NEW HMRC Cycle to Work Valuations - upto 25%

Headhuunter

The Beginner wrote:

Headhuunter wrote:

But the employer is not obliged to sell the bike to the employee, they could pass it onto another corporate couldn't they? Then that corporate could pass it on to the employee, effectively circumventing the need for FMV assessment. THis could be done at no cost to anyone. If the bike is not passed directly to the employee then there is no need to sell it at FMV. Or am I missing something?

This is what Cyclescheme seems to be enacting, they want employers to pass the bike to them at a nominal fee and then they pass the bike onto the employee at something less than FMV.

As the employee has still benefited due to being that employee its still a benefit in kind, I guess the 3rd party could offer a 'discount' for employee's of said company, but that discount would then still have to be from a realistic RETAIL value to not be a benefit in kind, so that is likley to be roughly equal to a manipulated FMV such as I suggest anyway.

Where I worked a while back I was heavily involved on behalf of the unions with working out a usage scheme for our products for employees and the 'benefit in kind' area is a real minefield, a lot of benefits are simply not chased up by HMRC due to impracticalities of doing so and often informal agreements were reached as to what level could be given before HMRC got interested even though what was agreed was still strictly a taxable benefit.

Simon

That's what I'm thinking. Are HMRC really going to spend time arguing and debating over FMV of thousands of bikes nationally? Studying dodgy, blurry photos which claim to show than a bike is in fact worn out and therefore only worth 10% of the original cost?

Headhuunter

PresumingEd wrote:

I asked Cyclescheme whetehr or not they would be able to circumvent the FMV rules, as per my earlier post (sorry about the font, TailWindHome; I didn't think it would be that bright!).

Unfortunately hey sent me a standard reponse on the issue but it was still interesting, as it indicated that you will be charged at one of four FMV levels, dependent upon the state of your bike. Not sure quite what process will be followed but I am hoping that I can just self-certify that my bike is knackered and thereby pay the lowest FMV.

But how does Cyclescheme take ownership of the bike without being forced to pay FMV? Why should Cyclescheme be able to evade the FMV but an employee not? I assumed that it was because Cyclscheme is a company and not an employee but if that's not the case then what would be the point of the employer pasing the bike to Cyclescheme. Seems like Cyclescheme is trying to stick its oar in and make another sack of cash at the other end of the scheme as well.

RufusA

gtvlusso wrote:

Because the final payment was £25 from my employer and the bikes were "desirable" - I managed to sell the bikes for more than the value of the total laid out including the final payment.

And that's entirely the point and the reason behind the FMV guidance in a nutshell:
a) How can a bike have a resale value of hundreds and a "fair market" value of £25. Surely the fair market = average resale value.
b) Why should you be able to make profit year after year on a scheme that's Government funded to encourage people to cycle!

I personally think the cycle to work scheme has been badly thought out. They simply dusted off and repainting an old bit of old legislation designed for home computers, rather than dreaming up something fit for purpose.

There is no subtle Tory kill off of the cycle scheme. It's simply the HMRC doing what the HMRC always do, clarifying tax policy; it's run by civil servants and not politicians.

Rufus.

mansun

Here is what Evans Cycles are responding with:

Good afternoon,
Unfortunately the new legislation affects all customers whether they are current or new and the hire agreement is subject to the government guildelines.

We are currently in the process of looking at ways to amend the scheme so that the extra costs can be absorbed or offset allowing us to maintain a high saving for our customers.

We expect to publish our plans within the next 2 weeks in which we will be notifying all of our current customers.

Regards,
Evans Cycles

meggiedude

mansun wrote:

Here is what Evans Cycles are responding with:

Good afternoon,
Unfortunately the new legislation affects all customers whether they are current or new and the hire agreement is subject to the government guildelines.

We are currently in the process of looking at ways to amend the scheme so that the extra costs can be absorbed or offset allowing us to maintain a high saving for our customers.

We expect to publish our plans within the next 2 weeks in which we will be notifying all of our current customers.

Regards,
Evans Cycles

Interesting - thats not the guidance I got over the phone from cyclescheme.

The guy I spoke to informed me about the new system of scoring the condition of the bike - A - D, where A is pristine and D is heavily used, scratched and left out in the rain 24x7.
He said this valuation could be performed by you or a shop ( so I guess its in a LBS best interest to score low).

