Cycle Scheme - how does it work?
Discussion
I would seriously consider taking this further, they are making you redundant and therefore the onus should be on them to make the deal as painless as possible, I suggest asking for a payment to cover "outplacement" costs that at the very least makes up any difference between what you would have paid under the old rules if the scheme had run it's course and any premature end brought about by their actions.
Edited by OneDs on Tuesday 17th August 14:26
Basically, the scheme was too good to be true and so it's effectively being killed off. Much like the similar scheme for employee PC purchases about 12 years ago.
What stinks is that HMRC will be applying the changes retrospectively to existing arrangements rather than just to new ones from this point on. That's just unfair.
What stinks is that HMRC will be applying the changes retrospectively to existing arrangements rather than just to new ones from this point on. That's just unfair.
I think we are going to go down the route of taking any extra hit on the ee's behalf. It's probably about £10k in additional tax for the 100 or so who participate in the scheme each year here and the scheme fits with our transport policy, of aiming to reduce single occupancy car journeys.
The people we use at Cyclescheme.co.uk are trying to fudge it with self-determined condition reports reducing the % market value but this looks fraught with more loop holes than currently exists, as mentioned there are more than enough of those already.
The people we use at Cyclescheme.co.uk are trying to fudge it with self-determined condition reports reducing the % market value but this looks fraught with more loop holes than currently exists, as mentioned there are more than enough of those already.
The latest I've seen from Cycle Scheme appears to indicate anyone in before 30 Sept will benefit from the 'existing' purchase provisions (ie 5%) and anyone after that will be looking at 25% (or take the tax hit on the difference). Not sure whether this is just CS having a punt or whether they have run it by HMRC
Here's the HMRC manual extract that deals with end of scheme valuation: http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a....
Here's the HMRC manual extract that deals with end of scheme valuation: http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a....
I've got the "white paper" from cyclescheme.co.uk and I don't like it:-
It's not clear on the transfer of ownership:-
It looks to me as in order to qualify for their market value assessment process you have to transfer ownership of the bike from the employer to Cyclescheme.co.uk and then once the assessment is done (possibly by the employee) to the employee, this will make final payments more complicated as they cannot be done directly through payroll.
The fair market value is untested with HRMC:-
They reckon their categories A/B/C/D (20%/15%/10%/5%) transfer values will stand up to HRMC scrutiny but haven't got clarification as to whether they will or not, they've just chosen their own interpretation of the policy.
It is incentivising, an extension of new 3rd party contractual arrangements (with no costs-hmmm someone will pay something somewhere (like the dealers having to charge a admin fees)) for the hire period for no reason other than to avoid higher transfer costs.
It is also incentivising trashing your bikes and leaving out in the open all year to achieve the smallest possible transfer value at the end of the period, possible a contradiction in terms. If I'd trashed a £1,000 bike in a year then there's no way I'd want it.
The dates are nothing to do with HRMC guidance, just the earliest they can bring the changes (contractually) in.
The whole thing is a fudge as already stated, I'd much prefer to an agreed the HRMC market value process other than the top whack 25% and pickup the taxable benefit charge over and above our current arrangement, I may ditch them if they can't oblige.
It's not clear on the transfer of ownership:-
It looks to me as in order to qualify for their market value assessment process you have to transfer ownership of the bike from the employer to Cyclescheme.co.uk and then once the assessment is done (possibly by the employee) to the employee, this will make final payments more complicated as they cannot be done directly through payroll.
The fair market value is untested with HRMC:-
They reckon their categories A/B/C/D (20%/15%/10%/5%) transfer values will stand up to HRMC scrutiny but haven't got clarification as to whether they will or not, they've just chosen their own interpretation of the policy.
It is incentivising, an extension of new 3rd party contractual arrangements (with no costs-hmmm someone will pay something somewhere (like the dealers having to charge a admin fees)) for the hire period for no reason other than to avoid higher transfer costs.
It is also incentivising trashing your bikes and leaving out in the open all year to achieve the smallest possible transfer value at the end of the period, possible a contradiction in terms. If I'd trashed a £1,000 bike in a year then there's no way I'd want it.
The dates are nothing to do with HRMC guidance, just the earliest they can bring the changes (contractually) in.
The whole thing is a fudge as already stated, I'd much prefer to an agreed the HRMC market value process other than the top whack 25% and pickup the taxable benefit charge over and above our current arrangement, I may ditch them if they can't oblige.
