Bad news for the Cycle to Work scheme

amaferanga

I've just read that HMRC will take any sale of less than 25% to be a taxable benefit and you will therefore be taxed on the difference. Your employer wouldn't actually have to make you pay 25%. Doesn't sound quite as bad. At the end of the day provided you don't pay more for the bike through the scheme it's not a bad deal.

More here

Rykard

amaferanga wrote:

I've just read that HMRC will take any sale of less than 25% to be a taxable benefit and you will therefore be taxed on the difference. Your employer wouldn't actually have to make you pay 25%. Doesn't sound quite as bad. At the end of the day provided you don't pay more for the bike through the scheme it's not a bad deal.

More here

if you can justify the lower valuation, bike worn out by use, do you still pay tax on the difference?

Cressers

Is this guy a deliberate troll?

No.

amaferanga

Rykard wrote:

amaferanga wrote:

I've just read that HMRC will take any sale of less than 25% to be a taxable benefit and you will therefore be taxed on the difference. Your employer wouldn't actually have to make you pay 25%. Doesn't sound quite as bad. At the end of the day provided you don't pay more for the bike through the scheme it's not a bad deal.

More here

if you can justify the lower valuation, bike worn out by use, do you still pay tax on the difference?

Dunno, but you'd have a hard time getting a reputable bike shop to value a bike at 5% after just a year - it'd have to be in a bit of a state I'd have thought?

Headhuunter

Cressers wrote:

So it should. If people want to ride to work then fine, but they shouldn't expect to be subsidised by the taxpayer.

Studies have shown that driving is heavily subsidised by the taxpayer so why shouldn't cycling be? It's far more sustainable.

http://www.rdrf.org/freepubs/pumpup.htm

Most people and scientists accept now that global warming is largely man made and due to emissions, unfortunately the free market has developed to rely on fossil fuels and without state and suprantaional intervention into the free markets, if predictions are correct, we're all f*cked.

alan_sherman

The cycle to work scheme bolstered and already growing industry - the cycle industry. Did it really need taxpayers money wasted on the beaureaxcracy and efectively subsidising the few that could buy a bike through the scheme? probably not.

yes I bought a bike through the scheme. I could have bought anoher but haven't. Th eone I did buy was only used for work a few times (but meant that the 'old' bike could be used for the commute).

The ropey part of the scheme from the beginning was that it was a lease back with ownership being the employers until a final payment of 'fair market value' was made. I'm surprised that this hasn't been focussed on before.

Remember the computer scheme that was essentially the same? The big difference was that the computer you bought really was effectivley worthless at the end of the scheme due to the advancements (or reduced costs) in the lease period.

prawny

My CTW scheme is over 3 years, so I should be hit for 8% max, not too bad.

Why don't the scheme just run over 3 years instead? I don't need a new bike yet although there won't be much of the original one left in another 18 months.

When calculating the FMV can you take off any replacement parts you've bought and put the work out ones on? Seems a bit crappy if they want you to pay for wheels, seat, handlebars etc that you've already had to replace at your own expense.

Headhuunter

I'm wondering what will happen in my case. I am still in the "rental" period but a couple of my colleagues have completed this and have subsequently bought 2nd bikes however our employer has not charged a FMV. I spoke to the woman in accounts, she didn't even realise we were supposed to "buy" the bikes at the end of the rental period, she said that the Partners of the firm wouldn't be bothered with this and as far as they're concerned we can have the bikes. In fact 2 of the partners have bought bikes on C2W anyway.

So it looks like there will be no "sale", at least until HMRC chases up (if they ever do). I wondering what would happen if, in 2 or 3 years HMRC realises. Will we be forced to "buy" the bikes at that point? If so, they'll be worth a lot less than 25%. Also would they deliver us a tax bill of siome kind for receiving a free benefit for the bike from the end of the rental period to the point of sale/realisation?

On another thread someone was saying that FMV will be much lower than HMRC estimates if the bike is in worse condition and if you provide photos to prove this. So it appears to penalise people who actually care for their bikes and replace worn bits!

My final musing is are HMRC really, truly going to waste many man hours chasing up on FMVs and photos of 2nd hand bikes simply to gather a tiny amount of tax? It seems an enormous waste of time for them....

cougie

It does seem a bit bleeding stupid that most schemes run for a year, and you can apply each year. What kind of bike lasts just one year ?

alfablue

amaferanga wrote:

Rykard wrote:

amaferanga wrote:

I've just read that HMRC will take any sale of less than 25% to be a taxable benefit and you will therefore be taxed on the difference. Your employer wouldn't actually have to make you pay 25%. Doesn't sound quite as bad. At the end of the day provided you don't pay more for the bike through the scheme it's not a bad deal.

More here

if you can justify the lower valuation, bike worn out by use, do you still pay tax on the difference?

Dunno, but you'd have a hard time getting a reputable bike shop to value a bike at 5% after just a year - it'd have to be in a bit of a state I'd have thought?

