Cycle to Work - Getting a 2nd bike

iandennis

I have an Cycle to Work scheme arranged by my company. As my first bike is coming to an end in March, I was looking at getting another until I received this response when I asked HR:

"Your only options are to pay the Continuation Deposit based on using the bike for a further 3 years upon which you will pay a fee of 7% of the purchase price (providing the HMRC chargeable rates have not been changed by the end of April). It will not be until after the end of April 2015 that you will be able to purchase another bike under this scheme. Alternatively, if you wish to pay the 25% (or relevant HMRC % in place at the time of purchase) that would be due if you wish to purchase your current bike and close off the existing agreement you would then be free to enter into a new Cycle to Work Scheme for a further bike."

Having spoken to other people they have purchased other bikes when the first one finished. Can anybody help me argue this one, is there an HMRC guideline I can refer to rather than hearsay about other schemes.

Would still prefer C2W but otherwise I would just use a credit card at 0% for 15 months.

Thanks

Ian

MarksMintness

+1 some clarification on this by someone in the know would be great.

I've had my C2W email regarding the Continuation Deposit (which I'm going to pay it's only £57 for a further 30 months) but it doesn't look like I will be able to take out another agreement during this time... booooo!!!!

optimisticbiker

C2W rules from HMRC have no restrictions on the number of bikes you can have on the scheme. However, some schemes do limit you to one bike at a time (the N+1 rule not being understood by these schemes). This is probably because:

"However, where salary sacrifice arrangements are used, Cycle to Work schemes must be regulated hire agreements between the employer and the employee. The terms ‘hire’ and ‘loan’ are therefore both used in these guidelines"

and therefore its whether your employer will let you have multiple hire agreements that is the determining factor.

sketchley

First your HR department cannot say "It will not be until after the end of April 2015 that you will be able to purchase another bike under this scheme" as your are hiring the bikes not purchasing them, any contract of commitment from them to you regarding sale or purchasing make the agreement a hire purchase and not a rental so not valid for C2W. The consumer credit act exclusion for C2W providing the value of the hire agreement is sub £1000 doesn't apply as your current hire agreement value over the remaining three years is zero. So there is not reason a why you cannot hire another bike under the scheme. However, both the current and new bike primary use must be commuting for you to qualify for the tax break so this maybe where HR are coming from. Consider telling HR you want a new bike to ride on dry days and will use the old one on wet days.

Also look here http://assets.dft.gov.uk/publications/c ... idance.pdf

3) What value of equipment can be supplied?
There is no limit on the total value of the equipment including the cycle. It is possible to loan two cycles to one employee if, for example, that employee needed a cycle at either end of a train journey between their home and place of work. (However, please see Section 9.1 where the Office of Fair Trading (OFT) has advised that the group consumer credit licence will cover schemes up to a value of £1,000).

iandennis

Thanks Sketchley, that's the type of thing I was looking for, to use as a reference.

My HR dept is a stickler for detail so having something to fight is essential.

Ian

FoldingJoe

Sounds like you are on the Cycle Scheme one, the same as our work.

I was planning on doing this in April when my year is up - so paying the 7%, at which point I thought the contract then shifted between yourself and Cycle Scheme direct, and nothing to do with your employer?

iandennis

Sorry, it's an internal company scheme, no connection with Cyclescheme, hence why its going to be more difficult to fight my corner for a 2nd bike

FoldingJoe

Phew, I thought I was going to be in the same boat as you then!!!

bails87

Isn't it more to do with having 2 contracts, rather than 2 bikes?

You can have £1k and buy 2 bikes if you want (e.g one to ride from home to a station, one to ride from the station to the office), but having two hire agreements running alongside each other would be an issue?

iandennis

yes, 2 contracts appears to be the issue. However if one is finished and into extension period then I would hope the company would be more open to a 2nd agreement

sketchley

bails87 wrote:

Isn't it more to do with having 2 contracts, rather than 2 bikes?

You can have £1k and buy 2 bikes if you want (e.g one to ride from home to a station, one to ride from the station to the office), but having two hire agreements running alongside each other would be an issue?

No it wouldn't unless the value of the employees remaining obligations under the combined agreements from the date the 2nd one was signed to the end of both is greater than £1000*. But as per OP the obligations under the first agreement are zero so the 2nd agreement can be for £1000 without a problem. You may still have to prove to HMRC that the majority of use of both bikes is commuting, there may also be a case that the FMV at end of contract on both bikes might be considered higher as they are not ridden as much as you have two bikes for commuting, but that's tenuous at best.

*£1000 Limit is only because of the consumer credit act which if the employees company is licensed separately could be exceeded.

Topaxci

I administer the CTW scheme for where I work and find the link to the following HMRC pages answer most of the questions:
http://www.hmrc.gov.uk/manuals/eimanual/EIM21664.htm

Legally under scheme you can have more than 1 bike, you can run two hire agreements at the same time as long as the value doesn't exceed £1,000 (I believe some companies can be higher).
You also shouldn't worry about the 50% use and the guidance says the bike & equipment should be used 50% of the time for qualifying journeys (commuting). Not that you have to use the bike for 50% of your commutes.

the employees must use the cycle or equipment mainly for qualifying journeys. 'Qualifying journeys' means the same as for the works bus exemption (see EIM21850). Other use of the cycle, for instance pleasure use or use by members of the employee's family will not disqualify the exemption provided that the other use is not the main use of the bicycle.

However you are restricted to your companies internal policies. A well constructed arguement to HR may get you the result you want (and I hope it does) but chances are they are going to be stuck in their ways, especially if it means changing an existing policy.

