Fair market valuation, cycle to work.

metalmonkey

Has anyone as above the vaulaution through on bike yet?

I left my job but I had made all the payments, then I got an email through from them telling me that the if I wanted to keep the bike I would have pay £212 plus VAT, I was like what the hell :x

I have paid £65 a month and now they want that as well! I had a voucher which is well £1000 the bike is a Felt Six Comp they said they want it back if I can't afford to pay it, do you think they want the shorts as well? It was through Evans I got the bike, I called them they said it was down to the employer to sort the final fee.

I checked the HRM web site on this, they said up to that amount can be charged, but my bike is used, needs a service. Also how much is a bike worth a year on? Any advice around this would be great casue I'm going to set this right. How can someone at a deak who knows nothing about bikes, decide what its worth it all seems very wrong.

paulus69

We've just had a scheme introduced at work and having read the small print am not keen. Your workplace has to ask for that amount otherwise they will not be fufilling the rules set out by HMRC, its a pain in the arse if you leave.

Zachariah

I have just finished paying off a CTW commuter, originai purchase was £550, monthly pre-tax payments were £46-ish, final one just now came automatically out of PAYE packet at £23 (before tax) plus VAT (after tax). Employer is a large local authority.

Tonymufc

Does anybody know that if you opt for the the extension period if you can re-apply for another bike on the scheme before the extended hire period has finished. I.e. once the twelve month hire period has finished I take the extended hire period then immediately re-apply for another voucher?

hatbeard

Tonymufc wrote:

Does anybody know that if you opt for the the extension period if you can re-apply for another bike on the scheme before the extended hire period has finished. I.e. once the twelve month hire period has finished I take the extended hire period then immediately re-apply for another voucher?

i was told by my employer that once the 12 month salary sacrifice is up I can start another voucher. the only restriction is you can't have more than one salary sacrifice setup at one time.

the fmv is utter crap. I can understand paying tax on the value of the bike as it is technically a benefit and as such they can't open up a loophole by letting you get around paying tax where tax is due. but why on earth am I paying my company money for something they've never 'really' owned. in essence I'm paying for the same item twice.

tailwindhome

Ask your company to extend the rental period (obviously at £0 rent). Then buy the bike in a couple of years at the minimum FMV

If they insist on a the new 25% FMV now, you are under NO obligation to buy the bike. If you decide not to buy, what are they going to do with it?

The Rookie

Its not what the company is going to do with it, its HMRC rules.....

If you have a reasonable company get then to get a quote for a sale to an LBS (which will be low as a 'trade in' without buying, that value can then be classed as the FMV, or get them to auction it, you buy, that is also FMV.

Simon

Headhuunter

The Beginner wrote:

Its not what the company is going to do with it, its HMRC rules.....

If you have a reasonable company get then to get a quote for a sale to an LBS (which will be low as a 'trade in' without buying, that value can then be classed as the FMV, or get them to auction it, you buy, that is also FMV.

Simon

the 25% FMV is not a "rule" it's a guideline, unfortunately some companies take it as the letter of the law. An LBS my be able to assess the bike and put a lower value on it after a year of use... However if you're leaving the company, whether they will feel they can be bothered to do you a favour by accepting your lower valuation is another matter...

The Rookie

The FMV is a rule, the 25% is the guideline part of it.....as we both say, get a decent valuation of the bike, if it's less than the 25% then the company have justification for setting the FMV at that level, although to be honest a reasonable looked after £501+ bike after one year should be worth more than the 25%!

Simon

symo

Don't buy the bike, you can get another shot at the scheme for new shinier bike surely?

Phate

Cyclescheme guidance is the following regarding fair market value*

25% if it's in perfect mint condition, washed and dried after every ride...
20% if it's in good nick
15 % if it has good wear and tear (ridden through the elements, etc)
10 % If it's been through the paces(ridden proper, through winter all year long, in salt, etc...)

* for a £500+ bike

symo

There you go offer them 10%

Headhuunter

symo wrote:

There you go offer them 10%

Yeah, just haggle, if you give it back what are they going to do with it? It would be a hassle for them to clean it up and sell it on ebay or something

RufusA

Phate wrote:

Cyclescheme guidance is the following ....10 % If it's been through the paces(ridden proper, through winter all year long, in salt, etc...)

Is this up to date guidance from Cyclescheme?

AFAIK HMRC is still of the opinion it should be 25% and "if employers chose to use lower values, it would remain open to HMRC to challenge these..."

