Cycle Scheme Stitch up!
Discussion
Just been informed by my company that HMRC have decided a fair value for my bike is no longer the 5% we were suggested when I begun my contract, but 25%!
So 40% tax incentive get's reduced to 15%, (40% of original £1000 = £400, 25% of original £1000 = £250; 400 - 250 = 1500. Luckily the company is going to pick up 205 as benefit in kind (to which i get taxed of course). But this begs the question, why would anyone bother with this scheme in future! Only the Government (Tax office) can change the goal posts half way through the scheme!
So 40% tax incentive get's reduced to 15%, (40% of original £1000 = £400, 25% of original £1000 = £250; 400 - 250 = 1500. Luckily the company is going to pick up 205 as benefit in kind (to which i get taxed of course). But this begs the question, why would anyone bother with this scheme in future! Only the Government (Tax office) can change the goal posts half way through the scheme!
Indeed.
What a lot of companies are doing is to defer the final payment / transfer of ownership for three years, after which the value is effectively written off and the nominal fee can apply.
If you're at the same company, and you have your bike for riding to work on, why would you need to exit the scheme at 1 year rather than 3? Of course, the answer is that it's a good way for the middle class to buy posh road or mountain bikes that will never be used for their commute, and doing it yearly (selling last years one second-hand for about what was paid for it) keeps them in shiny new bikes all the time.
I'm amazed the scheme still exists, tbh. Chopping VAT off complete bikes under £400 would be far more effective at making decent commuter bikes more affordable for people.
What a lot of companies are doing is to defer the final payment / transfer of ownership for three years, after which the value is effectively written off and the nominal fee can apply.
If you're at the same company, and you have your bike for riding to work on, why would you need to exit the scheme at 1 year rather than 3? Of course, the answer is that it's a good way for the middle class to buy posh road or mountain bikes that will never be used for their commute, and doing it yearly (selling last years one second-hand for about what was paid for it) keeps them in shiny new bikes all the time.
I'm amazed the scheme still exists, tbh. Chopping VAT off complete bikes under £400 would be far more effective at making decent commuter bikes more affordable for people.
It was initially a voluntary fee for the company to take for 'admin'. 5% is £50 on the £1000.
I heard of this a few months before mine ended, but HR said its only if you used the scheme directly, we apparently didn't, so HR could charge what they want, so I paid £1 for it at the end.
They shouldn't be allowed to change terms part way through a contract though...
I heard of this a few months before mine ended, but HR said its only if you used the scheme directly, we apparently didn't, so HR could charge what they want, so I paid £1 for it at the end.
They shouldn't be allowed to change terms part way through a contract though...
itsnotarace said:
Playing devils advocate here but did you really assume that your £1000 bike would only be worth £50 at the end of 12 months?
If it got run over by a truck, maybe
The nominal 5% charge was the figure being suggested by the company, who were offering the cycle scheme. I believe this was standard practice in most places. It's not like people naively went into the scheme expecting to only pay £50 for a £1000 bike - this is what employers were courting potential cycle scheme customers with.If it got run over by a truck, maybe
In my case, I paid up and left the cycle scheme just in time - my final payment being £37 on a £750 Trek 1.5! Next bike will be bought outright or on 0% as the Cycle Scheme just doesn't seem worth the trouble any more.
You dont sign a contract saying the bike is going to be sold on at 5%, nor does it say it will even be offered to you at the end of the period (although that is pretty much always the case) otherwise it would be a hire purchase agreement and subject to Benefit in Kind, this has always been a key issue with C2W but a lot of people have signed up without fully understanding the risks.
Therefore anyone on the scheme currently, regardless of when they started it will have to pay the higher value or delay the transfer of ownership. another option is to pay a nominal fee such as £1 and then have the remaining balance (£249 on a £1000 bike) put down as BIK on which you pay a small percentage...the total cost therefore is around £75 (based on lower rate taxpayer), only slightly more than the 5% value of £50 (plus you dont need to pay outright) used originally, of course it depends on how flexible your employer is and whether they run their own scheme or use Cyclescheme / Cycleplus as to whether you can use this. I believe Cyclescheme are advocating an extended hire period which is fine if your in the same company for a few years....
Kind of ruins the annual upgrade (using the value of last years bike which is sold off and that value added to a new £1000 voucher to increase your overall budget year on year) scheme that I and a lot of others had in mind, not surprising really though.
