cycle to work end payment p11d ?

simon ayre

still don't understand even after a watching video etc

can any one tell me in laymans terms what I would pay on a £999 bike at the end of the year on p11d I know its 25% but 25% of what

The total cost of bike ie 25% 0f £999 =£250 ?
or 25% of bikes market value after the year ?
or 25% of the tax that has been saved over the year

By the way my salary is 26k

andy9964

Pretty sure it's a percentage of the current value ie. 1 year old, as you didn't technically own it when you first got it

mpatts

Andy9964 wrote:

Pretty sure it's a percentage of the current value ie. 1 year old, as you didn't technically own it when you first got it

My understanding is that the 25% is suppose to represent current market value - in other words £250 is due at the end of the term on a £1k bike.

andy9964

mpatts wrote:

Andy9964 wrote:

Pretty sure it's a percentage of the current value ie. 1 year old, as you didn't technically own it when you first got it

My understanding is that the 25% is suppose to represent current market value - in other words £250 is due at the end of the term on a £1k bike.

That wouldn't represent much (if any) saving.
Looking at the table on this site
http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm
A one year old bike with original purchase price of over £500, is worth 25% of that. So a £1k bike is now worth £250.
Employee pays tax on the £250 @ 20% =£50 Or more if he is a higher rate tax payer

pdw

You don't say what your scheme is proposing to do, but I'm guessing they're planning to gift the bike to you at the end of 12 months, in which case you have received a benefit which the tax man thinks is work £250, so you've got to pay tax on £250. 20% of £250 is £50.

If the employer sells the bike to you for £250, then you've paid fair market value, and no tax is due.

rolf_f

The normal method is that the hire transfers to the cycle scheme provider at the end of the first year (for which you pay a fee roughly equivalent of one months hire). After another two years you take ownership at no extra cost.

Effectively (though imprecisely), it works out that you make 13 payments rather than 12.

Andy9964 wrote:

mpatts wrote:

Andy9964 wrote:

Pretty sure it's a percentage of the current value ie. 1 year old, as you didn't technically own it when you first got it

My understanding is that the 25% is suppose to represent current market value - in other words £250 is due at the end of the term on a £1k bike.

That wouldn't represent much (if any) saving.

No! And it would ignore the fact that the individual would have already paid that £250 during the first year!

CanalRider

I bought a £1000 bike on the scheme twelve months ago. I'll let you know the exact figure when I get it. I currently pay a tad over £83 per month before tax.

rolf_f

CanalRider wrote:

I bought a £1000 bike on the scheme twelve months ago. I'll let you know the exact figure when I get it. I currently pay a tad over £83 per month before tax.

What's £1000 divided by 12?

cookeeemonster

Rolf F wrote:

CanalRider wrote:

I bought a £1000 bike on the scheme twelve months ago. I'll let you know the exact figure when I get it. I currently pay a tad over £83 per month before tax.

What's £1000 divided by 12?

I've had it explained to me a couple of times by my office accountant...still no idea what they do but no, you won't actually be paying £83 per month, they do some sort of tax voodoo to make the real figure lower.

Mine has just finished after a year and I'm leaving my job, they sorted it so ill end up paying £67 extra tax to take ownership ( for an £800 voucher). Other places could ask for more but it depends I think. Basically if you don't leave your job after a year then no problem!

patrickf

Andy9964 wrote:

mpatts wrote:

Andy9964 wrote:

Pretty sure it's a percentage of the current value ie. 1 year old, as you didn't technically own it when you first got it

My understanding is that the 25% is suppose to represent current market value - in other words £250 is due at the end of the term on a £1k bike.

That wouldn't represent much (if any) saving.

Which is exactly why I didn't bother when I bought my bike last year. A cheeky "can you so a deal for us" at the checkout got me an already discounted bike reduced by another 10% along with everything I was buying at the time.

There's no chance you'd have that bargaining power on any cycle scheme.

cookeeemonster

patrickf wrote:

Andy9964 wrote:

mpatts wrote:

Andy9964 wrote:

Pretty sure it's a percentage of the current value ie. 1 year old, as you didn't technically own it when you first got it

My understanding is that the 25% is suppose to represent current market value - in other words £250 is due at the end of the term on a £1k bike.

That wouldn't represent much (if any) saving.

Which is exactly why I didn't bother when I bought my bike last year. A cheeky "can you so a deal for us" at the checkout got me an already discounted bike reduced by another 10% along with everything I was buying at the time.

There's no chance you'd have that bargaining power on any cycle scheme.

The trick is not to tell them about the cyclesheme until after the bargaining is done. I got an already discounted bike price matched to a lower price before I mentioned the voucher (don't think large chains are that bothered anyway tbh)

davegore2005

i paid £17 a month on my boardman hybrid comp over 18 months, and the final payment was £35...no clue how it was worked out but £341 for a listed price at the time of purchase of £600 wasn't too bad a deal.

Dave

IanLD

In my case I've been taxed on the benefit in kind value of £250 on a £1000 bike. Means a very small adjustment to my tax code and the bike ownership transfers to me after the initial years 'rent'.

Better than having to pay the inland revenues assessment of value which would have been £250...

the_hundredth_idiot

This final payment nonsense is why my firm has extended the "hire period" to 5 years. The bike is paid off over 12 months but it isn't given to the employee for another 4 years - i.e. 5 years in total. So, after 5 years, the final payment to transfer ownership is negligible.

Downside is that I can't get another bike for a few years now (in addition to my Condor and my Brompton ..., both of which I genuinely do use for commuting).

patrickf

The Hundredth Idiot wrote:

This final payment nonsense is why my firm has extended the "hire period" to 5 years. The bike is paid off over 12 months but it isn't given to the employee for another 4 years - i.e. 5 years in total. So, after 5 years, the final payment to transfer ownership is negligible.