Edited by OneDs on Wednesday 18th August 14:15
OneDs said:
The dates are nothing to do with HRMC guidance, just the earliest they can bring the changes (contractually) in.
So my period ends before the end of Sept - does that mean, from your reading, that CS will be looking for a 5% settlement amount?I called them but they were cagier than a vivisection lab.
The reason they are being cagey is that every employer who uses them trying to clarify exactly where we stand and in reality it's all just if and buts and not actual clear direction.
All they have done is put together a "possible solution" "white paper" that might protect employees & employers from significant payments of tax as taxable benefits. It has more holes than a tea strainer in it at the moment.
My view is that your better of speaking to your employer as it will be either you or them picking up the tab if you transfer the ownership to you and HMRC don't agree that Cyclescheme.co.uk's process is appropriate.
All they have done is put together a "possible solution" "white paper" that might protect employees & employers from significant payments of tax as taxable benefits. It has more holes than a tea strainer in it at the moment.
My view is that your better of speaking to your employer as it will be either you or them picking up the tab if you transfer the ownership to you and HMRC don't agree that Cyclescheme.co.uk's process is appropriate.
Edited by OneDs on Wednesday 18th August 14:25
If at the end of a 12mth hire period you pay £1 for a £1,000 bike the 25% (HRMC) valuation will apply, so you will have to pay Tax & NI on £249 (+vat on £250), alternatively your employer could pick up the bill and pay a gross up on it
The employee would pay £61.48 (low rate) or £120.03(high rate)
The employer would pay £159.84 (low rate) or £193.24 (high rate)
In addition (reading between cyclescheme.co.uk's white paper and the HMRC guidance) it looks like valuation applies to the voucher amount not the bike purchase price so if you went all out on accessories you really will be screwed.
This probably gives you an overall discount of around 20%-30%, less so if you brought loads of accessories, given that most bikes shops will give a 10% discount for nothing and a 15% - 25% for membership and/or affinity scheme it starts to make it look very pointless.
Solely for the "avoidance of tax", the cyclescheme.co.uk process would have your employer transfer the bike to their ownership and you would take out an extension to hire contract so that by paying nothing extra but extending the term of hire you are reducing the value of the asset.
In addition or straight after the initial 12mth period when Cyclescheme have taken on the bike, they would transfer the bike to you for a direct payment to them at either 20%, 15%, 10% or 5% (+ vat) based upon your own assessment of the condition of the bike (anyone see a slight problem with that one).
Oh and their % figure being rounded down! and based on an industry survey not agreed with HRMC, so HRMC could still ask for a further payment.
As I said more holes than a tea strainer!
The employee would pay £61.48 (low rate) or £120.03(high rate)
The employer would pay £159.84 (low rate) or £193.24 (high rate)
In addition (reading between cyclescheme.co.uk's white paper and the HMRC guidance) it looks like valuation applies to the voucher amount not the bike purchase price so if you went all out on accessories you really will be screwed.
This probably gives you an overall discount of around 20%-30%, less so if you brought loads of accessories, given that most bikes shops will give a 10% discount for nothing and a 15% - 25% for membership and/or affinity scheme it starts to make it look very pointless.
Solely for the "avoidance of tax", the cyclescheme.co.uk process would have your employer transfer the bike to their ownership and you would take out an extension to hire contract so that by paying nothing extra but extending the term of hire you are reducing the value of the asset.
In addition or straight after the initial 12mth period when Cyclescheme have taken on the bike, they would transfer the bike to you for a direct payment to them at either 20%, 15%, 10% or 5% (+ vat) based upon your own assessment of the condition of the bike (anyone see a slight problem with that one).
Oh and their % figure being rounded down! and based on an industry survey not agreed with HRMC, so HRMC could still ask for a further payment.
As I said more holes than a tea strainer!
Edited by OneDs on Wednesday 18th August 14:56
OneDs said:
I've got the "white paper" from cyclescheme.co.uk and I don't like it....
