Cyclescheme Final Payment

spongtastic

I've been told that my final salary payment is due next month and after that cyclescheme will write to me with the final payment to purchase as my employer has decided to pay them the £1 to administer.

Has anybody got actual figures they've been charged rather than the often quoted 5%? or do they actually just send you a bill based on 5%?

I've skimmed through about 15 pages of search results on the forums but can't find anything already quoted.

Oxygen Thief

My work gives it to you for nothing so god knows.

El Capitano

I'd be interested to find out as I've got just 2 payments left on mine.

mzm70

Mine was 5%+VAT from Cyclescheme £88 on a £1500 voucher last month.

stumpyjon

They will have a formula for calculating the final value of the bike which has to be more complex than 5% otherwise it would not meet the requirements for salary sacrifice. It ought to take into account the condition of the bike, number of miles it's covered etc.

tarquin_foxglove

I was quoted 9% by my employer, apparently on the recommendation of Cyclescheme.

I disputed it & was asked to provide evidence of FMV, which I did. My valuation was then accepted.

See Cee's post here for how I got the evidence of FMV...
http://www.bikeradar.com/forum/viewtopic.php?t=12677851&postdays=0&postorder=asc&start=80

Zaskar20

My final payment is due anytime and I've been told it would be a nominal £5 charge. My original purchase was for £1000 12 months ago.

bbug

spongtastic wrote:

Has anybody got actual figures they've been charged rather than the often quoted 5%? or do they actually just send you a bill based on 5%?

My final payment was a single extra payment of the monthly repayment amount. This was not tax free/salary sacrifice, but deducted after all the other deductions had been taken out.

supersonic

The bike belongs to the company - in theory they can keep it or charge you whatever they like.

Cyclescheme recommend a 5% fair market value - which is bloody good really, given as most bikes drop to half value after a year.

stumpyjon

As I said before though it has to at least look like the bike was valued at the end of the scheme. Any employer telling you up front what you're going to pay, be it a percentage or value is risking the whole scheme. Hire purchase arrangements (which is what that would be) are exempted from the salary sacriface scheme. Really low valuations are also dodgy. The inland revenue is cracking down on this at the moment. When we were trying to set a scheme up recently (which failed due to lack of senior management interest :evil: ) we even considered deferring the purchase of the bike for a couple of years after payments had finished so the final value would be a lot lower.

Father Faff

Yes at our work we offer the option to defer purchase for a couple of years which meant my Meta 5 wasn't worth a lot by the time I bought it - in fact apart from the frame there wasn't much original left at all! All those hard commutes to work over t,moor!

And your work should properly work out the market value at time of sale and not just use a percentage.

bikedibley

Gentlemen, I set up Hargroves Cycles's Cycle 2 Work scheme and have dealt heavily with CycleScheme. Now I work for a major mailorder player in the UK. Okay, credentials over.

Officially, the final payment aka "Fair Market Value" is not outlined by the government. The Department for Transport states "the value for which a willing buyer would pay a willing seller after one years' use". It is not outlined the exact amount because nobody can tell how much a bike will be worth after 12 months.

IBM is a huge employer and charges their staff 5% (CycleScheme administer this). Same with Carnival cruises and other major employers. Some charge as much as 10%, but that is a bit unfair.

Essentially, your employer owns your bike until you pay the final amount to transfer ownership. If your employer hand you the bike for FREE, it is still considered an asset to your company and is NOT YOURS. Likewise, if your employer decides to charge you just £1, it will look like a benefit-in-kind and would not look favourable in an audit.

Employers get away with anything from 3%-10%, but this sum MUST be paid!

cicatriz

Paid mine off last year. The final payment worked out at £57.50 on a £1,000 voucher so that was 5% + VAT. Remember VAT is now back up to 17.5% so 5% + VAT now would be £58.75. Not much different I know but still worth knowing.

spongtastic

Thanks all, if the company administered the final payment I'd charge myself nothing, but as they're getting cyclescheme to do it I'm glad to hear it is around 5%

just need to decide on this years bike.

jmillen

My final payment is due at the end of this month. I was also expecting a 5% final payment figure, that was until a letter arrived on my doorstep telling me that my final payment would actually be 15% (£150).

I was shocked to say the least, so a few of us emailed our HR department today to find out what was going on. We were told their hands are tied as HMRC have now enforced a 15% final value payment.

Does anyone have any experience of this or even work for the HMRC to confirm if this is the case?

alfablue

I expect this will probably be a misinterpretation or miscommunication somewhere, and it may suit one or both parties to do so (your employers and hmrc). What if the bike had been wrecked through a year of commuting, £150 would not be a fair market value then.

What your employers may make on the deal on £1000 bike:

15% final payment £150
12.9% NI payments saved £129
20% capital write-down for depreciation £200
VAT (if they kept it) £175

Employer makes up to £654

Get tough with them! Throw toys out of pram, Make an ugly scene. Threaten to commute naked. Hand bike back to them virtually destroyed (let them sue you). Stamp feet, hard! :twisted:

Radioactiveman

Hmmm sounds like BS to me, I cant back that up but I wouldn't trust HR clowns to do anything.

