Cycle to work scheme VAT change query

t4tomo

With the recent announcements that from 1 Jan the employer has to charge VAT on the salary sacrifce "payments" does anyone know:

Is it OK for employees who are current mid sacrifce to change the amounts such that all the sacrifice is made pre 1 Jan to avoid this? I.e vary the origina sacrifce agreement

and

if a new agreement is being taken out now, is it OK for the sacrifce period to be over say 4 months so it ends before 1 Jan to avoid the VAT being passsed onto the employee, albeit not transferring ownership for some time to avoid being clobbered by the residual value changes.

(our work scheme has always passed on the VAT benefit to to the employee.)

Christophe3967

t4tomo wrote:

With the recent announcements that from 1 Jan the employer has to charge VAT on the salary sacrifce "payments" does anyone know:

Is it OK for employees who are current mid sacrifce to change the amounts such that all the sacrifice is made pre 1 Jan to avoid this? I.e vary the origina sacrifce agreement

and

if a new agreement is being taken out now, is it OK for the sacrifce period to be over say 4 months so it ends before 1 Jan to avoid the VAT being passsed onto the employee, albeit not transferring ownership for some time to avoid being clobbered by the residual value changes.

(our work scheme has always passed on the VAT benefit to to the employee.)

These links might help. Looks like any salary sacrifice arrangment already in place won't be affected.

http://www.cyclescheme.co.uk/employers/ ... vat-update

http://www.cyclescheme.co.uk/employers/ ... te-summary

calonuk

[/quote]
These links might help. Looks like any salary sacrifice arrangment already in place won't be affected.

http://www.cyclescheme.co.uk/employers/ ... vat-update

http://www.cyclescheme.co.uk/employers/ ... te-summary

[/quote]

I would have to disagree, the new conditions come into force from Jan 2012. As the agreements that have been signed are rental agreements it would mean that any payment made after the 1st Jan should be treated with VAT.


Effect of the CJEU judgment in particular circumstances
Cycle to Work Scheme
Under the Cycle to Work Scheme employers purchase bicycles and safety equipment and provide them to employees. Where this has been done under a salary sacrifice arrangement, the effect of the judgment is that employers must account for output tax based on the value of the salary foregone by the employee in exchange for the hire or loan of a bicycle.

Affected businesses should apply this treatment from 1 January 2012. Employers can continue to recover VAT on the purchase of the bicycle and associated equipment.
Employers who have provided bicycles under deduction from salary arrangements are unaffected by the judgment as payments received from employees have always been subject to VAT and will continue to be so.

VAT remains due when a bicycle is disposed of and its value should normally be based on the price of an identical or similar item, taking into account the age and condition etc.

We are aware that valuing bicycles has caused difficulties for Scheme operators and therefore, to reduce administration burdens, the table used to value bicycles for direct tax purposes may be used. This table provides valuations for bicycles based on the age and original price. Any bicycles that fall outside of the table (such as antique or specialist bicycles) should be valued using the normal VAT valuation rules. If businesses choose to use lower values, they may be challenged in which case evidence will be required to support the valuat

In theory you could change the scheme terms finish it early however this would have to be something you and your boss agree as you have already both signed and agreed a contract with the original terms.