Well, I've seen it too and, although it cannot be and does not profess to be a definitive statement of tax law, it seems pretty well reasoned and based on some assumptions that at least have some capacity for being argued. Frankly, I've seen worse from others under regulatory scrutiny and don't think the changes (or the potential consequences) would put me off participating either as an employer or as an employee (unless, of course, I just could not afford to bear the notional tax on £200 quid of unearned 'income', or whatever is the difference. It's not big numbers is it?). It cannot be forgotten that Cycle Scheme are the major player with thousands signed up and HMRC have to be seen to be dealing with people reasonably and proportionately whilst easinng their pants down...Pupp said:
OneDs said:
I've got the "white paper" from cyclescheme.co.uk and I don't like it....
Well, I've seen it too and, although it cannot be and does not profess to be a definitive statement of tax law, it seems pretty well reasoned and based on some assumptions that at least have some capacity for being argued. Frankly, I've seen worse from others under regulatory scrutiny and don't think the changes (or the potential consequences) would put me off participating either as an employer or as an employee (unless, of course, I just could not afford to bear the notional tax on £200 quid of unearned 'income', or whatever is the difference. It's not big numbers is it?). It cannot be forgotten that Cycle Scheme are the major player with thousands signed up and HMRC have to be seen to be dealing with people reasonably and proportionately whilst easinng their pants down...We've worked very closely with HRMC on other more significant areas of taxation and from our interactions I'm not sure that the HMRC will view:-
1. The rounded down generic valuation categories as an accurate reflection of evidence of the true market value for an individual bike based on the voucher amount and condition only.
2. The ability of participants to self categorise the condition of their bike as appropriate.
3 The secondary transfer of ownership and extension to hire period at no extra cost as anything other than "at best" dubious tax management and "at worst" tax avoidance.
In addition I'm seriously unhappy about the incentive to get the lowest condition report possible after the 12 month period as it rewards abuse of our property.
My initial thoughts are that we insist the condition report is carried out by a partner store and must be approved as suitable evidence by HMRC, we retain ownership in an extension situation. We carry the full taxable benefit costs as an employer in condition A&B situations - a nominal (£5) fee, and any C&D ratings are paid for by the employee through our payroll.
Edited by OneDs on Thursday 19th August 09:42
Edited by OneDs on Thursday 19th August 09:50
OneDs said:
In addition I'm seriously unhappy about the incentive to get the lowest condition report possible after the 12 month period as it rewards abuse of our property.
Interesting viewpoint. You actually see the bikes as 'your property' rather than that being a distinction that allows your employees to buy their bikes under the scheme?
I seriously doubt anyone participating in the scheme views their employer's (or cyclescheme's) 'ownership' of the bike as anything other than a technicality.
I agree, but HRMC build their cases on technicalities, if they see the extension period and condition reporting as nothing other than tax avoidance, it will be mainly the employer, not cyclescheme.co.uk and the employee who'll get clobbered.
Whilst £10k's of er taxable benefits a year is small fry, I'd rather not have the hassle, and audit opportunity in the first place.
Whilst £10k's of er taxable benefits a year is small fry, I'd rather not have the hassle, and audit opportunity in the first place.
Edited by OneDs on Thursday 19th August 10:32
I suspect that Cyclescheme are using scare tactics to encourage businesses to use their disposal service.
At the end of the hire period the bike is a company asset like any other. I see no reason why its disposal would be any different to that of obsolete computers, office furniture or staplers. Businesses shift these every day without the need for secondary arrangements or assesments.
It is very much in the interest of CS to manage both ends of the transaction.
Were you aware that if you decide not to buy the bike through them at the current 5%, they will still invoice the employee 5% as a disposal/scrappage fee.
It is a fantastic racket.
At the end of the hire period the bike is a company asset like any other. I see no reason why its disposal would be any different to that of obsolete computers, office furniture or staplers. Businesses shift these every day without the need for secondary arrangements or assesments.
It is very much in the interest of CS to manage both ends of the transaction.
Were you aware that if you decide not to buy the bike through them at the current 5%, they will still invoice the employee 5% as a disposal/scrappage fee.
It is a fantastic racket.
I wasn't aware of that and I'm also not sure what happens to the VAT on the original purchase price, I know that bike shops get loads of hassle from them, meaning that many are now adding a 10% admin fee to the whole thing.
JAYB, I forwarded you that request and some more stuff this morning, you may find it of interest.
JAYB, I forwarded you that request and some more stuff this morning, you may find it of interest.
Edited by OneDs on Thursday 19th August 10:48
Been interested reading the differing opinions on this.