Wouldnt surprise me if they just made that figure up out of their heads.

Father Faff

jmillen wrote:

My final payment is due at the end of this month. I was also expecting a 5% final payment figure, that was until a letter arrived on my doorstep telling me that my final payment would actually be 15% (£150).

I was shocked to say the least, so a few of us emailed our HR department today to find out what was going on. We were told their hands are tied as HMRC have now enforced a 15% final value payment.

Does anyone have any experience of this or even work for the HMRC to confirm if this is the case?

No they should sell it at market value - if you could prove your bike is worth less than £150 by showing ads for a similar aged bike for example then you should try that with them. However to be fair a commuter bike is likely to be worth at least 15% of new after 1 year of use.

Don't argue too hard with them because they don't have to sell it to you and could dispose of it on the open market if they think they'll get a better price!

alfablue

Okay, HMRC says: "If a cycle is transferred to an employee at a nominal value (say 5 to 10% of the original retail price), then if the market value is higher, the employee will be taxable on the difference." (EIM21667).

Now, if the fair market value is deemed to be £150, and the employer charges you £50 (i.e. 5%), then the taxable benefit you have received is £150-£50 = £100. You woukld then be liable to pay tax on the £100 at the rate relevant to you so 20%, 40% or 50%, £20, £40 or £50 respectively.

So if you are a basic rate tax payer, tell HR you'll pay £50, and then say you will pay tax on the remaining benefit - it could be £20 more if the FMV is £150.

jmillen

I doubt they're not going to mess around with risking getting the bikes back and trying to sell them separetely. The company employs 3500 staff in the UK. Thats a whole lot of bikes to get back if people dont want the final payment (obviously only a % of those 3500 would have taken part in the scheme.

Halfords T&C's state that its generally approx. 5% which is what we were all expecting. As has been pointed about above, the bike is worth alot more than the £150 and in total I'll be paying about £780 for it (Boardman Pro). Its not really even the amount, its the principal. People who did it last year paid a £20 final payment on a £1000 bike, now they're wanting £150 and claiming the HMRC is behind the increase.

It seems to me that we need to call HMRC to see if there is something in place to make companies charge the 15% our HR department is claiming

alfablue

No, there is nothing in place with the HMRC enforcing this. I linked to the HMRC document above, have a read, its all in there. What has happened is HMRC has said (as it always did) that IF the bike was sold on at less than the FMV, the difference was a taxable benefit in kind.

Your employers have made a knee-jerk reaction, realising the bikes are worth more than £20, so have set an arbitrary £150. All they had to do was let you have the bikes for £50, and tax you £20. Simple . . . unless you are in HR :roll:

teulk

For the last two c2w schemes ive been charged 3% plus VAT

fivetones

Cycle Scheme have just informed me that a £1000 value will have a final payment of £200+vat (!).

As I only save £294 to begin with this seems to me to be a deal killer?

Am I missing something obvious?

fivetones

Oh, they also say I can't top up the £1000 voucher to the value of the bike I need to cover.

supersonic

Your employer sets the final payment, not cyclescheme.

And generally you can't top up the voucher as this is a hire of the bike. You don't own the bike until ypur employer offers it you to the end and you pay that final payment.

Chunkers1980

They just offered me mine without paying a penny....

Depends on your company....

TommyEss

fivetones wrote:

Cycle Scheme have just informed me that a £1000 value will have a final payment of £200+vat (!).

As I only save £294 to begin with this seems to me to be a deal killer?

Am I missing something obvious?

They should not be stating a final price for the end of the scheme, as this turns the arrangement into a hire-purchase scheme, which is deemed a benefit in kind, and thus taxable.

Question them as to why they are breaching this rule first.

General thinking is that the final payment, i.e. fair market value, should be in the region of 5% of the initial cost of the bike.

As for your comment on topping up - this is not techincally speaking allowed, as for the duration of the scheme, the bike is owned by the company, and not by yourself. If you top up your £1000 voucher by £500, then the company only technically own 2/3rds of the bike - messy!

fivetones

Thanks for the reply Tommy.

Yeah, I understand the messiness of the topping up. Was told by bike shop it would be fine and now by cycle scheme that it isn't.

The final payment this is worded as "no more than" so legally they are probably ok but it's alarming none-the-less.

TommyEss

I think you'll find most bike shops are ok with topping up - but this should be done very much on the QT.

There are all kinds of tricks people play - buying frames with receipts saying it's a full bike, time trial bikes for your commute - really?

At the end of the day - I think everyone is getting away with this - but there is a risk - however small - that if you take the piss, you could get found out, and be liable for some tax.

fivetones

OK, fair enough.

Thanks for the info.

stuart_c-2

Just as a sort of follow up on this, just noticed this:

http://www.evanscycles.com/news-and-events/hmrc-announces-new-guidance-on-the-operation-of-cycle-to-work-schemes

If I'm reading it right, your final payment for your £1k bike could be £250?!?! :shock: