Cyclescheme valuation...WTF!!!!

tailwindhome

moonio wrote:

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.

I'm not sure that in the grand scheme of things cyclescheme can be blamed for the dramatic inflation in bike prices. Dramatic exchange rate movements and increase demand (over an above cyclescheme) are bigger factors.

I would have thought that in the current climate cyclescheme is supressing the price of some bikes as manufacturers target a retail price of £1000.

I'm not sure you were duped into buying a better bike because of cyclescheme, posting on here is a much bigger factor

alfablue

I don't feel duped or anything; if I get a benefit in kind I expect to pay tax on it, however, if my employer sells the bike to CycleScheme for £1, and then Cyclescheme try to charge me £250 I will go ballistic (my employers did not do this last time so I need to hold fire).

dhope

TailWindHome wrote:

moonio wrote:

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.

I'm not sure that in the grand scheme of things cyclescheme can be blamed for the dramatic inflation in bike prices. Dramatic exchange rate movements and increase demand (over an above cyclescheme) are bigger factors.

I would have thought that in the current climate cyclescheme is supressing the price of some bikes as manufacturers target a retail price of £1000.

I'm not sure you were duped into buying a better bike because of cyclescheme, posting on here is a much bigger factor

The Boardman Team Carbon is up to £1200 for people outside of the C2W scheme, but they'll reduce it to keep within the usual £1k limit if you turn up with vouchers.

ooermissus

My (small) company bought the bikes but didn't bother with the salary sacrifice bit - employees with bikes (lent to them) are duty bound to charge for fewer taxis, tubes etc. when getting to and from meetings, which makes it work financially (just). Made the whole thing a lot simpler.

jonginge

TailWindHome wrote:

moonio wrote:

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.

I'm not sure that in the grand scheme of things cyclescheme can be blamed for the dramatic inflation in bike prices. Dramatic exchange rate movements and increase demand (over an above cyclescheme) are bigger factors.

I would have thought that in the current climate cyclescheme is supressing the price of some bikes as manufacturers target a retail price of £1000.

This

There was a buy a computer through work scheme (HCI) some time back. That didn't last that long either....

gtvlusso

dhope wrote:

TailWindHome wrote:

moonio wrote:

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.

I'm not sure that in the grand scheme of things cyclescheme can be blamed for the dramatic inflation in bike prices. Dramatic exchange rate movements and increase demand (over an above cyclescheme) are bigger factors.

I would have thought that in the current climate cyclescheme is supressing the price of some bikes as manufacturers target a retail price of £1000.

I'm not sure you were duped into buying a better bike because of cyclescheme, posting on here is a much bigger factor

The Boardman Team Carbon is up to £1200 for people outside of the C2W scheme, but they'll reduce it to keep within the usual £1k limit if you turn up with vouchers.

Ah - is that there own brand Halfords C2W scheme vouchers or the usual C2W ones????

snooks

I did well out of the scheme, I got my voucher, in August a few years ago, held onto it for a couple of months (the bike I wanted was out of stock....honest;) ) nearer the end of the year, the current models get reduced, and yat tididly at ta tahhhh £1,400 bike reduced to £999 and off I went.

Now I think what is happening at my work, is that instead of paying the final FMV payment, you can opt to defer it, so you are still in effect still hiring the bike from the company, and only have to worry about it if you leave the company.

KeimanP

I got my bike on the cycle to work scheme or more ride2work through evans. The voucher that I got was for £1000 to buy a bike and some extras

I bought a specialized aleez for £630 and the rest was lights, clothes, mudguards, waterbottles etc

Now after nearly a year of using my kit it would be realistic to mark the clothes as used and who would want to buy my second hand bibshorts? so the 25% I am now liable to pay should be more limited to the £630 I spent on the bike.

The bike now new is listed at £599.99

25% of this is £149.99 which would be a better to pay than £250.

Would this be a reasonable arguement?

My employers are fairly reasonable so should not have a problem with me extending the scheme if needed.

hatbeard

KeimanP wrote:

I got my bike on the cycle to work scheme or more ride2work through evans. The voucher that I got was for £1000 to buy a bike and some extras

I bought a specialized aleez for £630 and the rest was lights, clothes, mudguards, waterbottles etc

Now after nearly a year of using my kit it would be realistic to mark the clothes as used and who would want to buy my second hand bibshorts? so the 25% I am now liable to pay should be more limited to the £630 I spent on the bike.