, you can provide evidence that the value is lower, and if the evidence is credible then that should be okay. Evans published a paper explaining how bikes in different states of repair could be valued and a 10% valuation wasn't extraordinary.

Wulz

If you have signed a lease hire agreement then this must be binding. I think its a shame thats its getting messed with but its still not the end of the world. Do you think they can mess with existing agreements?

i would doubt it but i guess they may be able to change the interpretation of the market value bit.

Either way folk compaining of others getting a benefit that they cant are wasting their time. everyone in britain today can point at another group in society who appear to be getting something they are not. Get over i say.

Always some famliy on the dole getting this benefit that benefit, its up to you to derive your own pound of flesh.

For once in my life i got a bloody bike and saved a few quid, guess what? i dont feel to guilty

guilliano

The scheme used to take into account what had already been paid, now it looks like it won't. Cyclescheme (one of the biggest growth companies in the UK in the last few years) showed that on a £500 bike under the new terms a saving of £19 would be made. This won't discourage enthusiasts, but will discourage newcomers to the scheme. There will soon be no incentive for people to ride to work.

The flipside is...... it stops the enthusiasts buying a second bike tax free when they could already be using a bike for commuting (which is a lot of people).

In my shop we have never sold anything other than a complete bike on the scheme and I have never heard of anyone getting anything other than a complete bike and accessories on the scheme. As far as I knew the scheme was always subject to audit and as such any shop selling anything other than a complete bike would have to be completely stupid!

JohnnyAllez

One thing about the scheme - people don`t have to lay out a grand up front but pay it off over the specified time period (and not everyone has a grand lying about to spend on a bike "for work")

teulk

If they want to change the scheme then add the cost to the monthly payments instead of having a huge amount to pay at the end. I for one will not be getting another bike on the scheme if my final payment is £250 for £1000 voucher - i simply couldnt afford to pay it.
For me the scheme has meant i have be able to buy a way nicer bike than i could have generally afforded.
The scheme is open to alot of abuse but thats the fault of the shops who allow it to happen.
I have only commuted twice on my bike which is obviously not in line with the scheme rules but health wise im am fitter and healthier, i have also raised alot of money for charities via cycle rides. I ride my bike just about everyday and ride about 100 - 150miles a week.
Ok so i havent comformed to the scheme and there is no getting away from that but getting the bike has had a profund effect on my life style.

alfablue

teulk wrote:

If they want to change the scheme then add the cost to the monthly payments instead of having a huge amount to pay at the end. I for one will not be getting another bike on the scheme if my final payment is £250 for £1000 voucher - i simply couldnt afford to pay it. .

It really means you may be liable for tax on a benefit of £250 less your transfer payment, so at the basic rate you may have to pay £40 tax.

random man

Interesting quote from Cyclescheme's website:

"What happens at the end of the hire period?

At the end of the hire period employees may be given the opportunity to buy the bike for a full market value, however this cannot be an automatic entitlement. The cost of full market value cannot be stated before or during the hire period as this could be considered a benefit in kind and therefore not be eligible for tax benefits. Many employers opt for Cyclescheme to take ownership of the bikes at the end of the hire term, in which case any offer sale to the employee will come directly from Cyclescheme"

Cyclescheme have made buying a bike through them seem very attractive, they say you will save 40-50%, so it's in their interests to keep it going the bit in bold may be the way forward ie they may be willing to offer a far better final payment deal than your employer, who will not want the hassle.

alfablue

Many employers opt for Cyclescheme to take ownership of the bikes at the end of the hire term, in which case any offer sale to the employee will come directly from Cyclescheme"

This is a ploy by Cyclescheme to get employers to give Cyclescheme bikes which they then sell to employees and make another slice of profit. There is nothing altruistic about it, and Cyclescheme are egging-up the "hassle" issue to erm, persuade (or frighten) employers in to going for it.

Underscore

Wulz wrote:

If you have signed a lease hire agreement then this must be binding. I think its a shame thats its getting messed with but its still not the end of the world. Do you think they can mess with existing agreements?

It's not messing with it. The agreement cannot include a commitment to offer the bike for sale at the end of the hire period. Hence, the price at which it might be offered to you is not fixed as part of the agreement.

For those of us who have already completed the scheme, I don't believe that we can be asked to pay more (for the bike). However, the HMRC can, IIRC, go back up to 6 years where tax has been under-paid so I guess the taxman could start asking for the benefit-in-kind tax on the difference between what was paid and the guidance figure...

_

Headhuunter

alfablue wrote:

Many employers opt for Cyclescheme to take ownership of the bikes at the end of the hire term, in which case any offer sale to the employee will come directly from Cyclescheme"

This is a ploy by Cyclescheme to get employers to give Cyclescheme bikes which they then sell to employees and make another slice of profit. There is nothing altruistic about it, and Cyclescheme are egging-up the "hassle" issue to erm, persuade (or frighten) employers in to going for it.

