Cycle to work scheme disposal costs changed by HMRC

Purelynix

Hi all

I decided to get a bike through the cycle to work scheme which gave me £800 and I bought a £700 bike and £100 worth of safety equipment. The Hire Agreement is for 18 months. I pay £49.54 per month before tax. I am in the lower tax bracket. My contract terms and conditions say

"The selection will be disposed of at the end of the term of this Hire Agreement for a nominal sum, equating to fair market value at that time usually £20 (plus vat) or 5% of the capital value (plus VAT) whichever is greater. The circumstances and terms of the disposal of the Selection are neither governed nor influenced by this Hire Agreement"

HMRC have now said that thy do not believe that the disposal costs are reasonable and for bikes over £500 the disposal fee will be 21% at 18 months. (I was expecting 5% as per t & c's). This is for forth coming agreements and is applied retrospectively to those in progress.

I have paid for the maintenance of my bike and been taking really good care of it. Should the person I am hiring it from maintain it?

Is there anything I can do to fight the rise?
Anyone else having to deal with this?

Sorry for all the questions and thanks in advance for any help!

Nix

molerat

Seems like a good way to kill a scheme stone dead

ZootHornRollo

i am very saddened to hear about this as my work were going to offer the scheme to employees once they roll out their new payroll system.

I guess it doesn't kill the scheme but makes it far less attractive. It will still provide an interest free way of paying up a bike for thoese who wish to do so and it will still offer a reasonable discount.

i guess there is nothing you can do to fight it as you entered a hire agreement, not a hire purchase agreement. You entered the scheme knowing you were not guaranteed to own the bike at the end. sorry if thats not what you wanted to hear!

Coveredinbees!!!!

£700 for a bike is it gold plated or something

sheslookinhot

Purelynix wrote: »

Hi all

I decided to get a bike through the cycle to work scheme which gave me £800 and I bought a £700 bike and £100 worth of safety equipment. The Hire Agreement is for 18 months. I pay £49.54 per month before tax. I am in the lower tax bracket. My contract terms and conditions say

"The selection will be disposed of at the end of the term of this Hire Agreement for a nominal sum, equating to fair market value at that time usually £20 (plus vat) or 5% of the capital value (plus VAT) whichever is greater. The circumstances and terms of the disposal of the Selection are neither governed nor influenced by this Hire Agreement"

HMRC have now said that thy do not believe that the disposal costs are reasonable and for bikes over £500 the disposal fee will be 21% at 18 months. (I was expecting 5% as per t & c's). This is for forth coming agreements and is applied retrospectively to those in progress.

I have paid for the maintenance of my bike and been taking really good care of it. Should the person I am hiring it from maintain it?

Is there anything I can do to fight the rise?
Anyone else having to deal with this?

Sorry for all the questions and thanks in advance for any help!

Nix

I am in the same boat, £900 bike over 18 months. I pay tax at 40% so still a great bargain for me.

Purelynix

ZootHornRollo wrote: »

i am very saddened to hear about this as my work were going to offer the scheme to employees once they roll out their new payroll system.

I guess it doesn't kill the scheme but makes it far less attractive. It will still provide an interest free way of paying up a bike for thoese who wish to do so and it will still offer a reasonable discount.

i guess there is nothing you can do to fight it as you entered a hire agreement, not a hire purchase agreement. You entered the scheme knowing you were not guaranteed to own the bike at the end. sorry if thats not what you wanted to hear!

I thought this might be the case but as the agreement t&c's make reference to the disposal cost then maybe this was enforceable.

Coveredinbees!!!! wrote: »

£700 for a bike is it gold plated or something

No, that is the going rate for a decent ladies racing bike these days!
Trek 1.2 triple WSD

sheslookinhot wrote: »

I am in the same boat, £900 bike over 18 months. I pay tax at 40% so still a great bargain for me.

Yep for higher rate tax payers it is still worth it. What I don't get is why they have a higher percentage payback for bikes worth over £500 than those below this. If anything expensive bikes depreciate very quickly because of the new technology that comes out each year. Road bikes are like laptops. Each year is miles better than the one before!

King_Nothing

I'm looking to go into this scheme in the new year. What is the OP actually saying?

sickparrot

King_Nothing wrote: »

I'm looking to go into this scheme in the new year. What is the OP actually saying?

That it's probably not worth doing any more. I've just had a bike through cyclescheme worth £550, I'm paying £30 per month for 12 months, which is £360, and now I'm going to have to fork out £137 to keep it at the end. I probably could have saved more than £50 if i'd just waited until next years model came out and got this one at a discount.

And just giving it back at the end is not an option, not after i've invested so much money into it.

The only advantage I can see now is the spread payments, so just find a bike shop that does interest free credit.

King_Nothing

Ohhh right, I thought you got the voucher, got the bike, and you just paid off your wage monthly and that was it, I didn't know about a lump sum at the end of it and you technically not owning the bike, lol.

Is there a link to HMRC official stance on the change anywhere?

Frank_DeFord

@Judas : Yes, the employers were disposing of the cycles for nominal sums, but this was an employer being nice - the bicycle had been paid off in full, they had saved 12.8% of the pre-VAT cost of the bicycle over the length of the Scheme (via NIC savings per employee), so why ask for even more money from the employee?

I think employers should carry on being beneficial. All HMRC wants is its tax, and since the Cycle to Work Scheme has become so enormously successful, they are missing out on millions (potentially) in tax, hence this tightening of a loophole. Have the employee pay the tax to HMRC that it requires under this new legislation, and call it quits. Keep the costs low for the employee. That, after all, is the spirit of the Scheme!

In fact, if we're truly talking beneficial employers here, they should contribute to the tax bill through their annual NIC savings! Shudder the thought.

King_Nothing

Just worked it out, my company is in a 1 year deal, If I get a £1k bike, I have to pay back £730 out of my wages, put together with the 25% I would have to pay at the end, that gives me a grand total of £20 saving lol

Spose after that, the only way I can look at it, is to get a tiny saving, and a year long interest free bike loan essentially.