Cyclescheme valuation...WTF!!!!

moonio

dhope wrote:

moonio wrote:

Intresting, my bike was stolen earlier this year...so how can they palce a market value on a bike i no longer have..

It's not your bike, you're hiring it, and there'll be a mention of it in the T&Cs

Yes, but how can they calculate the market value of a bike that doesnt exist? Its just what someone is prepared to pay for it afterall.

Monkeypump

woodchips69 wrote:

The 25% valuation has been set by Cyclescheme without viewing the bike. My employer has outsourced the valuations back to them to deal with. I think it should be my employer who I need to deal with.
To all those who keep saying we should know it is only a loan of a bike, can I draw your attention to practically every bike website/magazine and the adverts about saving 50% off the price of a new bike. For some reason they don't say "pay upto £60 per month for the LOAN of a bike for a year, then give it back"! Maybe its because they might actually never sell any through it if they tell the truth!!!

And to all those who enter into a finance agreement without fully understanding it.... I question your common sense.

If something looks too good to be true, it usually is! So, whilst the various cycle schemes aren't as good a deal as they once were, it's still a good way to save SOME money on a new bike and spread the cost of purchase. Just make sure you understand all the details.

(Of course, I acknowledge that the changes made by HMRC are not in the spirit of the scheme - but a good thing never lasts).

sketchley

In order to receive the VAT and tax savings the bike MUST be hired to you as lease HIRE. Any suggestion of entitlement to purchase the bike at end of hire perios makes it lease purchase and you have to pay the full vat and tax.

Simples.

woodchips69

To Monkeypump:-
I did understand the T & C's at he time I signed up, its just that I was expecting/led to expect to pay approx. £50-80 at the end based on their 5%ish rule. I didn't expect to pay £250!!!
And as I have already said, if I knew that at the start, or if I was due to sign now, I wouldn't. I would just pay the cash.
In effect if I pay the £250 I would have saved myself £35 at the end. In what way is that worth the hassle, or indeed the savings, that where offered at the start of the Ride to Work schemes?
In a word its POINTLESS.
Unless you're a scheme administrator!!!

sketchley

@woodchip

This is one of the problems in the change of rules mid way through the hire agreement. In fact the new rule can work even better meaning you pay less but as you've agreed one thing and the rules change it's a bit harse. Read the links above but in general terms you have 3 options.

1. Prove the market value of the bike is less than 25% you will need picutures and adverts for simualr bikes to back up your claim. HMRC point is this will be difficult and infact the resales value of a one year old £500 bike is more than £25 (5%). If you sold the bike having paid 5% you would make a profit (tax free) which is reason for new rules.
2. Renegoiate the hire term. This is good option you can for example agree to carry on hiring the bike at zero cost per month until either you leave the company or 6 years expires at which point you pay zero anyway. Again read the links above from evans.
3. Pay the money,

notsoblue

I think this is all fair enough. My only problem with it is that it appears that Cyclescheme is benefiting grotesquely from this. For a £1000 bike they take ownership of the bike from the employer for a nominal fee of £1, and then get to claim £250 from the employee at the end and pocket it all? Its not like the ownership fee goes to offset any tax revenue lost. Employees don't save money, neither do Employers, and money that would have been paid in tax just goes straight to Cyclescheme. Bit of a swindle if I've understood that correctly. Excellent business plan for Cyclescheme though.

re-cycles

moonio wrote:

dhope wrote:

moonio wrote:

Intresting, my bike was stolen earlier this year...so how can they palce a market value on a bike i no longer have..

It's not your bike, you're hiring it, and there'll be a mention of it in the T&Cs

Yes, but how can they calculate the market value of a bike that doesnt exist? Its just what someone is prepared to pay for it afterall.

Is it not part of the T&Cs that the bike must be insured?

alan_sherman

I think that HMRC have effectively killed the scheme with the rule change. I wouldn't get another bike through the scheme now.

But then it was always a bt too good to be true. Why should we get a government scheme (with all the added bureaucracy) to get cheaper bikes? You can buy a perfectly good commute to work bike for £250.

I'd rather the money and effort was converted into policing bad driving.

andy83

re-cycles wrote:

moonio wrote:

dhope wrote:

moonio wrote:

Intresting, my bike was stolen earlier this year...so how can they palce a market value on a bike i no longer have..

It's not your bike, you're hiring it, and there'll be a mention of it in the T&Cs

Yes, but how can they calculate the market value of a bike that doesnt exist? Its just what someone is prepared to pay for it afterall.

Is it not part of the T&Cs that the bike must be insured?

I think it says your responsible for the bike ie if it gets stolen you need to replace it or accept you still have to pay the premium

alan sherman
Posted: Tue Nov 9, 2010 4:37 pm Post subject:
I think that HMRC have effectively killed the scheme with the rule change. I wouldn't get another bike through the scheme now.

