CycleScheme - leaving my employer

[ukaskew]

Struggling with this a little. I signed up to Cyclescheme last September, I purchased goods to the value of £513.96. I've been sacrificing a portion of my salary since then over a 12 month period. I heard nothing after that.

Last week I handed my notice in, I received confirmation of my resignation today...and a bill for £535.25 for my bike. I've been reading the T&Cs but just cannot get my head around it at all. I'm trying to arm myself with some info to discuss with my HR dept next week, but I can't possibly figure out how I've been presented with a bill larger than the original purchase price of the goods.

Has anyone had any experience of this when leaving the employer they signed up through?

[broster]

The bike belongs to the employer does it not?
When I left my employer they emailed cycle scheme to say they had no interest in the bike and I could have it. Had to pay the outstanding amount as I left midway through so if actually cost me more than the bike was worth.

[ukaskew]

It does belong to the employer, obviously I need to speak to them but i can't figure out why they've decided to charge me more than the original purchase price for the bike. If correct it's going to end up costing me near enough a grand for a £500 bike as I've already completed the 12 months of salary sacrifice.

[schmunk]

Strictly you've been loaned the bike by your employer, and the money that's been deducted from you is in reference to this loan.

The bike remains your employer's throughout, but it is common practice for it to be given to the employee at some point. This then creates a benefit in kind tax liability, with the value dependent on the price on the bike and length of loan.

Of day is unusual for employers to do differently (as in your case), but that's within their rights to do so...

Edited by schmunk on Saturday 29th November 18:02

[Magic919]

They should charge you 25% of the original cost if you want to keep the bike after 12 months.

[ukaskew]

Magic919 said:

They should charge you 25% of the original cost if you want to keep the bike after 12 months.

Source?

No mention of 25% on the CycleScheme site I can see.

[Countdown]

ukaskew said:

Magic919 said:

They should charge you 25% of the original cost if you want to keep the bike after 12 months.

Source?

No mention of 25% on the CycleScheme site I can see.

HMRC rules (see link below)

You can either take outright ownership after 12 months by paying 25% of purchase price OR you can normally extend the hire period for a further 4 years by paying either 3% or 7% of the purchase price. At the end of the 4 years the bike becomes yours at no extra cost.

Let me know if you've got any questions. We are currently implementing this at our workplace.

http://www.cyclescheme.co.uk/employers/employer-up...

Edited by Countdown on Saturday 29th November 11:07

[CoolHands]

looks like 18% of the original value you would have to pay? See here

http://www.hmrc.gov.uk/manuals/eimanual/eim21667a....

[ukaskew]

Countdown said:

HMRC rules (see link below)

You can either take outright ownership after 12 months by paying 25% of purchase price OR you can normally extend the hire period for a further 4 years by paying either 3% or 7% of the purchase price. At the end of the 4 years the bike becomes yours at no extra cost.

Let me know if you've got any questions. We are currently implementing this at our workplace.

http://www.cyclescheme.co.uk/employers/employer-up...

Thanks for that, very useful. I'm hoping it's just a significant error from my employer. Either way I'm struggling to see how the scheme will actually have ended up saving me any money, as it stands it's going to cost me a hell of a lot more!

Staff that have been through the scheme previously have just been given the bike at the end, so the savings were pretty clear in that situation.

[anonymous-user]

The bike was 513 & the 12 months ended last September?
If that's right then you should have saved tax etc on that, so you would have paid 300-400.
At that point they should have offered to extend the hire period or other options as above.
Sounds like their information is incorrect..

[jodypress]

I've recently purchased a bike on the cycle to work scheme on a 12 month agreement. At the end of the 12 months it's mine as I'll have paid it all off.

OP what were your monthly payments?

[ukaskew]

Jimboka said:

The bike was 513 & the 12 months ended last September?
If that's right then you should have saved tax etc on that, so you would have paid 300-400.
At that point they should have offered to extend the hire period or other options as above.
Sounds like their information is incorrect..

That's right, ended being £30 something a month in terms of reduction of salary, I didn't hear anything after, which I believe has been the case with others that have done it. I was under the impression that although they cannot guarantee it, they can give you the bike after 12 months and that is the usual situation.

