Cycle to Work Scheme - New HMRC Rules?

J_Devon

Evening folks, hoping someone may be able to shed some light on this situation...

A few people in our office have been waiting to see what our final payments would be for the bikes which we got through the Cycle to Work Scheme (through Halfords).

Last year, when we all signed up we asked for some guidance as to how much the final figure would be. We were told it shouldn't be anymore than 5% which was fine. This is also mentioned on Halfords T&C's. A colleague had only been charged £20 (2%) from the year before, so we were all comfortable with that.

Well, we've had our bikes a year now, and a couple of days ago we received our letters telling us that we'd have to pay 15% as a final payment. We of course, expecting approx. 5%, contacted our HR department to find out where this figure came from. We were told that HMRC have enforced the 15% figure on employers, so their hands were tied, if it were up to them, it'd be less.

My question to the population is, is this true? Have HMRC changed the rules and enforced a 15% final payment?

I'd be very grateful for anyones comments, especially from those who work within the HMRC and can confirm or deny this info.

Many thank in advance

Weirdlittleman

HMRC state to avoid the employee being taxed it must be passed at Market value. If Market Value is the 15% then yes it is enforced.

Normally with these schemes you find that the companies set the price up front of the bike and over the term the person pays this price.

What was the original purchase price of the bike? What have you paid for it monthly x months and what is the value to retain.

J_Devon

Sounds to me like HMRC have told all employers, you must collect the Market Value of the bike for the final payment and our employer has decided on a 15% fee.

If this is the case, the employer makes the decision as to what % it should charge? They're never going to get an independant dealer to value each and every bike so just apply a blanket % to cover everyone...?

MrsManda

‘… An employer or a third party cycle provider may choose to offer the cycle for sale to the employee after the loan has ended. If the employee is able to buy the cycle for less than its market value, the difference will be liable to tax and to employer’s Class 1A NIC liability’;
and
‘each cycle that is sold in this way should be valued at the time of sale’;

cyclescheme/employers

So each bike should be valued at the time the employer is selling the bike to the employee. The scheme suggests employers transfer ownership of all the bikes to the cyclescheme and let them deal with it. I can't see where anyone has said you have to pay 15%

J_Devon

Thanks for the replies.

It sounds to me like they've covered themselves by saying that HMRC have told them they need to do it. What they mean is, they have to cover the Market Value and have applied their own % to that.

Thanks for your input, I'll be calling them tomorrow to discuss.

Judith_W

It is correct that the payment is based on market value. If your hire agreement has been over 12 months then 15% is not unreasonable. Some companies are doing hire agreements over 24 or 36 months so you make payments for 12 then a year or 2 later you get asked for the payment to transfer the bike into your name.

I don't work for HMRC but I do know that they are seriously cracking down on this. I would suggest asking whether they could extend the hire agreement period so the final payment would be less as the bike is older and more used.

Halfords

Hi there,

Carl from Halfords here, perhaps I can help.

HMRC are currently undertaking a review of the transfer of ownership process and Halfords are providing direct input and comment to assist them, however what we can advsie is that there has been no policy issued by HMRC which imposes a trasnfer rate. HMRC guidance remains constant in that the bicycle may be made available to employees at the end of the hire term for a rate which is reflective of fair market value. The following link will take you to an updated HMRC manual which was issued in in the last few days, and which is used by inspectors for guidance.

hmrc.gov.uk/manuals/eimanual/EIM21667.htm

Alternatively contact me directly, carl.james[at]halfords.co.uk and I can help you.

paulwf

Ever since the tax free bike scheme started the final value has been a big issue with HMRC refusing to set a figure. Generally companies have used 5% as a nominal figure as HMRC haven't commented on any sales that have gone through at that rate.

It was only a matter of time before this became an issue, it has passed under the radar for years and years but now tax free cycle schemes are getting hugely popular it looks like HMRC is now prepared to look into it so companies are starting to charge a real market value.

diable

I was made redundant from the company who I went through to get a bike via the C2W scheme and when I received a letter asking for the final fee I told them I was in Poland and they could collect it anytime they wanted, they waived the fee lol

heffsta

diable wrote: »

I was made redundant from the company who I went through to get a bike via the C2W scheme and when I received a letter asking for the final fee I told them I was in Poland and they could collect it anytime they wanted, they waived the fee lol

I have got a bike on Ride to work and have had it for two months. I might be moving soon so will leave the company. Any idea what happens, I know I have to pay the remaining balance, and it states that the bike will be a taxable benefit. What does that mean, does it mean I keep the bike and pay the original VAT on top of the balance (basically paying the full value of the bike).

Any ideas would be appreciated