The bike now new is listed at £599.99

25% of this is £149.99 which would be a better to pay than £250.

Would this be a reasonable arguement?

My employers are fairly reasonable so should not have a problem with me extending the scheme if needed.

I asked that exact question of my employers as I'd read somewhere that you can apply a different valuation to accessories [citation required] but their response was the FMV was for the full voucher value (I too only paid £670 for my bike as it was on sale and blew the rest on 'accessories').

my guess is that this is to keep administration of the scheme to a bare minimum.

CiB

That's having their cake and eating it though. The HMRC guidleines were revised [or clarified] to prevent punters being able to claim that a £1k bike was worth £50 after a year's use, when any fule kno that it's not - £250 is much nearer the mark. They can't conversely claim that a pair of shorts, shirt, helmet etc that's been in regular use for that same year is also worth 25% of its original value. I don't know anyone who'd pay me £22 for a pair of my second hand shorts with a thread hanging off the logo.

In the end, the revised guidelines were there so that HMRC were seen to be correct. Used clothing at 25% is as wrong a valuation as a used bike at 5%.

hatbeard

CiB wrote:

That's having their cake and eating it though. The HMRC guidleines were revised [or clarified] to prevent punters being able to claim that a £1k bike was worth £50 after a year's use, when any fule kno that it's not - £250 is much nearer the mark. They can't conversely claim that a pair of shorts, shirt, helmet etc that's been in regular use for that same year is also worth 25% of its original value. I don't know anyone who'd pay me £22 for a pair of my second hand shorts with a thread hanging off the logo.

In the end, the revised guidelines were there so that HMRC were seen to be correct. Used clothing at 25% is as wrong a valuation as a used bike at 5%.

but the rules also technically state there's only a handful of accessories the voucher is valid for. arguably bibtights/padded shorts are not safety equipment so you shouldnt be buying them on the scheme. in this instance i think it's better that the shops turn a blind eye to it as you can properly kit yourself out with the essentials with no initial outlay from your own pocket (at least not until you sign up on here as a result of getting a bike *sigh* ).

cycleschemes dodgy £70 loan extension tactics aside it seems the best way to make do with the new scheme is only use it if you plan on staying in the same job for more than a year and take out an extended hire period and wait until the valuation drops.

I plan on putting aside an extra £21 a month into a 'cycle2work' fund as a contingency in case I decide to leave work (or lose my job to redundancy etc) and if I'm still here in 3 or 5 years then I've either managed to save some money as the fmv will be lower when I pay it off and if i do leave prematurely I've still made a small saving on my original bike purchase and I get to keep it at the end of everything so i'm not wasting my initial outlay. If I keep that up then next year I can get another bike on the scheme and not have to worry about paying off the first bike as that moneys in the bank so to speak.

moonio

TailWindHome wrote:

I'm not sure you were duped into buying a better bike because of cyclescheme, posting on here is a much bigger factor

What I meant was someone with a budget of £300 could quite posibly have bought a £500 bike instead, because they would have still only paid £300 or so under the original sugested terms.

I wasnt talking about me, but about consumers in general.

Monkeypump

moonio wrote:

TailWindHome wrote:

I'm not sure you were duped into buying a better bike because of cyclescheme, posting on here is a much bigger factor

What I meant was someone with a budget of £300 could quite posibly have bought a £500 bike instead, because they would have still only paid £300 or so under the original sugested terms.

I wasnt talking about me, but about consumers in general.

Perhaps people should buy the best (most suitable) bike for them, and make a saving, rather than spending more 'just because they can'?

Not sure there's any duping going on at all.

Monkeypump

Sketchley wrote:

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

Why? Although it might not be in the spirit of the scheme, businesses exist to make money, whether you like it or not.

navt

KeimanP wrote:

I got my bike on the cycle to work scheme or more ride2work through evans. The voucher that I got was for £1000 to buy a bike and some extras

I bought a specialized aleez for £630 and the rest was lights, clothes, mudguards, waterbottles etc

Now after nearly a year of using my kit it would be realistic to mark the clothes as used and who would want to buy my second hand bibshorts? so the 25% I am now liable to pay should be more limited to the £630 I spent on the bike.