But then it was always a bt too good to be true. Why should we get a government scheme (with all the added bureaucracy) to get cheaper bikes? You can buy a perfectly good commute to work bike for £250.

I'd rather the money and effort was converted into policing bad driving.

Yep was good while it lasted. i wont be getting another one through it, had two and happy with that.

notsoblue

alan sherman wrote:

I think that HMRC have effectively killed the scheme with the rule change. I wouldn't get another bike through the scheme now.

But then it was always a bt too good to be true. Why should we get a government scheme (with all the added bureaucracy) to get cheaper bikes? You can buy a perfectly good commute to work bike for £250.

I'd rather the money and effort was converted into policing bad driving.

I think you have a good point. But the problem with the scheme at the moment is that all it seems to be doing is generating revenue for Cyclescheme and other administrators of the scheme.

http://road.cc/content/news/11880-cycle ... ness-award

"...Bath-based Cyclescheme has been named the fastest-growing private company in Britain in this year’s Fast Track 100 league table, published in The Sunday Times."

And that was *before* the 25% FMV enforcement...

Tonymufc

I may be missing something here. I rang cyclescheme last week regarding my own agreement. Yeah sure there's going to be the transfer fee to cough up but for the next three years the bike isn't going to cost you a penny to use (running costs aside) then at the end of that term you then pay approx 7% of the bikes original value. I've worked out that I will have saved 170 quid. Admittedly not the savings we were promised but still not a bad saving all the same. Its still better than an interest free loan.

Monkeypump

notsoblue wrote:

I think this is all fair enough. My only problem with it is that it appears that Cyclescheme is benefiting grotesquely from this. For a £1000 bike they take ownership of the bike from the employer for a nominal fee of £1, and then get to claim £250 from the employee at the end and pocket it all? Its not like the ownership fee goes to offset any tax revenue lost. Employees don't save money, neither do Employers, and money that would have been paid in tax just goes straight to Cyclescheme. Bit of a swindle if I've understood that correctly. Excellent business plan for Cyclescheme though.

Indeed, a fine business plan. Fortunately my employer spotted this, and opted out of transferring ownership to them (i.e. retained ownership and the end of the 'hire' period, then transferred ownership direct to me after my final payment).

Cyclescheme still got the 10% fee from the bike shop at the start of the agreement, but nothing after that.

shouldbeinbed

hatbeard wrote:

W1 wrote:

woodchips69 wrote:

The thing that has pi**ed me off the most is that there has been no communication from them about this at all!
First I knew about it was when I got the email from them yesterday. Surely if the scheme is going to change they should inform you and that people already on it should stay on their original terms.
3 lads at my work have just received their bikes on the scheme and they still think it is based on the 5% valuation at the end. I know it probably says somewhere in the small print about the changes, but Cyclescheme have hardly made a song and dance about it. Probably because they know no-one would sign up anymore!!!!

I don't mean to seem unsympathetic, but it is staggering how many people sign up to financial agreements without reading them, and then have a rant when the risks that are outlined come to fruition.

I agree but in this case the previous guideline price was set at 5% regardless of age/condition of the bike, the people who are getting the biggest shock are those who signed their agreements before the gov decided to move the goalposts and now are being asked for 5x as much as they were expecting.

anyone who signed up after the rules change who didn't realise what they would have to pay deserve all they get. I did it but I knew exactly what I was signing up to*

*although i reserve the right to rant about the new charges still as they are pretty much b*llocks.

nothing was 'set' on the contract. I signed up to and both cs and my employer were deliberately vague but were clear that 5% was only a guideline figure not set in stone and up to the employer to set as they saw fit. FAQ on cs site was saying this 18 odd months ago when I was looking at it.

I copped lucky and did pay 5% in Sept but have seen and heard enough on here and elsewhere for at least the last 9 months about this to make me not jump in for another one.

If you'd bought a grands worth of bike yourself and I came along and offered you £50 for it a year later would you sell it to me?

jds_1981

alan sherman wrote:

You can buy a perfectly good commute to work bike for £250.

The cheapest geared road bike on evans is £270. Then add on a change to spds, shoes, helmet, lock, puncture repair kit, pump, some suitable clothing (maybe a panier and rack) and lights & I'm sure you'll easily be pushing £600.



edit: beings me on to a good idea - maybe I should just buy lycra and similar with cyclescheme - I suspect 5% would be a realistic valuation on that after a year

jds_1981

shouldbeinbed wrote:

If you'd bought a grands worth of bike yourself and I came along and offered you £50 for it a year later would you sell it to me?

