Leaving CycleScheme

sarajoy

Just in case anyone is curious as to what happens if you leave after having paid off the full amount - but BEFORE the end of the the agreement:

Hi Sara,

As you joined the cycle to work scheme in February 09, I have received a report to confirm that you have paid all the 12 monthly payments for your bike, however unfortunately as you are leaving during the Hire Agreement period (36 months), you will be due to pay 5% of the original voucher value in order to complete the terms of the hire agreement. According to the records your voucher was for £612.90 (5% of £612.90 = £30.65) Therefore £30.65 is due to be paid to complete the agreement for your bike.

Please can you confirm you are in agreement with the above figures and I will then arrange for £30.65 to be processed in the final salary payment in August.

Thanks and kind regards, ***

Clever Pun

The monsters!!!

cee

I am on a cyclescheme...not a voucher one..but the same thing..

anyway...i always expected to pay around 5% as a final payment to tranfser ownership to me after the 12 month rental period had completed....

Is it really any different if you pay the full amount before the end of the agreement, or just inline with the agreement?

spen666

If this payment is only due if you leave scheme early, then why leave early?

The Rookie

This doesn't appear to be a final payment so the OP can keep the bike, this appears to be a final fee on the hire agreement for 'completing the terms (whatever that means). As the 'purchase value' of the bike CANNOT be in the terms it can't be that.

Simon

Mr Smooth

I think there's always a final payment. The initial payments, as I understand it, are to rent the bike. It's the final payment when they actually sell you the bike and it becomes yours. For the computer scheme a similar payment was needed.

If you leave before the 12 months, you have to pay the remaining outstanding payments from net pay!

londonbairn

It's because the OP left the company within 36 months.

The Rookie

Mr Smooth wrote:

It's the final payment when they actually sell you the bike and it becomes yours. For the computer scheme a similar payment was needed.

A final payment to keep the bike is strictly NOT PERMITTED to take advantage of the C2W tax break, so it can't be in the original agreement.

Simon

The Rookie

Mr Smooth wrote:

It's the final payment when they actually sell you the bike and it becomes yours. For the computer scheme a similar payment was needed.

A final payment to keep the bike is strictly NOT PERMITTED to be agree in advance if you want to take advantage of the C2W tax break, so it can't be in the original agreement.

Simon

waddlie

That's an odd one. I think you would still have had to pay the 5% at the end of the 36 months anyway - I paid my 12 monthly payments, then the agreement came to an end and I had to pay 5% to take ownership of my bike at the end. Odd that it's a 36 month agreement when you pay over 12?

alfablue

The hire agreement must not include a final payment fee (as stated above) so the agreement was not legal. In addition, the 5% is supposed to represent fair market value (FMV). The FMV would not be the same at 36 months as it would be at 12 months. It may be that they set 36 months so that no one can claim that the employee paid less than FMV, whereas 5% after 12 months is in some peoples' opinion (not mine), stretching things somewhat.

TommyEss

I was told if you leave the scheme early, regardless of whether you want to transfer ownership or not, you must pay off the full amount owed.

e.g. If I'm made redundant or resign during the period of the scheme - I must pay in full there and then - with no further tax benefit on the remainder of the balance.

Then, if I wish to transfer ownership of the bike back to me, I must pay the fair market value.

Here, it looks like Sara's paid off the full remainder of the balance, and then paid a 5% FMV payment to transfer ownership.

No mystery here - all seems ship-shape and Bristol fashion - what's the problem?!

alfablue

Yep, more or less ship shape - re-reading the op there is the implication that after the end of the agreement there is no 5% final payment, so maybe they presume the FMV is £0 after 36 months, which is quite sensible.

The other ambiguity is that their agreement includes a FMV transfer fee - technically this cannot be included in the original agreement as it would become a hire-purchase agreement rather than a hire agreement, and would not attract the tax break. The employer should only include this in a secondary agreement drawn up at the time of transfer.

But maybe that isn't too important, a 5% fee to transfer ownership is the norm and seems fair enough.

spen666

TommyEss wrote:

....

No mystery here - all seems ship-shape and Bristol fashion - what's the problem?!

The problem is the apyment appears to be said be to fixed in the contract. 5% as the fair mv fixed at the outset cannot be said at the outset to be the fmv at the end.

The agreement is void as per the tax benefits and in theory the OP could ve liable to repay all the tax breaks they have received

TommyEss

Yeah - see what you mean - it might just be poor wording though - when they say:

however unfortunately as you are leaving during the Hire Agreement period (36 months), you will be due to pay 5% of the original voucher value in order to complete the terms of the hire agreement.

It doesn't say why she's due to pay 5% - this could (possibly) be taken instead as:

however unfortunately as you are leaving during the Hire Agreement period (36 months), and you wish to transfer ownsership of the bike from us to you, you will be due to pay 5% of the original voucher value in order to complete the terms of the hire agreement.

I dunno - we haven't got the full email trail or the hire agreement - Sara - can you come back and shed some light?

Also - whilst we're discussing it,

Hypothetically

If the scheme has been worded badly by your company, and the scheme is inspected by HMRC and deemed to be in breach, i.e. hire-purchase - do you have any come back to your company in respect of the tax that you now owe because they worded the scheme badly - or is it all on yourself because you read every word of the agreement and signed saying as much?!
[/b]

sarajoy

Waddlie wrote:

Odd that it's a 36 month agreement when you pay over 12?

I always thought so. Just the way they roll, I guess - might be to stop people getting a new bike every year.

TommyEss wrote:

Here, it looks like Sara's paid off the full remainder of the balance, and then paid a 5% FMV payment to transfer ownership.

No mystery here - all seems ship-shape and Bristol fashion - what's the problem?!

I've got no problem with it, just thought I'd show people what happens in this case as I think it's a little rare.

spen666 wrote:

The problem is the apyment appears to be said be to fixed in the contract. 5% as the fair mv fixed at the outset cannot be said at the outset to be the fmv at the end.

The agreement is void as per the tax benefits and in theory the OP could ve liable to repay all the tax breaks they have received

I was worried that the latter might happen. So I was pleased to be charged the 5%!

I don't, however, remember seeing the 5% ever having been written into the contract. CycleScheme insinuates that the release payment /might/ be 5%, but never tells you outright. It was never mentioned on anything I signed.

londonbairn

You do pay the full amount left plus the 5% at the end of the year, that's what happened to me when I quit for greener pastures in December.

That should mean that you have the full VAT exposure plus most the income tax exposure of what remains.

mirmintrude

I'm just about to take advantage of the cyclescheme at work and it says final change of ownership payment = 5%. It also says that if you choose not to transfer ownership after paying the 12 months there'll be a "disposal fee" (but that it's equivalent to the final transfer fee - 5%).

I don't think that 5% FMV/final charge thing is set in stone - my brother bought a £900 bike, made his 12 payments and his final transfer payment was a fiver! Different employer to me so perhaps a different scheme?

TommyEss

Be wary if it actually states in the wording a final cost - that's in breach of the terms of the Bike2Work scheme, and could wind yourself in trouble with the tax man. Check with your company - if necessary, insist they change the wording.

Zombie_donkey

TommyEss wrote:

e.g. If I'm made redundant or resign during the period of the scheme - I must pay in full there and then - with no further tax benefit on the remainder of the balance.
!

I would hope the employer would pick up the tab if they were making me redundant. I would certainly demand it was part of any severance agreement.