The vast majority of savings are still there, but it's down to your employer as to whether you can access them...ultimately I suspect a lot will welcome a 'safe' 25% fee which will see them get a greater return on the bike and also cover them against investigation from HRMC (at the cost of the employee's savings)
Take a look at your initial contract, there will be no mention of a 5% final valuation (or at least there shouldn't be anything other than a suggestions 'at the employers discretion'), you could always hand the bike back to the company at the end, forcing them to dispose of it somehow
Therefore anyone on the scheme currently, regardless of when they started it will have to pay the higher value or delay the transfer of ownership. another option is to pay a nominal fee such as £1 and then have the remaining balance (£249 on a £1000 bike) put down as BIK on which you pay a small percentage...the total cost therefore is around £75 (based on lower rate taxpayer), only slightly more than the 5% value of £50 (plus you dont need to pay outright) used originally, of course it depends on how flexible your employer is and whether they run their own scheme or use Cyclescheme / Cycleplus as to whether you can use this. I believe Cyclescheme are advocating an extended hire period which is fine if your in the same company for a few years....
Kind of ruins the annual upgrade (using the value of last years bike which is sold off and that value added to a new £1000 voucher to increase your overall budget year on year) scheme that I and a lot of others had in mind, not surprising really though.
The vast majority of savings are still there, but it's down to your employer as to whether you can access them...ultimately I suspect a lot will welcome a 'safe' 25% fee which will see them get a greater return on the bike and also cover them against investigation from HRMC (at the cost of the employee's savings)
Take a look at your initial contract, there will be no mention of a 5% final valuation (or at least there shouldn't be anything other than a suggestions 'at the employers discretion'), you could always hand the bike back to the company at the end, forcing them to dispose of it somehow
Matthew_Eames said:
You dont sign a contract saying the bike is going to be sold on at 5%, nor does it say it will even be offered to you at the end of the period (although that is pretty much always the case) otherwise it would be a hire purchase agreement and subject to Benefit in Kind, this has always been a key issue with C2W but a lot of people have signed up without fully understanding the risks.
Therefore anyone on the scheme currently, regardless of when they started it will have to pay the higher value or delay the transfer of ownership. another option is to pay a nominal fee such as £1 and then have the remaining balance (£249 on a £1000 bike) put down as BIK on which you pay a small percentage...the total cost therefore is around £75 (based on lower rate taxpayer), only slightly more than the 5% value of £50 (plus you dont need to pay outright) used originally, of course it depends on how flexible your employer is and whether they run their own scheme or use Cyclescheme / Cycleplus as to whether you can use this. I believe Cyclescheme are advocating an extended hire period which is fine if your in the same company for a few years....
Kind of ruins the annual upgrade (using the value of last years bike which is sold off and that value added to a new £1000 voucher to increase your overall budget year on year) scheme that I and a lot of others had in mind, not surprising really though.
The vast majority of savings are still there, but it's down to your employer as to whether you can access them...ultimately I suspect a lot will welcome a 'safe' 25% fee which will see them get a greater return on the bike and also cover them against investigation from HRMC (at the cost of the employee's savings)
Take a look at your initial contract, there will be no mention of a 5% final valuation (or at least there shouldn't be anything other than a suggestions 'at the employers discretion'), you could always hand the bike back to the company at the end, forcing them to dispose of it somehow
You mean like writing it off and someone offering them £1 for it as scrap?Therefore anyone on the scheme currently, regardless of when they started it will have to pay the higher value or delay the transfer of ownership. another option is to pay a nominal fee such as £1 and then have the remaining balance (£249 on a £1000 bike) put down as BIK on which you pay a small percentage...the total cost therefore is around £75 (based on lower rate taxpayer), only slightly more than the 5% value of £50 (plus you dont need to pay outright) used originally, of course it depends on how flexible your employer is and whether they run their own scheme or use Cyclescheme / Cycleplus as to whether you can use this. I believe Cyclescheme are advocating an extended hire period which is fine if your in the same company for a few years....
Kind of ruins the annual upgrade (using the value of last years bike which is sold off and that value added to a new £1000 voucher to increase your overall budget year on year) scheme that I and a lot of others had in mind, not surprising really though.
The vast majority of savings are still there, but it's down to your employer as to whether you can access them...ultimately I suspect a lot will welcome a 'safe' 25% fee which will see them get a greater return on the bike and also cover them against investigation from HRMC (at the cost of the employee's savings)
Take a look at your initial contract, there will be no mention of a 5% final valuation (or at least there shouldn't be anything other than a suggestions 'at the employers discretion'), you could always hand the bike back to the company at the end, forcing them to dispose of it somehow
If it is Cyclescheme, have a word with them because they are plugging another solution, which is a continuing hire agreement for another two or three years for a negligible hire fee, by which time the residual value of the bike will be nil and it can be transferred to you at no cost withouit incurring a tax charge.