Rufus.

rolf_f

TailWindHome wrote:

If they insist on a the new 25% FMV now, you are under NO obligation to buy the bike. If you decide not to buy, what are they going to do with it?

If the company has any sense at all, it will ask for a disposal fee equal to the FMV........

Headhuunter

Rolf F wrote:

TailWindHome wrote:

If they insist on a the new 25% FMV now, you are under NO obligation to buy the bike. If you decide not to buy, what are they going to do with it?

If the company has any sense at all, it will ask for a disposal fee equal to the FMV........

How can they charge a diposal fee for something which they own, which has simply been rented out? Is that possible? It's officially the employer's bike until the FMV has been paid for an "ex rental" bike so it's perfectly possible just to give it back and be done with it.

Tonymufc

This may be a daft question, but what would stop the employer from simply giving you the bike.

Monkeypump

Headhuunter wrote:

Rolf F wrote:

TailWindHome wrote:

If they insist on a the new 25% FMV now, you are under NO obligation to buy the bike. If you decide not to buy, what are they going to do with it?

If the company has any sense at all, it will ask for a disposal fee equal to the FMV........

How can they charge a diposal fee for something which they own, which has simply been rented out? Is that possible? It's officially the employer's bike until the FMV has been paid for an "ex rental" bike so it's perfectly possible just to give it back and be done with it.

Are you sure that you really want to violate a 'good will' agreement to buy the bike back? It's HMRC that have moved the goalposts, not your employer.

Monkeypump

Tonymufc wrote:

This may be a daft question, but what would stop the employer from simply giving you the bike.

The same thing that stops them giving you a free company car, or any other taxable benefit.

Headhuunter

Monkeypump wrote:

Headhuunter wrote:

Rolf F wrote:

TailWindHome wrote:

If they insist on a the new 25% FMV now, you are under NO obligation to buy the bike. If you decide not to buy, what are they going to do with it?

If the company has any sense at all, it will ask for a disposal fee equal to the FMV........

How can they charge a diposal fee for something which they own, which has simply been rented out? Is that possible? It's officially the employer's bike until the FMV has been paid for an "ex rental" bike so it's perfectly possible just to give it back and be done with it.

Are you sure that you really want to violate a 'good will' agreement to buy the bike back? It's HMRC that have moved the goalposts, not your employer.

But he has left the employer, he has resigned/been sacked and is moving on. He owes them nothing. It's just a case of sorting out the final purchase price on the bike or giving it back to the ex employer. In any case the employer should know full well the risk that an employee may not want the bike at the end of the rental period. if they really want to get rid of it, they may as well agree to a few years free rental (which is perfectly legal) and then sign the bike over to the (ex) employee later once it's value has fallen to zero. Otherwise they can keep it and dispose of it themselves. At least that's how I would view it.

Tonymufc

Monkeypump wrote:

Tonymufc wrote:

This may be a daft question, but what would stop the employer from simply giving you the bike.

The same thing that stops them giving you a free company car, or any other taxable benefit.

Ahhhh...... :oops:

hatbeard

Tonymufc wrote:

Monkeypump wrote:

Tonymufc wrote:

This may be a daft question, but what would stop the employer from simply giving you the bike.

The same thing that stops them giving you a free company car, or any other taxable benefit.

Ahhhh...... :oops:

it's perfectly acceptable for the company to give you the bike for free but the valuation of the bike as it stands at the time you take ownership (FMV) is then classed as a taxable benefit and you are required to pay the tax on that value to HMRC. this and the extended hire period seem to be the only two reasonable options for getting a decent discount anymore.

I think this is how the scheme should have been setup for all people who use it in the first place but the taxman presented companies the opportunity of getting a final payment as well and it's pretty bloody obvious which of those two options most companies will go for.

barrybarryr

Buy a shite broken bike of eBay and then give that back to them. That's what I intend to do when mine ends.

RufusA

barrybarryr wrote:

Buy a shite broken bike of eBay and then give that back to them.

Even a shite broken version of your bike from ebay will probably cost you more that 25% of the initial purchase price IMHO. Unless it's accident damaged and had half the components stripped off in which case your employer might ask tough questions about how you are not looking after company property!

Rufus.

Phate

RufusA wrote:

Phate wrote:

Cyclescheme guidance is the following ....10 % If it's been through the paces(ridden proper, through winter all year long, in salt, etc...)

Is this up to date guidance from Cyclescheme?