The HMRC valuation applies to the value of the bike, net of VAT. This is made clear. This is why you are asked to specify the value of the bike and value of accessories when signing up; at least you are on Evan's R2W scheme.

woodchips69

Surely the whole point of the government introducing the scheme in the first place was to get more people commuting to work on bikes rather than cars, not for anyone to make profit (either company or user).
I'm fairly certain that not many people are going to sell their bikes after 1 year just to make a bit of a profit, I definitely don't know anyone who has, and I wouldn't have thought too many people would pay upto £1000 for a bike just for it to sit in the garage while they brag about saving a couple of hundred on it (more like £50 now!). Also, just looking at the amount of posts on here about it there seems to have been quite a big take up of the scheme. That has to be a good thing for peoples health, especially if its getting people to do some exercise if they wouldn't normally do any. The health service alone must benefit from this long term.
The government tried to do this a few years back with computers when they wanted every home to have access to the internet. The basic idea being that if you couldn't afford a home computer yourself, the computer scheme would help you get one with help from the government (not paying tax,interest, etc. through salary sacrifice) similiar to cyclescheme.
However, the cost of the computers was extortionate and there was still a valuation fee at the end. How the hell exactly does that help people who are struggling to pay for one in the first place?!
This is where the cyclescheme seems to be heading now.

Heckler1974

+1 Woodchip, savings aside, if a cheaper bike got people on bikes, surely that's a good thing for everyone?

Underscore

TBH, I think that there's two sides to this. The HMRC want to make sure that people are really paying something close to FMV, which is in the legislation after all. Employers are wanting to get the whole purchase price of the bike back during the salary sacrifice period, which is not a requirement but since few employers administer the scheme themselves and are expected to hand over the bike to (e.g.) CycleScheme at the end of the hire period for a pitance, so I can understand this approach. However, the upside is that this scheme is, for a lot of people, of minimal benefit.

Consider, I am currently seeking authorisation to acquire a Kona Sutra, which is £1000 RRP. However, if you are a CTC member or a Wiggle platinum member, you can get it for £880... but, sourcing through CycleScheme, you have to start at £1000 since the dealer has to pay 10% to them.

Considering the cases where your employer can and can't claim back the VAT, and basic rate (20% + 11% NI) and higher rate (40% + 1% NI) tax, and assuming that you end up paying 25% at the end of the year:

• Basic rate, can't claim back VAT: £940.00
• Basic rate, can claim back VAT: £840.00
• Higher rate, can't claim back VAT: £837.23
• Higher rate, can claim back VAT: £752.13

So a basic rate tax payer may be better off by £40 - but could be much worse off, and a higher rate tax payer will be better off by just over £40 or just under £130.

Yes, better than a poke in the eye with a pointed stick but, for most people, hardly a significant incentive to start cycling to work. I also feel that the scheme has, for bike below £1000, made it easier for companies to increase their prices without impacting their sales, so I suspect that the scheme may not have made purchasing a bike cheaper at all in the long run. I'm just pleased that I got a bike on the scheme during those few happy years when there really was a saving to be had...

_

sketchley

I don't think that HMRC motivation is to get people to pay FMV. The motivation is to make sure they do not get a tax free income. e.g. Buy bike @ 5% then sell it at 25% = 20% tax free income. All HMRC want you to do is pay the tax on his benefit if you trasnfer after one year. 40% of 25% is 10% tax that's all you need to pay after one year. For lower rate tax payes your only paying 20% of the 25% which is 5%. i.e. transfer the bike for a nominal pound then pay the tax and your no worse off as a lower rate tax payer than the old scheme.