Think the question may be to do with jumping through the hoops to buy a bike from cyclescheme from what is often a prescribed supplier, or going away to any shop you want and negotiating discount with much greater choice.

I didn't go cyclescheme because it appears to be a scam & their were too many hoops to jump through (e.g. can only do one month in the year) & bought my bike with a 20% straight off

chrishumes

think im going to be caught by this in jan as thats when the 12 months is up.

Siemens have stopped this now as it isnt a viable scheme. thats coming from a massive company!

could you not say that the bike was only £500, and you bought £500 worth of lycra, and then say that the lycra value has no value as no one would buy it second hand?! then 25% of the bike is only £125?? and try to say it needs new brakes/gears or summit?

im certainly going to challenge it

woodchips69

Yeah definitely going to speak to employer about it.
I know HMRC rules have changed but it still seems like a big money spinning exercise for the administrators than a genuine attempt at getting people who would normally drive to work to use a bike.
And before everyone starts saying most people use them only for leisure, the people I know who have them at work do use them for both. That surely was what the aims of the scheme where originally about.
I think when people become fully aware of the new "rules", ride to work will be dead with-in a year or so.

sketchley

Sounds like cyclescheme are taking the mickey.

There is another way. Offer to take bike from employer for the same
1 pound cyclescheme are offering. This is less than HMRC guidelines so is a taxable benefit. Declare benefit as 25% less 1 pound and pay tax on it. You pay much less than 25% and cycle scheme don't get penny.

woodchips69

Like your thinking Sketchley, I'm going to speak with them when I go back to work on Friday.
Also, just noticed that my hire agreement was signed by my employer on 4th Aug 2009 and the start date for the new 25% rule was 6th Aug 2010, so might get round it that way.

_jon_

The main reason I decided not to join this scheme was due to the vagueness surrounding the amount the final payment would be. That and the fact I'd have to insure it (costing even more each month).

After reading about the scheme I decided I'd rather own a bike outright. I can understand why people went for it though.

MrChuck

I signed up for the scheme a week after my employer said they'd be going for the new guidleines- my bike got nicked at the wrong time!

Anyway, I worked out that in the worst 25% case I'd still be ahead, although not by much. The advantage for me is that I can pay in instalments- the bike I wanted wasn't available from anywhere convenient on interest free credit. If not for that I'd probably have just got one on credit.

That said I don't feel I'm being hard done by. As somebody else said the scheme as it stood before was too good to be true really, and I'm still saving a bit of cash where I wouldn't otherwise.

ooermissus

woodchips69 wrote:

Well, believe me, I'm not thick and I did read the small print. It didn't state that the final valuation would be 5%, but it did say that it was an approximate figure that was usually used. I could understand a few % difference either way but to jump to 25% is taking the pee.

But the original guidance was pretty clear wasn't it? This from Oct 09 "to prevent a taxable
benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the full market value of the equipment."

Did the rules ever really change? Or were companies simply told to stop understating the full market value?

rolf_f

_Jon_ wrote:

The main reason I decided not to join this scheme was due to the vagueness surrounding the amount the final payment would be. That and the fact I'd have to insure it (costing even more each month).

After reading about the scheme I decided I'd rather own a bike outright. I can understand why people went for it though.

But surely you'd insure your bike anyway? Not that it costs me anything to insure my bikes anyway - all on the house insurance.

jds_1981

Rolf F wrote:

But surely you'd insure your bike anyway? Not that it costs me anything to
insure my bikes anyway - all on the house insurance.

I don't mine - it's either in the house, or locked up at work in a private area. Only chance of it being stolen is if I'm pushed off during my commute

_jon_

Rolf F wrote:

_Jon_ wrote:

The main reason I decided not to join this scheme was due to the vagueness surrounding the amount the final payment would be. That and the fact I'd have to insure it (costing even more each month).

After reading about the scheme I decided I'd rather own a bike outright. I can understand why people went for it though.

But surely you'd insure your bike anyway? Not that it costs me anything to insure my bikes anyway - all on the house insurance.

If I'd paid £1000 plus on a bike then maybe but I decided I'd be better off buying a cheaper second hand bike that isn't worth insuring instead.

sketchley

ooermissus wrote:

woodchips69 wrote:

Well, believe me, I'm not thick and I did read the small print. It didn't state that the final valuation would be 5%, but it did say that it was an approximate figure that was usually used. I could understand a few % difference either way but to jump to 25% is taking the pee.

But the original guidance was pretty clear wasn't it? This from Oct 09 "to prevent a taxable
benefit in kind arising as a result of the transfer of ownership the employee must pay the employer the full market value of the equipment."

Did the rules ever really change? Or were companies simply told to stop understating the full market value?