Downside is that I can't get another bike for a few years now (in addition to my Condor and my Brompton ..., both of which I genuinely do use for commuting).

Question is though what happens if you leave the company within the 5 years? I have heard other companies doing similar things to get around the HMRC guideline valuations.

Problem is as with all government initiatives is that they are too complicated. Make it simple damnit and don't change your mind.

To those that got their bike cheap, was this before HMRC clamped down on the valuation costs? It used to be that employers seriously undervalued bikes at the point of transfer. This isn't allowed anymore.

andy9964

The Hundredth Idiot wrote:

.

Downside is that I can't get another bike for a few years now (in addition to my Condor and my Brompton ..., both of which I genuinely do use for commuting).

check the details. My company does a similar 5 year thing, and allows us two bike purchases in a rolling 5 year period.
Basically, I could get a new bike every 2-3 years. Or another one next June, then none for a further four years

rolf_f

The Hundredth Idiot wrote:

Downside is that I can't get another bike for a few years now (in addition to my Condor and my Brompton ..., both of which I genuinely do use for commuting).

There is nothing in the regulations to stop you taking on another cycle scheme after the initial years payment has been completed - ie the remaining 4 years (or whatever) doesn't preclude participation though your company might have it's own restrictions.

the_hundredth_idiot

Yeah - only allowed one in a five year period. When my flexible benefits renewal comes up each year, the bike option is greyed out for me on the grounds that I already have one.

I think I get stung for the full residual value (not just as a P11D) if I leave within 5 years. However, payroll told me that wouldn't happen (I checked carefully as I was thinking that 5 years is a long time to be with the company) - i.e. it would be transferred to me at nil cost/effectively forgotten about - and I got them to put it in writing as I thought (and still think) they were confused on that point.

Completely agree with patrickf - make it simple and leave it alone. For many people, it is now more cost effective to wait for the sales and get last year's model at a discount than use C2W.

cookeeemonster

People keep saying it's more effective to wait for the sales and so on...you can actually buy sale and discounted bikes on the cycle to work scheme - you then get the benefit of both discounts

the_hundredth_idiot

Fair point - I thought Evans (which my firm uses) didn't allow purchase of sale items but a quick check at the small print suggests they do.

So, putting aside the "sale" issue, if I was a basic rate tax payer and my firm wanted me to pay them 25% of the retail price to transfer ownership to me after a year:
> purchase outright: £1,000 (from net pay)
> purchase through R2W: £950 = £700ish (i.e. the net amount I would otherwise have received after income tax and NI) + £250 (final value)

So still a small saving from using R2W.

Admittedly, many companies use longer "hire" periods than 1 year (so transfer price < 25%), or just add the notional value to P11D (so the final value was effectively £50 rather than £250). That makes the numbers more in favour of R2W.

bails87

Back to the OP, as I understand it there are three options:
1. Extend the hire period. you typically pay one month's fee again and keep the bike for a couple of years with no further charges. Then either give it back, have ownbership transferred to you for free or buy it very cheap.

2. The company gifts the bike to you and you pay tax on the benefit. That's where the 25% comes from. That was the standard valuation used after a year. So a £1000 bike is worth £250. It's gifted to you, you pay (for example) 20% tax, so you pay 20% of £250 (£50) to the taxman.

3.You buy the bike outright at the end of the hire period. Again, the 25% calculation might be used. So you give your employer £250 and they give you the bike.

I think you're talking about option 2, which is the cheapest way to get ownership of the bike.

kajjal

CookeeeMonster wrote:

People keep saying it's more effective to wait for the sales and so on...you can actually buy sale and discounted bikes on the cycle to work scheme - you then get the benefit of both discounts

Depends on how the scheme is run, one part of the company I work for has a Halfords only £500 max limit. The other uses a third party which allows up to £1,000 at pretty much any well known bike shop. For the sales it is more likely only manufacturer discounts are passed on as it costs the shops to trade in the scheme.

reformedfatty

Hm. Didn't realise there was the option for employers to gift the bike and just charge the BIK tax... sods law mine doesn't so I'll be coughing up the 250 in a month or so..

patrickf

CookeeeMonster wrote:

People keep saying it's more effective to wait for the sales and so on...you can actually buy sale and discounted bikes on the cycle to work scheme - you then get the benefit of both discounts

If that's the case then great. I must admit I'm only going by what other people have said regarding some shops not allowing this. I have a feeling it depends on the scheme involved though - why is there not just one single simple scheme to all of this?

Also, when I bought my first bike I thought I'd jump on the 0% interest offer and the shop weren't entertaining further discount on that at all. Payment had to be cash or card for them to take 10% off everything.

pdw

why is there not just one single simple scheme to all of this?

Because the "scheme" is simply a tax break. A number of commercial companies, such as Cyclescheme, have set themselves up in order to help employers administer the schemes, but being commercial companies, they're in it to make money, which they do by charging bike shops to redeem their vouchers. This is why bike shops are less likely to offer discounts when buying on a commercial scheme.

If your employer runs the scheme themselves, then as far as the bike shop is concerned, it's just an ordinary cash transaction.

patrickf

pdw wrote:

why is there not just one single simple scheme to all of this?

Because the "scheme" is simply a tax break. A number of commercial companies, such as Cyclescheme, have set themselves up in order to help employers administer the schemes, but being commercial companies, they're in it to make money, which they do by charging bike shops to redeem their vouchers. This is why bike shops are less likely to offer discounts when buying on a commercial scheme.

If your employer runs the scheme themselves, then as far as the bike shop is concerned, it's just an ordinary cash transaction.

I understand all of this. My question was out of frustration that the "scheme" has so many commercial sides and that they all operate slightly differently.