Some examples

Let's start with £1000 bike,

Employer Clams back VAT (17.5%) = £ 851
Employer can capital allowances against the depreciation of the cycles and safety accessories resulting in reduction of 10% = £ 766
Salary Sacrifice = 12 Monthly Payments of £ 63.83

This is deducted before tax is paid 40% tax on £ 63.88 = £ 25.53 so net payment = £ 38.30 (Note I don’t think you save NI)

12 x 38.30 = £ 459.60

Now assuming transfer after 1 Year = 25% or £ 250
You only need pay tax on this so 40% of £250 = £ 100
Total Paid = £ 659.60 for a £1000 bike

Transfer after 2 Years = 17% or £ 170
40% of £250 = £ 68
Total Paid = £ 527.60 for a £1000 bike

Transfer after 3 Years = 12% or £ 120
40% of £250 = £ 48
Total Paid = £ 507.60 for a £1000 bike

Transfer after 4 Years = 7% or £ 70
40% of £250 = £ 28
Total Paid = £ 487.60 for a £1000 bike

Transfer after 5 Years = 2% or £ 20
40% of £250 = £ 8
Total Paid = £ 467.60 for a £1000 bike

Transfer after 6 Years = 0% or £ 0
Total Paid = £ 459.60 for a £1000 bike

For Lower Rate Tax Payer 12 Payments of £63.88 less tax @ 20% = £ 51 or £ 613 for year.
As above tax paid of FMV @ 20% based on new guidelines means total cost.

1 Year £ 663
2 Years £ 647
3 Years £ 637
4 Years £ 627
5 Years £ 617
6 Years £ 613


All for £1000 bike.

Can’t be bothered to do non vat registered stuff, but you get the point

Monkeypump

Somebody somewhere (perhaps on this thread, I can't be bothered to check) suggested that the employee would only need to pay tax on the 25% FMV (i.e. tax at their usual rate on a FMV of £250 for a £1000 bike). Not sure if this is true, but it does sound logical.

If the bike is valued at £250, and the employer gives it to the employee FOC, this is effectively a benefit of £250 which would be liable to tax.

This could, of course, be complete nonsense.

Underscore

Sketchley wrote:

Employer can capital allowances against the depreciation of the cycles and safety accessories resulting in reduction of 10% = £ 766

I want to work for your employer - mine keeps the capital allowances for itself!

Sketchley wrote:

This is deducted before tax is paid 40% tax on £ 63.88 = £ 25.53 so net payment = £ 38.30 (Note I don’t think you save NI)

Yes, you do save NI (and your employer saves the employer's NI too). It's a salary sacrifice - you take a temporary reduction in your salary. Both tax and NI are calculated on the reduced salary.

And, yes, I'm aware that HMRC only really cares about the tax and I'm aware that, if you are willing and able to delay taking ownership, it can still be a beneficial scheme. My point is simply that, for a lot of people doing the basic sums, they are likely to come up with a figure which is, at best, underwhelming and, at worst, looks to be penalising them for commuting by bike.

_

Wrath Rob

Think of it another way.

You get a bike on a 12 month interest free loan that has no credit checks for. As an additional perk you might save some money.

For me this was the main win. I paid £500 for a £1500 bike, (over the £1k limit) and I'm in the process of paying my 12 monthly contributions. I'll then pay an amount at the end to buy the bike. OK, so its not as good a deal as it was but I'm still spreading the cost of the purchase over 12 months and not whacking the whole load on a Visa card and paying interest on the loan.

navt

For all we know, Woodchip69 pays income tax at 50% so his savings would be massive!!!

alfablue

Monkeypump wrote:

Somebody somewhere (perhaps on this thread, I can't be bothered to check) suggested that the employee would only need to pay tax on the 25% FMV (i.e. tax at their usual rate on a FMV of £250 for a £1000 bike). Not sure if this is true, but it does sound logical.

If the bike is valued at £250, and the employer gives it to the employee FOC, this is effectively a benefit of £250 which would be liable to tax.

This could, of course, be complete nonsense.

No, I said it and it is true -

HMRC say

Terms on which simplified valuation approach can be used:

*Where the employer adopts the simplified valuation approach either

1) by ensuring that employees pay at least as much for the cycle as the amount calculated using the following table or
2) by using the table values to calculate the amount of any reportable earnings or benefit,

So the second scenario is what I described.

So basic rate tax payers pay £50 tax, higher rate £100 or £125, if they took posession of a £1k / 1 year old bike for zero transfer fee to employer. They go on to say:

as long as any payment that the employee makes for the cycle is equal to or more than the market value, there will be no tax charge under the employment income rules. If the employee pays less than market value, the difference will be taxable as employment income.