This looks like a real scam by Cyclescheme, they basically encourage the employer to hand over the employee's bike to Cyclescheme for a nominal fee or nothing and then try to sell it on to the employee at a large FMV mark up. If the emplyee says no, Cyclescheme sells the bike on the 2nd hand market and still makes a killing. Whichever way, Cyclescheme makes a killing.

I'm just not clear why Cyclescheme would be able to pay any less than FMV for the bike whereas the employee has to pay this new 25%. Is there some loophole allowing the employer to pass the bike to Cyclescheme at a lower rate?

PresumingEd

Presumably if the employer sells the bike to a 3rd party, such as Cyclescheme, then there is no taxable benefit in kind. The employer could then sell it as whatever price he or she chooses.

Following that logic, Cyclescheme could then sell the bike to the C2W user at whatever price they deem fit; i.e. they could stick to the old 5% formula. Altoiugh there could be a temptation for Cyclescheme to profiteer by charging 25%, I don't see that as being in their long term interests, because if 20-25% FMVs apply, the scheme will very quickly die, leading to meltdown for their business.

I don't see why HMRCs guidleines would apply in such circumstances

Rykard

what would happen if the company selles the bike to another employee at 5% and you then bought it off them?

Headhuunter

PresumingEd wrote:

Presumably if the employer sells the bike to a 3rd party, such as Cyclescheme, then there is no taxable benefit in kind. The employer could then sell it as whatever price he or she chooses.

Following that logic, Cyclescheme could then sell the bike to the C2W user at whatever price they deem fit; i.e. they could stick to the old 5% formula. Altoiugh there could be a temptation for Cyclescheme to profiteer by charging 25%, I don't see that as being in their long term interests, because if 20-25% FMVs apply, the scheme will very quickly die, leading to meltdown for their business.

I don't see why HMRCs guidleines would apply in such circumstances

This sounds like a good way round HMRC rules then. I could get my employer to sell the bike to my uncle (or whoever's) company for a tenner or something and then he could just give the bike to me.... HMRC rules evaded. Job done.

amaferanga

I think people need to calm down. FMV may be 25%, but that doesn't mean your employer has to charge you 25% for transfer of ownership. You'll be subject to tax on the difference between what you actually pay and what HMRC think you should pay (at least that's my understanding of it).

alfablue

That's what I've been telling them . . .

alfablue wrote:

teulk wrote:

If they want to change the scheme then add the cost to the monthly payments instead of having a huge amount to pay at the end. I for one will not be getting another bike on the scheme if my final payment is £250 for £1000 voucher - i simply couldnt afford to pay it. .

It really means you may be liable for tax on a benefit of £250 less your transfer payment, so at the basic rate you may have to pay £40 tax.

bompington

So I wonder what the FMV on mine is... seeing as how it was stolen last year?

guilliano

HMRC would probably just look on ebay or ask an "expert" what the sale value of a one year old bike is, then base their demand for money (sorry, requested transfer price) on the advice received.

Rykard

can you claim the cost of any replacement parts against the FMV? i.e. new cassette, chain & crank? these would come off the FMV?

amaferanga

FMV isn't what you'd get if you sold the bike on ebay though!

Simontheintrepid

teulk wrote:

If they want to change the scheme then add the cost to the monthly payments instead of having a huge amount to pay at the end. I for one will not be getting another bike on the scheme if my final payment is £250 for £1000 voucher - i simply couldnt afford to pay it.
For me the scheme has meant i have be able to buy a way nicer bike than i could have generally afforded.
The scheme is open to alot of abuse but thats the fault of the shops who allow it to happen.
I have only commuted twice on my bike which is obviously not in line with the scheme rules but health wise im am fitter and healthier, i have also raised alot of money for charities via cycle rides. I ride my bike just about everyday and ride about 100 - 150miles a week.
Ok so i havent comformed to the scheme and there is no getting away from that but getting the bike has had a profund effect on my life style.

I would just like to concur with this, but I can't really blame the shops. The Cyclescheme FAQ specifically says that while the bike should be used to travel to work for 50% of the time 'there is no requirement to cycle to work for a specified number of days throughout the year and there is no special requirement for you to record your trips'. What were they expecting!!

Once I'm up to speed I do hope to ride to work around 1-2x a week, but that's not why I bought it and I don't feel guilty. For all I pay in taxes, £200-300 off VAT (before these guidelines were published) was not going to upset me. Plus, as you mention, I'm fitter (is this less of a burden on the NHS? well I might get injured or need physio etc at some point so the jury's out there) and hopefully doing charity stuff in the near future. Unfortunately it's impossible to gauge how much fitter, happier, more productive a workforce is in relation to this scheme for the out of touch powers that be.

What I'm p***** off about is that I have committed to a more expensive bike because I thought it was in my budget, and now it looks like it won't be. This scheme has its backers and detractors, but it's disgusting to change the goalposts halfway through a contract. If it was a business partner, it wouldn't be tolerated.

rake

i dont back the scheme but its wrong to change a deal once signed up.