and was told to by their HR before making any decision.

Dodgy - post or PM what company you work for, I'll see if it's one of ours...and if it is I'll get your details/pass you my work email/direct line and get you sorted out.

TommyEss

supersonic wrote:

I do actually think that a lot of people believe the scheme is not a hire of the bike and it is theirs.

Yep, you're probably right - but those are the same kind of idiots who think 45% interest on a credit card is nothing to worry about either - some people are beyond help.

The cyclescheme website is crystal clear, if you just take the time to read it (and it's not exactly War and Peace)

And we keep coming back to it - yes, your company could say at the end of the scheme "that'll be £400 to purchase please" - but you'd tell them where to go and they'd then have the hassle of getting rid of a bike. Makes no business sense to have your assets tied up in 2nd hand bikes unless you're a 2nd hand bike shop or a bike hire shop, so why wouldn't they sell it through the most obvious and simplest route - i.e. you?

P-Jay

To be honest, I think this may have caused a touch of unjustified panic.

I got a R2W bike the first year they were available (I think) 2005 something like that.

Ours was very generous as in you could have it over 3 years interest free, I got a £600 voucher for £10 a month over 36 months so I paid £360 for a £600 bike.

Anyway after a year, I realised the bike was a steaming pile of Halfrauds wank and sold it.

At the end of the term, I paid £5 to transfer ownership.

Hands up anyone who's had one and paid more than a nominal amount?

Anonymous

so, how much would your average joe end up paying for their (bosses) bike over the space of 12 months if the voucher was worth 1000 in the first place?

P-Jay

sheepsteeth wrote:

so, how much would your average joe end up paying for their (bosses) bike over the space of 12 months if the voucher was worth 1000 in the first place?

Depends on how much Tax they pay. Byt average Joe? about £600 I think.

big_southern_jesse

Okay, having just organised the C2W scheme at my place of work, I hope I can clarify a few things.

The payments that come from your wage packet are to balance the price of the bike. The come from your wages before tax and NI are taken, so a £20 contribution makes approximately £12 difference to the money going to your account. This has to balance the value of the bike, else your company would be out of pocket by buying the bike. And the boatyard I work in has no interest in buying bikes as a business.
The lump sum the company pays to purchase the bike can be written off as a capital expense. I also believe, though not certain as it doesn't really concern me, the contributions also come out before employers tax is taken. This is the incentive for your company to take part. The return here is better than any lump sum in a savings account!

All this sounds remarkably like a hire purchase deal. However, there are very strict laws regarding how HPs are run. This whole scheme is set up to get people on bicycles. So it has to benefit both the user and the company! So in order to be distinctly different to an HP agreement the bike remains the property of the company. Any agreements that the bike is, or will be owned by the person paying the monthly contributions make the C2W scheme void, and make it an HP agreement. However, and this is where we come into the "nudge nudge, wink,wink, hope my boss is a decent chap" area.

Once the value of the bike has been met, usually over 12 or 18 months, the company maythen decide to sell the bike to whoeverthey wish. That is the complete agreement. That is all. Just don't fall out with your boss in the next year!

As mentioned above, there is some discrepency over the value of the final payment. By the paperwork, the bike should be sold for the fair market value of a second hand bike. It cannot be sold cheaper than that without causing all sorts of tax havoc due to unfair gain etc. However renting the bike for a year, then paying maybe 60% of the original value on top is not a good deal. There is no incentive. So someone has "conveniently" (And here we re-enter the "nudge nudge, wink wink" area) decided that 5 - 10% of the original price is what a 2nd hand bike should sell for.

As far as I'm aware, that's how it operates, but feel free to correct me. Remember the point of this is to get people on bikes and out of cars. There has to be an incentive, it just has to be relatively subtle!

Anonymous

id be very happy if all second hand bikes were worth 5-10% of their original market value after 12 months.

The Northern Monkey

Related topic... How much gets docked off your pay if you spend a 1K voucher??

Bear77

I've used our Halfords bike to work a few times now. I got the bike for three or five percent at the end of it cant remember which. Or they offer to take the bike back for an admin fee. The admin fee has always been higher than the amount to purchase the bike.

colintrav

So how much do you really end up paying overall ????


this applies to those that have actually got a bike through the scheme

nicklouse

bigbenj_08 wrote:

Related topic... How much gets docked off your pay if you spend a 1K voucher??

depends on your tax rate.

http://www.bikeradar.com/gear/article/b ... emes-18360

colintrav

supersonic wrote:

I do actually think that a lot of people believe the scheme is not a hire of the bike and it is theirs.

That is actually what I thought when I learned of this c2w scheme ...at first

Was kinda thinking of getting my old bike fixed up through this scheme ,.but I get the impression it sounds like a lot of hassle ...

Now if the your basically hiring it of the company what's the point of money coming off your tax going towards the cost ?? if your having to pay a another fee at the end the year which can really vary depending if the company wants to treat you nice or not

Catch 22 in the end by the sounds of it

Briggo

The sky is falling, the sky is falling!

bannedbiker

Look at it as rent to buy...!

I pay 72 quid a month to rent my bike from my company, this is before i pay tax, so i pay about 15 quid less tax in my whole paypacket. After a year i get the oportunity to buy the bike I've been hiring for say 10% of what the company paid for it (worst case). As the bike was £1000 most would think that i would then buy it for £100 BUT dont forget that the company claimed back VAT on it (15%), so they essentially only paid £850 making the 10% £85. Once i've bought the bike i can look back and say, well i paid 72quid a month, but that was more like 57 due to the TAX efficiency, so 12 x 57 = 684 then i paid my final value fee of 85quid, 684 + 85 = 769.
I got £1000's worth of bike for £769, i got to pay that over 12 months without interest.
OK, so for 12 months the bike wasn't in my name, but did i miss something where bikes started having log-books lilke cars/motorbikes?!