My company still won't entertain the idea of extending agreements beyond 18 months, so we have to invoice fair market value at that point. They think it will create more work and even if it doesn't, it will make the scheme more attractive, so more people will want to join and again create more work. Go figure :x

prj45

My provider by default wouldn't let me get a second bike, but with a quick email from my company to say it was alright I got one ok, first bike is paid off but still company property, but i think they would've let me get a second regardless.

both bikes 1k, the new one a bit over even.

pdw

No it wouldn't unless the value of the employees remaining obligations under the combined agreements from the date the 2nd one was signed to the end of both is greater than £1000*. But as per OP the obligations under the first agreement are zero so the 2nd agreement can be for £1000 without a problem.

I don't think that's correct. The limit on the licence is based on the value of the goods hired, not the remaining payments.

http://www.oft.gov.uk/OFTwork/credit-licensing/cycle

"... the group licence covers the loan of bicycle(s) and/ or bicycle equipment up to the value of £1,000 (including VAT and not taking into account an income tax exemption)."

That said, if there are no payments then it may not be considered a hire agreement at all.

rolf_f

Just to clarify - the HMRC rules only count the initial hire period. If your initial hire period was one year and after that you have transferred ownership to a cycle scheme (and are continuing to hire it at zero monthly cost) in order to reduce the residual value to zero then at that point you can start another scheme and spend another £1000.

Of course, that assumes your employer is prepared to run the scheme again for you.

MarksMintness

Sorry to bother people again, but I'm in the same boat now with my initial 18 month hire period over. I've had my email through which gives me the 3 options (£57 further 30 months hire, £170 odd final settlement, send the kit back)
I don't want my bike anymore really, I bought a Trek 7.5 and would like to sell and put money towards a proper drop-bar road bike.
Having read through this and other threads I assume I will need to pay the final settlement in order for me to sell the bike legally?
I don't think our company will be doing anymore C2W schemes now as our FD has left, so I will need the cash tied up in this bike to put towards a new purchase!

prj45

MarksMintness wrote:

I don't want my bike anymore really

It's not your bike. Can't sell it until you take ownership by buying it off your company at a fair market rate (as enforced by the taxman). So no selling it!

MarksMintness

Cheers mate, that was where I was coming to I think. Best thing is to settle the agreement then I think and hopefully recoup some Costs to put toward next bike.
Cheers

leodis75

What do you think they would do if you did sell it? For example rather than pay the 25% at the end of term just pay the 7% for an extended loan period and then flog it, the 7% is FMR after 4 years and ownership is transfered.

pete54

I'm coming towards the end of my 12 months agreement with Cyclescheme. If I sign up for the extended 3 year agreement, what happens if I leave my job. Do I just pay the FMV at that point to Cyclescheme?

pete54

I think I just found the answer to my question in point 9 below:

http://www.cyclescheme.co.uk/employers/employer-updates/hmrc-update

Point 6 is relevant to those on Cyclescheme who want to get a new bike after the 12 months is up.

MarksMintness

pete54 wrote:

I think I just found the answer to my question in point 9 below:

http://www.cyclescheme.co.uk/employers/employer-updates/hmrc-update

Point 6 is relevant to those on Cyclescheme who want to get a new bike after the 12 months is up.

Yes point 6 is relevant to me:

6. Can an employee participate in a new scheme during the extended use period?

Yes, the employee is free to participate in future Cycle to Work schemes with their employer. The Extended Use Agreement is not a salary sacrifice arrangement and, apart from the refundable deposit, no further payments are required from the employee.

So it looks like I can get a 2nd scheme going now without paying for and then selling the Trek! Not sure if I will be able to though...

pete54

The only thing that worries me about Cyclescheme's Extended Use Agreement is that they say they don't have to give you the bike at the end of it. Also, if I decided I wanted to sell the bike during the period of the EUA they don't say whether you can just pay them the FMV at that point and take possession.

I will have to contact them and clarify these points before I sign the agreement.

sketchley

pete54 wrote:

The only thing that worries me about Cyclescheme's Extended Use Agreement is that they say they don't have to give you the bike at the end of it. Also, if I decided I wanted to sell the bike during the period of the EUA they don't say whether you can just pay them the FMV at that point and take possession.

I will have to contact them and clarify these points before I sign the agreement.

Not much you can do about that as neither cyclescheme or your employer can say they will give you the bike at the ed of either the initial or extended hire period as doing so would make you inelligable for the c2w tax break as the rental would cease to be a rental and would become a hire purchase agreement instead.

sketchley

pdw wrote:

No it wouldn't unless the value of the employees remaining obligations under the combined agreements from the date the 2nd one was signed to the end of both is greater than £1000*. But as per OP the obligations under the first agreement are zero so the 2nd agreement can be for £1000 without a problem.

I don't think that's correct. The limit on the licence is based on the value of the goods hired, not the remaining payments.

http://www.oft.gov.uk/OFTwork/credit-licensing/cycle

"... the group licence covers the loan of bicycle(s) and/ or bicycle equipment up to the value of £1,000 (including VAT and not taking into account an income tax exemption)."

That said, if there are no payments then it may not be considered a hire agreement at all.

Difficult to explain. If you left your company one week after starting the scheme fmv is close to £1000 hence the credit exclusion as this is what you still owe the company you were leaving. Note this is not the value of the remaining payments which are after tax break, hence the hmrc guidelines. However once you have completed initial year your obligation is in fact zero as you can then just give bike back. so you can get another £1000 bike as your total credit liability would be £1000. Hope that makes sense.