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

woodchips69

If all the last posts are true, and I have no doubt to believe they are not, why are Cyclescheme still asking me for £250 as opposed to just the tax on £250?

Oh, and I definitely don't pay 50% tax!

kelsen

woodchips69 wrote:

If all the last posts are true, and I have no doubt to believe they are not, why are Cyclescheme still asking me for £250 as opposed to just the tax on £250?

Oh, and I definitely don't pay 50% tax!

I think it depends on how the rules are interpreted over the final payment. Here's an illustration from my company:

BG2000

Sketchley wrote:

. For lower rate tax payes your only paying 20% of the 25% which is 5%. i.e. transfer the bike for a nominal pound then pay the tax and your no worse off as a lower rate tax payer than the old scheme.

Are you sure about this ?

I phoned CycleScheme and they said, slightly apologetically, that I can either pay about £210 (i.e. 25% of FMV) or £70 followed by 7% of FMV after 31 months.

They didn't say exactly how I'd be paying them. Assuming it goes through my salary sacrifice scheme, I'd be paying this 25% of FMV fee tax free, just like my previous 12 monthly payments.

So the 25% of FMV fee minus Income Tax and NI works out about 17.25%.

What makes you think we'd only pay 20% of 25% (5%) ?

Obviously, I hope I'm wrong, and in fact do only owe 5% of FMV - but CycleScheme clearly told me, I must now pay 25% of FMV to keep the bike.

---

Edit @ 11:04 - the previous examples are where the hire agreement ownership has been retained by the employer. My employer revoked their ownership, hence my confusion. But therein lies the difference in what and how you pay.

BG2000

Actually, I can clarify things (in my own head at least !).

Firstly, in my case, my employer handed ownership to Cyclescheme at the end of the scheme, so the final value fee must be paid in cash, by me, to Cyclescheme. There is no longer any agreement between myself and my employer, and hence no more salary sacrifice. The fact I received an email from Cyclescheme confirms this. Anyone not receiving such an email can assume their employer will handle the final value fees.

Many employers revoked their ownership this way, so Cyclescheme realised this wasn't fair on many people, and hence offered the extended ownership.

Contrary to my last post, you only pay 7% and nothing more. What actually happens is that your pay 7% up front, and then after 31 months Cyclescheme will contact me and ask if I still want the bike. I can give them the bike and they refund me 7% or I keep the bike and they keep my 7% payment.

I spoke to Cyclescheme again expressing concern that my bike may not even exist in 3 years time (I've already had one new frame under warranty). They said they simply contact you after 31 months and don't ask for proof of ownership.

Of course, they can't guarantee that after 31 months, HMRC won't have changed the final value fee again. So the final 7% payment isn't guaranteed, and could increase. But the difference between 25% and 7% is large in my case, so I'm willing to take the risk and wait 31 months more...

sketchley

BG2000 wrote:

Sketchley wrote:

. For lower rate tax payes your only paying 20% of the 25% which is 5%. i.e. transfer the bike for a nominal pound then pay the tax and your no worse off as a lower rate tax payer than the old scheme.

Are you sure about this ?

Very see alfablue post above explains it well. Works like this

Original Value £1000, FMV is then £250 after one year. You do not have to pay this. All you have to pay is tax on the difference between £250 and what ever you do pay for the transfer. If you just get given the bike then you pay 20% Tax on £250 which is just £ 50 or 5% of original value. Note: You pay this to HMRC not your employer (or CycleSheme)

What's more you only need to declare this on your next tax form, if the transfer happened in August 2010, you will not have to submit the tax form until end of 2011, and tax will not be payable until the April 2012. As it’s such a small amount this will be taken from PAYE monthly via your tax code, you won’t even notice it.

BG2000

Cheers Chris.

I think this doesn't apply as I'm effectively outside PAYE with this now as my employer hands the contracts over to Cyclescheme when its employees complete their final payment.

My only option now is to pay cash directly to CycleScheme: £250 now or £70 in 31 months time. There's nothing for me to declare - I don't think the latter will show on my tax record, unless Cyclescheme declare something to HMRC.