Yes very clear and they've not changed. All that's changed is the HMRC has issued guideline as to how to calculate the final value. The 5% assumption was based on buying a commuter bike then riding it every day for a year on a long commute, which should result in a bike worth a lot less than one used infrequently or only at weekends. Fact is people have used the scheme just to get cheap bike you still only have to pay full market value so if you can show with pictures and adverts for similar bikes to yours, a lower market value you can pay less.

Also, as it says on the Evans site http://www.evanscycles.com/ride2work/fo ... rticipants the guidelines make it clear that the hire period can continue after the salary sacrifice at no charge, affectively meaning that while you stay in employment you pay nothing after salary sacrifice is over unless you leave the company at which point you pay the market value or the disposal fee. The site also makes it clear that the total value of salary sacrifice does not need to equal the amount paid for the bike, in fact your employer can rent you the bike at whatever rate they wish deciding for example to deducted the final payment from the amount paid under salary sacrifice. There is also no reason why the salary sacrifice has to last one year; it could last 3 dramatically reducing the monthly amount. Providing you employer agrees of course. Finally your employer can write off some of the expense on the bike against their tax meaning they can recover the full cost of the bike with less contributions from you, again see Evans site linked above. Combine these points and you can actually pay a lot less than under the previous guidelines.

Still none of this really helps people already in the scheme who where hoping to pay just 5% at the end. These people should ask themselves a question regarding the true second hand value of the bike, would they consider 5% a bargain or would 25% be more appropriate, and they should also renegotiate their hire contract with their employer to either pay less or have the rental period last past the end of the salary sacrifice (or both!), in fact Evans recommend this and even offer a contract amendment form for existing subscribers..

alfablue

woodchips69 wrote:

Like your thinking Sketchley, I'm going to speak with them when I go back to work on Friday.
Also, just noticed that my hire agreement was signed by my employer on 4th Aug 2009 and the start date for the new 25% rule was 6th Aug 2010, so might get round it that way.

I don't think they are really new rules at all; we were always liable to pay tax on a benefit in kind, HMRC merely gave guidance on what this benefit might be worth. The guidance does not mean your employer has to charge you 25%, merely that you pay tax on receiving that benefit (less the amount you do pay), thus your employer could charge you a 5% fee to transfer ownership on a £1k bike, HMRC would suggest you are getting a benefit of 20%, i.e. £200, you therefore pay £40 or £80 tax depending on which band you are in.

If employers use the guidance to justify a charge of 25% then they are just profiteering; they are under no compulsion whatsoever to charge this amount.

kelsen

alfablue wrote:

woodchips69 wrote:

Like your thinking Sketchley, I'm going to speak with them when I go back to work on Friday.
Also, just noticed that my hire agreement was signed by my employer on 4th Aug 2009 and the start date for the new 25% rule was 6th Aug 2010, so might get round it that way.

I don't think they are really new rules at all; we were always liable to pay tax on a benefit in kind, HMRC merely gave guidance on what this benefit might be worth. The guidance does not mean your employer has to charge you 25%, merely that you pay tax on receiving that benefit (less the amount you do pay), thus your employer could charge you a 5% fee to transfer ownership on a £1k bike, HMRC would suggest you are getting a benefit of 20%, i.e. £200, you therefore pay £40 or £80 tax depending on which band you are in.

If employers use the guidance to justify a charge of 25% then they are just profiteering; they are under no compulsion whatsoever to charge this amount.

+1 This appears to be what my company are doing under the new guidelines.

sketchley

Agreed, any business making money from this should be ashamed.

Another thought. If cyclescheme are "offering" to take ownership for £1 then sell the bike to you. Does this not create the impression that the bike is in fact only worth £1 on the open market. Not sure how far you would get with it but several examples of Cyclescheme paying just £1 would seem to do the trick.

From http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

•If employers chose to use lower values, it would remain open to HMRC to challenge these and the employer or employee (as appropriate) would need to be able to provide evidence in support of these values i.e. to demonstrate that the employee could have realised no more than these sums from sale or disposal of the cycle. We would expect evidence of a lower value to include:

◦a photograph of the cycle demonstrating its condition along with a description of any important aspects of its condition that are not evident from photographic evidence,
◦broad details of the extent of usage of the cycle (which can vary considerably even between cycles that meet the “qualifying journeys” main use condition for exemption), and
◦contemporaneous evidence of the amount for which that type of cycle in that sort of condition would have realised in a private sale and in a sale to a cycle retailer.

moonio

Consumers have been totally ripped off by this scheme, firstly as retailers put the price of bikes up by approx 30% when it was introduced, and also we were duped into buying more expensive bikes than were would have otherwise chosen.

My bike originally cost £350, after the cycle to work scheme was introduced the price went up to £500, with the recent changes I will have paid approx £375, so it has in fact cost me £25 to be part of the cycle to work scheme..