However he also informed me that the new scoring does not apply until hire terms started after the end of Sept - the original valuation (typically in cycleschemes case being 5% - as per their own brochure) would be used up for hire agreements started until that point. I did wonder about this comment at the time as we know what HMRC are like when it comes to retrospective claims - but we will have to see how it pans out, and what info is sent to employers and passed on to employees.

I had just applied for my (1st ever) voucher before I learnt of this new news so I am concerned about the cooling off period of 7 days. Does it start after the voucher is recieved , or after the bike is delivered?

owenlars

We have a self administered scheme for which we obtained written approval from HMRC. The question arising from the latest FMV statements has been put to HMRC and they have said that our scheme will remain as per written approval. This includes agreement on FMV. Of course that's not to say they won't change their mind in the future but so far they have said we can carry on as agreed.

meggiedude

owenlars wrote:

We have a self administered scheme for which we obtained written approval from HMRC. The question arising from the latest FMV statements has been put to HMRC and they have said that our scheme will remain as per written approval. This includes agreement on FMV. Of course that's not to say they won't change their mind in the future but so far they have said we can carry on as agreed.

Bit confused by this. What do you mean by written approval will continue. Does this man you will still be able to value your bikes at end of term at your current rate (5%?, 10% ?? 0% etc - whatever it is) and therefore ignore the HMRC guidlines, or have I missed something.

Could also do with a responce about the cooling off period as per my note above if anyone can help would appreciate it.

Herbie The Dog

meggiedude wrote:

mansun wrote:

Here is what Evans Cycles are responding with:

Good afternoon,
Unfortunately the new legislation affects all customers whether they are current or new and the hire agreement is subject to the government guildelines.

We are currently in the process of looking at ways to amend the scheme so that the extra costs can be absorbed or offset allowing us to maintain a high saving for our customers.

We expect to publish our plans within the next 2 weeks in which we will be notifying all of our current customers.

Regards,
Evans Cycles

And yet when I spoke to Cyclescheme they told me about 2 options available.

The guy I spoke to informed me about the new system of scoring the condition of the bike - A - D, where A is pristine and D is heavily used, scratched and left out in the rain 24x7.
He said this valuation could be performed by you or a shop ( so I guess its in a LBS best interest to score low).

However he also informed me that the new scoring does not apply until hire terms started after the end of Sept - the original valuation (typically in cycleschemes case being 5% - as per their own brochure) would be used up for hire agreements started until that point. I did wonder about this comment at the time as we know what HMRC are like when it comes to retrospective claims - but we will have to see how it pans out, and what info is sent to employers and passed on to employees.

I had just applied for my (1st ever) voucher before I learnt of this new news so I am concerned about the cooling off period of 7 days. Does it start after the voucher is recieved , or after the bike is delivered?

Interesting - I was told something slightly different by CycleScheme:

The first was the self evaluation as mentioned above.

The second was an option of Cyclescheme taking the ownership of the bike for a further three years (no payments made by you in those three years) then transferring to you after those three years when a FMV has been paid (which after 4 years would be around 5%).

Obviously these are only ideas at the moment and need HMRC approval.

One interesting titbit I did get was that the nominal fee used to be applied to the value of the voucher. The new guidance is a FMV for the bike only. So if you spent £700 on a bike and topped the grand off with helmet, lights etc you may well be in a better position.

alfablue

Herbie The Dog wrote:

One interesting titbit I did get was that the nominal fee used to be applied to the value of the voucher. The new guidance is a FMV for the bike only. So if you spent £700 on a bike and topped the grand off with helmet, lights etc you may well be in a better position.

The 25% valuation only includes equipment fitted to the bike

In calculating the original price of the cycle, include safety equipment fitted to the cycle (such as lights and bells) but not safety equipment which would be worn by the cyclist (such as helmets or reflective clothing). Where used regularly for commuting and/or travel between workplaces, safety equipment worn by the cyclist is likely to have a market value that is lower than the table percentages for a cycle and cycle-based safety equipment

RufusA

meggiedude wrote:

Could also do with a responce about the cooling off period as per my note above if anyone can help would appreciate it.

YOU'LL need to check the wording of what YOU'VE signed.

However assuming it's a cancellation period caused by distance selling regs. then it will be 7 working days from the day after you recieve the goods.

HTH - Rufus

Headhuunter

Herbie The Dog wrote:

meggiedude wrote:

mansun wrote:

Here is what Evans Cycles are responding with:

Good afternoon,
Unfortunately the new legislation affects all customers whether they are current or new and the hire agreement is subject to the government guildelines.

We are currently in the process of looking at ways to amend the scheme so that the extra costs can be absorbed or offset allowing us to maintain a high saving for our customers.