AFAIK HMRC is still of the opinion it should be 25% and "if employers chose to use lower values, it would remain open to HMRC to challenge these..."

Rufus.

This was the Cyclescheme guidance from just over a fortnight ago.

Cyclescheme do however also offer to take ownership at the end of the year and rent the bike to you for free for 31months, leaving a FMV of 7% to be paid at the end of the 31months.

My work however have decided against this and will use the sliding scale dependant on condition and then let you pay the 10% over 3 months!

davman

I paid the last of my Cyclescheme payments in October. This was for a £650 bike, which was about £56 (£42) per month

Had an email from Cyclescheme last week with the 3 options, one of which was to pay £175 to obtain ownership of the bike.

If i end up paying this money, then the total cost for me to 'hire' the bike from Cyclescheme and then 'buy' it will be more than i got the original loan for! Might as well have bought it on 0% finance or on a credit card for the good it's done me.

Oh and the bike has been used regularly over the 'rental' period, including two unfortunate crashes (one of which put me in hospital for a week with a bleed on the brain) and not left in a shed or nice warm room. There is no way it's worth 25% of the original price. I couldn't even give the bike back as was bought as the tyres have been replaced, i've added more kit to it and had the wheels rebuilt with better, stronger rims. Might not even be worth 10%. It would be better financially for me to declare it as a taxable benefit and take the hit on my tax code next financial year. Don't know how that would stand with Cyclescheme though.

My employers are now looking into this, as they have 13 employers who are at the end or are coming to the end of the their cyclescheme period and are all going to have demands for money made above that which the employer signed up to with Cyclescheme. I'm preparing myself fo having to pay the FMJ but, as you can imagine, am not happy about it ata

For what it's worth, i believe Cyclescheme have seen this as a quick way to make a fast buck before the scheme is killed off because HMRC are recommending that the FMJ is a quarter of the original purchase price. Once people get wind of this, then they aren't going to use it as a way to purchase a bike. My employer is going to find it very hard to sell this to their employers if there is a possibility you may actually end up paying more for it than was originally provided.

It might all work out for the best and i end up paying only the 10% or lower figure, but it's left a nasty taste in my mouth.

cheers

Headhuunter

davman wrote:

I paid the last of my Cyclescheme payments in October. This was for a £650 bike, which was about £56 (£42) per month

Had an email from Cyclescheme last week with the 3 options, one of which was to pay £175 to obtain ownership of the bike.

If i end up paying this money, then the total cost for me to 'hire' the bike from Cyclescheme and then 'buy' it will be more than i got the original loan for! Might as well have bought it on 0% finance or on a credit card for the good it's done me.

Oh and the bike has been used regularly over the 'rental' period, including two unfortunate crashes (one of which put me in hospital for a week with a bleed on the brain) and not left in a shed or nice warm room. There is no way it's worth 25% of the original price. I couldn't even give the bike back as was bought as the tyres have been replaced, i've added more kit to it and had the wheels rebuilt with better, stronger rims. Might not even be worth 10%. It would be better financially for me to declare it as a taxable benefit and take the hit on my tax code next financial year. Don't know how that would stand with Cyclescheme though.

My employers are now looking into this, as they have 13 employers who are at the end or are coming to the end of the their cyclescheme period and are all going to have demands for money made above that which the employer signed up to with Cyclescheme. I'm preparing myself fo having to pay the FMJ but, as you can imagine, am not happy about it ata

For what it's worth, i believe Cyclescheme have seen this as a quick way to make a fast buck before the scheme is killed off because HMRC are recommending that the FMJ is a quarter of the original purchase price. Once people get wind of this, then they aren't going to use it as a way to purchase a bike. My employer is going to find it very hard to sell this to their employers if there is a possibility you may actually end up paying more for it than was originally provided.

It might all work out for the best and i end up paying only the 10% or lower figure, but it's left a nasty taste in my mouth.

cheers

As has already been discussed, get your employer to extend the rental period at £0 rent. It's perfectly legal. Just carry on "renting" the bike til it's FMV is zero and then they can hand it to you for nothing. I thought Cyclescheme had a similar system whereby they would take the bike off the employer and then rent it back to you for free til it was worth much less....

davman

Headhunter

thanks for your reply. However;

It isn't my employer who extends it though, the 'extended rental' period of three years is an offer from Cyclescheme. And that will cost me £49. Plus, Cyclescheme will also charge another Final Market Valuation at the end of this extended rental period. When i spoke to someone at Cyclescheme about this last Monday, i was told that even at the end of the extended rental period, i would be liable for anything between 3 & 7% of the original purchase price of the bike. that's anything between 20 and 45 quid. Plus VAT on top.

