Ride to Work scheme settlement figure
badlydrunkboy
Posts: 78
My C2W scheme finished this month and I had a letter from my employer stating my two options. Now, the value of the bike was £700 but with accessories came to about £930. The letter I got through is asking me for £212 :shock: which they've given me a choice of paying either in one go or over three months (which would mean me paying over £70 a month after tax, way more than i've been paying previously). Am I being unreasonable in thinking that this is a bit f**king much? I've done over 500 miles on the bike riding to work (probably 3-4 times the amount anyone else who took up the scheme here did) and yet I still seem to be being asked to pay over 30% of the value of the bike as a final settlement fee, even though I've had a crash on the bike and they've never asked to see it.
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Comments
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Does seem to be a bit of confusion about how they calculate FMV. Should it be for the cost of the bike, or for the cost of everything you bought under the scheme? If the latter then they're working within the rules.
Are those the only two options they gave you? Cyclescheme gives the option of paying a deposit of £70 to keep the bike another couple of years after which you have ownership. If your employer isn't doing something similar then it looks like they just don't want the hassle of dealing with protracted end of hire arrangements.0 -
Yeah, we got a letter that literally gave us 2 options. One being pay it all from one month salary, the other being spread it over 3 months. I'm not happy with either tbf. I dont believe that they can add the value of the other bits I bought like my helmet, a tool, D-Lock, track pump, lights and a saddle bag.0
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I dont believe that they can add the value of the other bits I bought like my helmet, a tool, D-Lock, track pump, lights and a saddle bag.
They're offering you the opportunity to buy the bike plus accessories, so they can offer you want they want. If it's too little, HMRC will consider it a benefit, and you'll owe tax. You should have a third option, which is to not buy the bike from them.
The HMRC guidance (http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm) says:
"In calculating the original price of the cycle, include safety equipment fitted to the cycle (such as lights and bells) but not safety equipment which would be worn by the cyclist (such as helmets or reflective clothing). Where used regularly for commuting and/or travel between workplaces, safety equipment worn by the cyclist is likely to have a market value that is lower than the table percentages for a cycle and cycle-based safety equipment."
If the bike was damaged in a crash, HMRC would probably accept a lower valuation, but it's a question of whether your company can be bothered to offer you that lower price.
Paying the 25% FMV is the worst way of handling the final fee. Transferring for a nominal amount and paying tax on the benefit, or extending the hire period until the bike is worth less are both more efficient, but it's a matter of persuading your company to offer one of those options.0 -
You can always give them the bike back. They do not have to sell it and you do not have to buy it. Seriously though point out to them how much they have received in payment from you showing that they are not out of pocket. You then have a couple of options,
1. Argue the real value of the bike is less than the FMV, for example the accessories are not worth what they did at the start, likewise if you have replaced stuff like tyres and wheels point out these are yours and should be excluded from valuation. Take pictures and find other bike of similar age /wear on e-bay and see what they go for.
2. As you have paid for all the bike already simply ask you employer to extend the rental period at £0 per month. Then look at FMV in 1 or 2 years time as it will be less. You will need to amend your rental agreement to show this but is perfectly legal. Only problem is you cannot sell the bike and if you leave employment with them you will need to buy the bike off them.
3. Again as you have paid for it ask them to give you the bike, you will then be liable for tax on the FMV of the bike, but only the tax. Your employer will need to complete a P11D form which you then submit with your tax return. They maybe reluctant to do this if they have a P11D exemption.
The are other legally dubious options, for example you could tell your employer that you don't want the bike. They will have to dispose of the asset which could mean throwing it in the skip out the back just when you happen to be there. Or you could ask them to sell it for a small fee to a third party who is not employed by the company and therefore not receiving a taxable benefit from their employer. You can then buy it from third party. A good friend or a relative would work here.--
Chris
Genesis Equilibrium - FCN 3/4/50 -
Transferring for a nominal amount and paying tax on the benefit
How does this work? I read something about being able to pay a 7% nominal fee and then pay the tax on the difference between that and the 25%FMV, is that right?0 -
badlydrunkboy wrote:Transferring for a nominal amount and paying tax on the benefit
How does this work? I read something about being able to pay a 7% nominal fee and then pay the tax on the difference between that and the 25%FMV, is that right?
Tax is due on the benefit you have received, that benefits is worked out on the difference between fair market value and any amount you pay for the bike. So if FMV is £200 and you pay £0 then tax is due on £200. If FMV is £200 and you pay your employer £200 for the bike then no tax is due. Your employer will need to provided you with a P11D form showing the amount of taxable benefit you have received, they maybe reluctant to do this if they have a P11D exemption.
Note the HMRC table quoting how to work out FMV is simply a table which they say if you follow it then they will accept the value, you can argue for a lower FMV for example if you replaced the wheels as they broke, as you then own the wheels you can reduce the amount of the FMV, particularly a bike with no wheel or indeed broken wheels (the one's you took off) is not worth very much. Similar for tyres, tube etc etc. Also if you've done 5,000 miles in a year your bike will be worth less than someone who rode only 2,000 miles. I suspect you could also argue that the money you have spent maintaining the bike has an impact on the value for example bike would be only be worth £100 is you did 5,000 mile in the year and performed no maintenance, but as you spent £500 looking after it it's worth more but that value has already transferred. In practice I would not worry too much, negotiate a fair price with your employer or extend the rental period, if the fair price is less than the FMV in table be prepared to back it up in the very unlikely event HMRC ask you to.--
Chris
Genesis Equilibrium - FCN 3/4/50 -
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