We expect to publish our plans within the next 2 weeks in which we will be notifying all of our current customers.

Regards,
Evans Cycles

And yet when I spoke to Cyclescheme they told me about 2 options available.

The guy I spoke to informed me about the new system of scoring the condition of the bike - A - D, where A is pristine and D is heavily used, scratched and left out in the rain 24x7.
He said this valuation could be performed by you or a shop ( so I guess its in a LBS best interest to score low).

However he also informed me that the new scoring does not apply until hire terms started after the end of Sept - the original valuation (typically in cycleschemes case being 5% - as per their own brochure) would be used up for hire agreements started until that point. I did wonder about this comment at the time as we know what HMRC are like when it comes to retrospective claims - but we will have to see how it pans out, and what info is sent to employers and passed on to employees.

I had just applied for my (1st ever) voucher before I learnt of this new news so I am concerned about the cooling off period of 7 days. Does it start after the voucher is recieved , or after the bike is delivered?

Interesting - I was told something slightly different by CycleScheme:

The first was the self evaluation as mentioned above.

The second was an option of Cyclescheme taking the ownership of the bike for a further three years (no payments made by you in those three years) then transferring to you after those three years when a FMV has been paid (which after 4 years would be around 5%).

Obviously these are only ideas at the moment and need HMRC approval.

One interesting titbit I did get was that the nominal fee used to be applied to the value of the voucher. The new guidance is a FMV for the bike only. So if you spent £700 on a bike and topped the grand off with helmet, lights etc you may well be in a better position.

But unless Cyclescheme actually takes over the bike from the employer after the "rental period" they have no say over what the FMV is for the bike so their opinion is irrelevant...

meggiedude

RufusA wrote:

meggiedude wrote:

Could also do with a responce about the cooling off period as per my note above if anyone can help would appreciate it.

YOU'LL need to check the wording of what YOU'VE signed.

However assuming it's a cancellation period caused by distance selling regs. then it will be 7 working days from the day after you recieve the goods.

HTH - Rufus

OK, will do.
Its a standard Cyclescheme contract - I did phone and was told, as you say, that it was after the bike ws recieved, but with all this varying feedback from cyclescheme and others regarding the new 'rules' I don't know what to believe currently.

If it is after the goods have been recieved I still have a few weeks to go before I need to make that decision. Hopefully by then we will know where we stand. At the moment I don't know what to believe when it comes to the FMV. You get a different answer depending who you talk to at the mement.

MD

The Rookie

mansun wrote:

Here is what Evans Cycles are responding with:

Good afternoon,
Unfortunately the new legislation affects all customers whether they are current or new and the hire agreement is subject to the government guildelines.

We are currently in the process of looking at ways to amend the scheme so that the extra costs can be absorbed or offset allowing us to maintain a high saving for our customers.

We expect to publish our plans within the next 2 weeks in which we will be notifying all of our current customers.

Regards,
Evans Cycles

PMSL, what a load of rot, there is no NEW LEGISLATION, HMRC are merely clarifying the legislation that everyone running a scheme should have been following anyway, its all there in B&W on the HMRC website and has been for years, if that is Evans response then they shouldn't be running a scheme!

Simon

RufusA

The Beginner wrote:

PMSL, what a load of rot, there is no NEW LEGISLATION, HMRC are merely clarifying the legislation that everyone running a scheme should have been following anyway, its all there in B&W on the HMRC website and has been for years!

+1

In fact if anything HMRC have provided certainty/clarity and IMHO have been rather generous with their undervaluation of the FMV of 1 year old quality bikes.

Consider the alternative of the employer having to defend a 5% notional FMV in a PAYE compliance visit when they can see you've just managed to sell the bike on ebay for 75% of its purchase price!

Rufus.

Herbie The Dog

Headhuunter wrote:

Herbie The Dog wrote:

meggiedude wrote:

mansun wrote:

Here is what Evans Cycles are responding with:

Good afternoon,
Unfortunately the new legislation affects all customers whether they are current or new and the hire agreement is subject to the government guildelines.

We are currently in the process of looking at ways to amend the scheme so that the extra costs can be absorbed or offset allowing us to maintain a high saving for our customers.

We expect to publish our plans within the next 2 weeks in which we will be notifying all of our current customers.

Regards,
Evans Cycles

And yet when I spoke to Cyclescheme they told me about 2 options available.