FYI - I am an ex-cycle trade employee, and have sold many bikes in relation to the government cycle to work scheme.
Something I feel I have to point out -
'Cycle to work' is a goverment initiative.
It is available to any PAYE employee who as long as they dont below minimum wage once making paybacks.
'cyclescheme' is something very different.
It is a third party company - they work by doing all the setting up, form filling in etc etc. These are the companies that uses these 'voucher' type systems aswell. They seel their service to employers as they fear the difficulty of managing and setting up such schemes.
Of course - they dont do it for free. They are taking a cut out of what should effectively be the customer savings.
It is not difficult to administrate. The company I worked for offered Cycle to work in the correct, best value manner. We would assist the companies with the tax/paye issues. We did not make any money on the cycle to work scheme itself.
Nor was there any 3rd party such as cyclescheme, wheelies etc involved, taking a cut.
I sold many, many bikes to employees of small organizations through to large ones such as Leeds City council - who were a repeat customer.
As has been mentioned - the original reason for the being a final charge is because the government was unwilling to change some tax laws to suit the matter - as it is, the employee HAS to charge you 'A' figure to get round the existing laws. This is the reason that most employees set a limit fo £1000 - this is where things such as consumer credit licences are needed.
I am far from a tax/credit/PAYE expert. However I have seen the scheme working, seemingly with much more successful results than some of you lot are seeing.
Thats a pity - because if done properly, it is great - easy to manage, and fantastic value for the customer.
I hope that it continues.
In the meantime, if your trying to get your employer to sign up to a cycle to work scheme, please avoid the 3rd party companys and speak to some indepent bicycle retailers. I wont name names but if anyone is in Edinburgh, Aberdeen, Newcastle, Leeds, Manchester of Sheffield :wink:then please PM if your interested and I'll give you the details of someone to talk to. Theres nothing in it for me, as an ex employee, other than the pleasure of seeing more people getting cracking value bicycles and getting out there enjoying them.
FYI - I am an ex-cycle trade employee, and have sold many bikes in relation to the government cycle to work scheme.
Something I feel I have to point out -
'Cycle to work' is a goverment initiative.
It is available to any PAYE employee who as long as they dont below minimum wage once making paybacks.
'cyclescheme' is something very different.
It is a third party company - they work by doing all the setting up, form filling in etc etc. These are the companies that uses these 'voucher' type systems aswell. They seel their service to employers as they fear the difficulty of managing and setting up such schemes.
Of course - they dont do it for free. They are taking a cut out of what should effectively be the customer savings.
It is not difficult to administrate. The company I worked for offered Cycle to work in the correct, best value manner. We would assist the companies with the tax/paye issues. We did not make any money on the cycle to work scheme itself.
Nor was there any 3rd party such as cyclescheme, wheelies etc involved, taking a cut.
I sold many, many bikes to employees of small organizations through to large ones such as Leeds City council - who were a repeat customer.
As has been mentioned - the original reason for the being a final charge is because the government was unwilling to change some tax laws to suit the matter - as it is, the employee HAS to charge you 'A' figure to get round the existing laws. This is the reason that most employees set a limit fo £1000 - this is where things such as consumer credit licences are needed.
I am far from a tax/credit/PAYE expert. However I have seen the scheme working, seemingly with much more successful results than some of you lot are seeing.
Thats a pity - because if done properly, it is great - easy to manage, and fantastic value for the customer.
I hope that it continues.
In the meantime, if your trying to get your employer to sign up to a cycle to work scheme, please avoid the 3rd party companys and speak to some indepent bicycle retailers. I wont name names but if anyone is in Edinburgh, Aberdeen, Newcastle, Leeds, Manchester of Sheffield :wink:then please PM if your interested and I'll give you the details of someone to talk to. Theres nothing in it for me, as an ex employee, other than the pleasure of seeing more people getting cracking value bicycles and getting out there enjoying them.
Edited by snotrag on Thursday 19th August 15:44
I have tried to get the company i have worked for to do this, but not getting anywhere with them so far,
might just wait till after my holidays and buy a bike myself.
should be interesting me trying to cycle from Blacburn to Rawtenstall over the grane road. 12 mile there with asscent 797 ft
might just wait till after my holidays and buy a bike myself.
should be interesting me trying to cycle from Blacburn to Rawtenstall over the grane road. 12 mile there with asscent 797 ft
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