The other thing (again if Cyclescheme) is that they are stating that they are switching to the new residual charge for agreements entered into from 30 Sept onward; before that the 5% is still being applied by them
The other thing (again if Cyclescheme) is that they are stating that they are switching to the new residual charge for agreements entered into from 30 Sept onward; before that the 5% is still being applied by them
Pupp said:
If it is Cyclescheme, have a word with them because they are plugging another solution, which is a continuing hire agreement for another two or three years for a negligible hire fee, by which time the residual value of the bike will be nil and it can be transferred to you at no cost withouit incurring a tax charge.
The other thing (again if Cyclescheme) is that they are stating that they are switching to the new residual charge for agreements entered into from 30 Sept onward; before that the 5% is still being applied by them
"Cyclescheme.co.uk" are currently "liasing" with HRMC on their PROPOSAL to do this, given I was told I should have had a final document last Friday from them, I'd wager their "liasing" didn't entirely go to plan.The other thing (again if Cyclescheme) is that they are stating that they are switching to the new residual charge for agreements entered into from 30 Sept onward; before that the 5% is still being applied by them
Spoke a to cycle scheme representative yesterday.
It seems that the HMRC are plugging the fact that 25% must be charged at the end of year 1.
Cycle schemes solution is that the ownership of the bike will go to them for 4 further years for a nominal fee (between 3% and 7%) depending on how much you spent on the bike itself not including the accessories.
At the end of the total 5 years - the bike will be worthless and will be yours.
There is no other fees to pay - unless you decide not to keep the bike at the end of year 5 (which would be made anyway).
During this time you cannot sell the bike without telling cycle scheme. If you do, again a nominal fee will be charged.
I'm hard pressed to believe that they will pursue you for selling the bike?
It seems that the HMRC are plugging the fact that 25% must be charged at the end of year 1.
Cycle schemes solution is that the ownership of the bike will go to them for 4 further years for a nominal fee (between 3% and 7%) depending on how much you spent on the bike itself not including the accessories.
At the end of the total 5 years - the bike will be worthless and will be yours.
There is no other fees to pay - unless you decide not to keep the bike at the end of year 5 (which would be made anyway).
During this time you cannot sell the bike without telling cycle scheme. If you do, again a nominal fee will be charged.
I'm hard pressed to believe that they will pursue you for selling the bike?
I agree - I found our C2W scheme not as good as it looked on paper.
My charges were:
a) £1000 bike - no discount on purchase
b) 10% "admin" fee (£100)to the management company
c) 5% final purchase (£50)
So yes, all in all I probably paid £750 all in for a brand new bike. I bought a Boardman MTB pro. 9 months later you could buy the same model for £750 new.
I won't be doing this again, as in some way, better bargains can be got by shopping around and buying last year's models.
I did enjoy the fact that I got £250 back from that tw*t Brown!
My charges were:
a) £1000 bike - no discount on purchase
b) 10% "admin" fee (£100)to the management company
c) 5% final purchase (£50)
So yes, all in all I probably paid £750 all in for a brand new bike. I bought a Boardman MTB pro. 9 months later you could buy the same model for £750 new.
I won't be doing this again, as in some way, better bargains can be got by shopping around and buying last year's models.
I did enjoy the fact that I got £250 back from that tw*t Brown!
Ray Singh said:
Spoke a to cycle scheme representative yesterday.
It seems that the HMRC are plugging the fact that 25% must be charged at the end of year 1.
Cycle schemes solution is that the ownership of the bike will go to them for 4 further years for a nominal fee (between 3% and 7%) depending on how much you spent on the bike itself not including the accessories.
At the end of the total 5 years - the bike will be worthless and will be yours.
There is no other fees to pay - unless you decide not to keep the bike at the end of year 5 (which would be made anyway).
During this time you cannot sell the bike without telling cycle scheme. If you do, again a nominal fee will be charged.
I'm hard pressed to believe that they will pursue you for selling the bike?
I'm waiting for some feedback from them, given the updates on Evans & Halfords sites recently I'd imagine Cycleschemes.co.uk's previous proposal has been shot out of the water and they pretty much have to go with the 12mth salary sacrifice and extended hire term for 4+ years, Evans looks like they have their heads screwed on in terms of flexbility but their lack of national coverage is a bit of a headache for a countrywide organisation.It seems that the HMRC are plugging the fact that 25% must be charged at the end of year 1.
Cycle schemes solution is that the ownership of the bike will go to them for 4 further years for a nominal fee (between 3% and 7%) depending on how much you spent on the bike itself not including the accessories.
At the end of the total 5 years - the bike will be worthless and will be yours.
There is no other fees to pay - unless you decide not to keep the bike at the end of year 5 (which would be made anyway).
During this time you cannot sell the bike without telling cycle scheme. If you do, again a nominal fee will be charged.
I'm hard pressed to believe that they will pursue you for selling the bike?
Edited by OneDs on Wednesday 6th October 15:02
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