I entered the cyclescheme scheme in good faith, as did all my colleagues.
I understand HMRC have set out guidelines as to the final payment/transfer of ownership/FMV/whatever you want to call it, to tighten the rules and make it more clear. I was under the impression, as was my LBS, that this was to be effective from September 2010. Cyclescheme, in their infinite wisdom, have turned this around (to their advantage i believe) and are charging the FMV (25%, which is only a guidline from HMRC) to all those employees who's individual schemes end after August 2010. Not start, end. Hence why i and 12 of my colleagues have been or will be stung.

This is exactly the same as me buying a new car for £10000 now and paying VAT at the current rate. And then being told by the dealer on the 2nd January 2011 that because VAT has increased to 20%, that i'm liable for the increase as well.

Incidentally, when my colleague in Finance spoke to the HMRC, she was told that HMRC consider the Cyclescheme to be bit of con. Any wonder why they've put such a ridiculous figure on the value after one year, other than to kill the scheme dead?


I'm not having a go at you here, so apologies if my email seems a little aggressive

Headhuunter

davman wrote:

Headhunter

thanks for your reply. However;

It isn't my employer who extends it though, the 'extended rental' period of three years is an offer from Cyclescheme. And that will cost me £49. Plus, Cyclescheme will also charge another Final Market Valuation at the end of this extended rental period. When i spoke to someone at Cyclescheme about this last Monday, i was told that even at the end of the extended rental period, i would be liable for anything between 3 & 7% of the original purchase price of the bike. that's anything between 20 and 45 quid. Plus VAT on top.

I entered the cyclescheme scheme in good faith, as did all my colleagues.
I understand HMRC have set out guidelines as to the final payment/transfer of ownership/FMV/whatever you want to call it, to tighten the rules and make it more clear. I was under the impression, as was my LBS, that this was to be effective from September 2010. Cyclescheme, in their infinite wisdom, have turned this around (to their advantage i believe) and are charging the FMV (25%, which is only a guidline from HMRC) to all those employees who's individual schemes end after August 2010. Not start, end. Hence why i and 12 of my colleagues have been or will be stung.

This is exactly the same as me buying a new car for £10000 now and paying VAT at the current rate. And then being told by the dealer on the 2nd January 2011 that because VAT has increased to 20%, that i'm liable for the increase as well.

Incidentally, when my colleague in Finance spoke to the HMRC, she was told that HMRC consider the Cyclescheme to be bit of con. Any wonder why they've put such a ridiculous figure on the value after one year, other than to kill the scheme dead?


I'm not having a go at you here, so apologies if my email seems a little aggressive

Yeah, would have been better for you if your employer had held onto the bikes rather than passing everything on to Cycle Scheme. I must admit, when all this hoo ha about FMV came out, I wondered if it was simply away for the govt to quietly kill off B2W without actually "officially" killing it, which would have had everyone up in arms

nightoff

As I understand it, at the end of the scheme the cycle belongs to the company unless the employee pays the FMV. If you are on good terms with the company could you oficially decline to buy the bike from your employer giving them the option of disposing of the bike how they feel fit, say a private sale through freeads which you happen to buy at a much lower price?

HMRC should be satisfied that the bike is sold as there is an advert and some small change in the petty cash tin.

Can anyone see any problems in this?

Headhuunter

nightoff wrote:

As I understand it, at the end of the scheme the cycle belongs to the company unless the employee pays the FMV. If you are on good terms with the company could you oficially decline to buy the bike from your employer giving them the option of disposing of the bike how they feel fit, say a private sale through freeads which you happen to buy at a much lower price?

HMRC should be satisfied that the bike is sold as there is an advert and some small change in the petty cash tin.

Can anyone see any problems in this?

But that's essentially how the current system works. You "rent" the bike for 12 months and then after this you "buy" it for ex rental, 2nd hand price. I'm sure if you wished, you could arrange for your employer to sell the bike through ebay or wherever, however it may well fetch more than 25% MV. If your employer simply arranged for a sale with 1 prospective buyer (you) at a set price, that's simply passing the bike on at less than the 25% FMV...

The best option as far as I can see for anyone is for your employer to extend the rental period for however long it takes for the bike to be worth zero or you leave the company...