As it stands it's going to be nearly £900 for a £500 bike which is clearly crazy. Is there any situation where that could possibly be ok for them to do that?

[Countdown]

ukaskew said:

Thanks for that, very useful. I'm hoping it's just a significant error from my employer. Either way I'm struggling to see how the scheme will actually have ended up saving me any money, as it stands it's going to cost me a hell of a lot more!

Staff that have been through the scheme previously have just been given the bike at the end, so the savings were pretty clear in that situation.

It DOES look like a massive miscalculation by your employer.. The absolute most you should have to pay is 25% of market value of the bike. And Cyclescheme know that this would negate the tax/NI savings you would have made, which is why they have the 3%/7% workaround. Might be worthwhile emailing Cyclescheme direct if you have no joy with your Payroll dept.

In the good old days Employers were able to give the bikes to employees at the end of the loan period. All this changed in 2010 IIRC. HMRC changed the rules.

[Countdown]

jodypress said:

I've recently purchased a bike on the cycle to work scheme on a 12 month agreement. At the end of the 12 months it's mine as I'll have paid it all off.
?

Not true I'm afraid. Technically the bike remains the property of your employer unless you pay the 25% of purchase price OR extend the hire period for another 3 years (you only pay 3%/7% of market value in the latter case)

[anonymous-user]

ukaskew said:

That's right, ended being £30 something a month in terms of reduction of salary, I didn't hear anything after, which I believe has been the case with others that have done it. I was under the impression that although they cannot guarantee it, they can give you the bike after 12 months and that is the usual situation.

As it stands it's going to be nearly £900 for a £500 bike which is clearly crazy. Is there any situation where that could possibly be ok for them to do that?

I'd say, at worst, you'll need to pay 25% of 513

[jodypress]

Countdown said:

Not true I'm afraid. Technically the bike remains the property of your employer unless you pay the 25% of purchase price OR extend the hire period for another 3 years (you only pay 3%/7% of market value in the latter case)

That doesn't seem to be the case for me. The figure I'm paying over 12 months is for the cost of the bike. After 12 months it's paid off and mine. Nothing outstanding.

[Magic919]

It will be taxed as benefit in kind if the employee pays nothing for the bike after 12 months.

[Fourmotion]

jodypress said:

That doesn't seem to be the case for me. The figure I'm paying over 12 months is for the cost of the bike. After 12 months it's paid off and mine. Nothing outstanding.

Well if that's the case you will pay tax on it as a benefit in kind. It is not by default yours. if they choose not to include it on your p11d then their auditors should be all over it.

And a bike which costs £513 from a shop will attract an 18% final payment if bought at the end of the hire period, as it's pre-VAT purchase value was below £500.

[schmunk]

jodypress said:

That doesn't seem to be the case for me. The figure I'm paying over 12 months is for the cost of the bike. After 12 months it's paid off and mine. Nothing outstanding.

There are two possibilities:

1. You have received a simple loan for the cost of the bike, which you are paying off, meaning that you are not gaining any tax relief on the cost of the bike and it is not a proper Cycle to Work scheme. The bike is yours from the beginning, because you bought it. The loan is not a taxable benefit as long as the total of all beneficial loans to you does not exceed £10,000 in a tax year.
2. You ARE in a proper Cycle to Work scheme and do not understand the rules. If this is the case, you do *not* automatically own the bike after 12 months - the bike is loaned to you by your employer. The schemes usually work such that you sacrifice an equal amount of your salary for the benefit of the loan, over a period of 12 months, meaning it does not cost your employer anything - you receive tax relief on this salary sacrifice. At some future point, your employer gifts the bike to you, which is a taxable benefit. As mentioned in earlier posts, this benefit is calculated based on the bike's age and original cost, and HMRC have published tables showing minimum values that they consider sufficient. This gift could happen at the 12 months point when your salary sacrifice ends, but most sensible schemes now use a 3 year period, to minimise the taxable benefit-in-kind.

Edit: I guess there's a option 3, that your employer is trying to operate Cycle to Work, and doing it wrong.

Edited by schmunk on Saturday 29th November 20:41

Edited by schmunk on Saturday 29th November 20:49

[Tribal Chestnut]

What happens if it's stolen?