The guy I spoke to informed me about the new system of scoring the condition of the bike - A - D, where A is pristine and D is heavily used, scratched and left out in the rain 24x7.
He said this valuation could be performed by you or a shop ( so I guess its in a LBS best interest to score low).

However he also informed me that the new scoring does not apply until hire terms started after the end of Sept - the original valuation (typically in cycleschemes case being 5% - as per their own brochure) would be used up for hire agreements started until that point. I did wonder about this comment at the time as we know what HMRC are like when it comes to retrospective claims - but we will have to see how it pans out, and what info is sent to employers and passed on to employees.

I had just applied for my (1st ever) voucher before I learnt of this new news so I am concerned about the cooling off period of 7 days. Does it start after the voucher is recieved , or after the bike is delivered?

Interesting - I was told something slightly different by CycleScheme:

The first was the self evaluation as mentioned above.

The second was an option of Cyclescheme taking the ownership of the bike for a further three years (no payments made by you in those three years) then transferring to you after those three years when a FMV has been paid (which after 4 years would be around 5%).

Obviously these are only ideas at the moment and need HMRC approval.

One interesting titbit I did get was that the nominal fee used to be applied to the value of the voucher. The new guidance is a FMV for the bike only. So if you spent £700 on a bike and topped the grand off with helmet, lights etc you may well be in a better position.

But unless Cyclescheme actually takes over the bike from the employer after the "rental period" they have no say over what the FMV is for the bike so their opinion is irrelevant...

I'm not saying it's right...I'm just passing on what Cyclescheme currently think. These are just options that they are considering.

However as everyone who has spoken to their employer/HMRC/CycleScheme seems to have been told something different I've just come to the conclusion that no one knows what the hell is going on. And that includes us lot!

Headhuunter

RufusA wrote:

The Beginner wrote:

PMSL, what a load of rot, there is no NEW LEGISLATION, HMRC are merely clarifying the legislation that everyone running a scheme should have been following anyway, its all there in B&W on the HMRC website and has been for years!

+1

In fact if anything HMRC have provided certainty/clarity and IMHO have been rather generous with their undervaluation of the FMV of 1 year old quality bikes.

Consider the alternative of the employer having to defend a 5% notional FMV in a PAYE compliance visit when they can see you've just managed to sell the bike on ebay for 75% of its purchase price!

Rufus.

There may be no new legislation but now that HMRC has "clairified " its position, many companies will take this as written in stone and will charge a set 25% or whatever after the 1 year rental period, whereas before they could charge 5-10% or whatever as there was no clarification and things were more ambiguous. The fact that HMRC has issued guidelines may as well be new law.

Although HMRC may well be being "generous" with their valuations, they are not really taking into account that the emplyee has already paid a fair amount of money to "rent" the bike. This rental cost + the new HMRC guidelines, if applied to the letter, will make the scheme far less attractive, savings are very small and it is likely that buying a bike on ebay or negotiating a cash price with a bike shop may be the better option. Or not and people will simply drive to work....

fenboy369

What happens if your bike gets 'stolen' in the last month of your payments? Can they charge a transfer fee and FMV on a nicked bike?

alfablue

fenboy369 wrote:

What happens if your bike gets 'stolen' in the last month of your payments? Can they charge a transfer fee and FMV on a nicked bike?

You have to reimburse the OWNER of the bike.

alfablue

more realistically I would think they would expect the bike back unless you paid FMV, the rules require you to be responsible for its loss and state you should insure the bike.

meggiedude

Headhuunter wrote:

There may be no new legislation but now that HMRC has "clairified " its position, many companies will take this as written in stone and will charge a set 25% or whatever after the 1 year rental period, whereas before they could charge 5-10% or whatever as there was no clarification and things were more ambiguous. The fact that HMRC has issued guidelines may as well be new law.

Although HMRC may well be being "generous" with their valuations, they are not really taking into account that the emplyee has already paid a fair amount of money to "rent" the bike. This rental cost + the new HMRC guidelines, if applied to the letter, will make the scheme far less attractive, savings are very small and it is likely that buying a bike on ebay or negotiating a cash price with a bike shop may be the better option. Or not and people will simply drive to work....

I agree fully with this. People (who I'll bet in the main are not eligible for this scheme) seem to be consistently choosing to miss this point about overall cost of ownership
This scheme was set up to encourage people to use bikes by offering them an incentive.

If HMRC had done their job properly in the first place, the 'new' valuations would have been set in place when the scheme kicked off, not several years later. Now this new position is putting people off signing up to the scheme and putting the fear of god into those who are already in it.