Cycle to Work Scheme Rip-off?

Steve73

Have just had a letter from work telling me that the bike I bought from the cyclescheme (Work gives you a voucher to use to buy a bike to cycle to work on as a Hire-purchase agreement, you buy it and use salary sacrifice to pay back monthly, claiming back a saving on NI and income tax contributions) has had its final market value fee changed from 5% to 25% of the initial value. This has been applied retrospectively to all cyclescheme contracts due to new HMRC rules. This means for a £550.00 bike I now have to pay back £45.84 a month for twelve months then a final payment of £165.00 (a fair second hand valuation of the bike according to the HMRC). Correct me if i'm wrong but isn't that an APR of 52.1%? I signed for the bike 1 month before this was introduced. Anything I can do? Is this even legal if i've already signed a contract? Can I claim I was mis-sold the scheme? Can I dispute the final value?
Help please.

GillsMan7

I think the thing is, it's not a loan. IIRC (I used this scheme) the company owes the bike, so they can charge what they like for you to own it at the end of the year. You should remember that the £45.84 is before tax, so you have made a saving, but the fee of £165 seems to obliterate that.

My company had an admin fee of £25 to give the bike to me at the end - and they waived that fee anyway.

kwaks

£45.84 is the gross value you pay back shown on your wages etc, however that will be less than £32 as a net value.

Without knowing your annual salary, and whether your employer can claim tax back it is impossible to give exact amounts.

Use the online calculator at cyclescheme.co.uk to work it out yourself.

MX5huggy

From a Website , I was on before firefox crashed!

At the end of the hire period employees may be given the opportunity to buy the bike for a full market value, however this cannot be an automatic entitlement. The cost of full market value cannot be stated before or during the hire period as this could be considered a benefit in kind and therefore not be eligible for tax benefits.

Steve73

I'm just annoyed at the massive rise in the space of about 1 month of signing the agreement. Surely they must have known that the new guidelines were going to come in. I know they can't specify a value and cant guarantee a final value but I feel like I've been mis-sold on the scheme initially. The final value could be questioned if I can get an approved valuation. £165 is a bit steep and as mentioned does wipe off the benefits of the tax savings in the first place.

MX5huggy

http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

Seems to be covering the issue.
My reading of it is that your employer does not need to charge you the 25% but if they charge you less you have to pay tax on the difference.

Gloomendoom

I looked at my employer's scheme and concluded that, even with the tax benefits, that it was cheaper to source my own bike.

IMHO many of these schemes are primarily intended to boost the employers' own 'green' credentials and the benefits to the employee, if any, are consequential.

Mark_Hewitt

Where I work if you take out the cycle scheme then you aren't allowed to have a car parking pass! So people don't bother.

frazmacd

The same just happened to me - cyclescheme wanted £90+ 'full market value' for my bike and equipment in order to transfer over ownership to me.

I was a little annoyed as this wipes out the majority of the benefits of buying the bike through this scheme.

The recommended market value comes from HMRC. (Do a google search for 'EIM21667a' and the HMRC guidance should appear at the top). The newer the bike, the higher the 'market value'.

Cyclescheme did however give me the to extend the hire period by 2.5years for a small deposit of £15, which I have taken up.
This is defintitely the smartest option as the bike will be worth a lot less in 2.5 years time! The 'market value' will have dropped to around 3%-7% of the bike's original value according to HMRC.

I would probably recommend to anyone out there who is thinking of joining the scheme to buy a 2nd hand bike for a fraction of the price of a new one! This is by far the best way to do it!

Cheers

Frazer