Cycle / Ride to work scheme - Help needed

newfreebie

I am writing to ask for advice on the Cycle / Ride to work scheme.

I signed up to the Scheme last year which involves me buying a new bike with accessories and which are then owned by my employers. The bike and gear are then 'hired' to me and I pay my employers a monthly rental fee to use them. The agreement at the time was that upon completion of the 12 month hire period, I could buy the item from my employer at a 'fair market value'. My employers deemed this to be 5% of the original price paid. This was the agreement I signed.

I have just been informed by my employer that changes in HMRC has resulted this scheme to be changed because HMRC deems the bike as a taxable benefit and that the 'fair market value' has to be increased.

Can anyone offer any advice on how best to approach this? It seems to me to be completely unfair given that I signed a contract under those agreements and now this has changed and they are applying the new rules to existing and new participants.

Any advice would be highly appreciated.

winners1980

The paperwork you actually signed at the time should not have agreed that you had an option to purchase the bike at a set price. If this was formally agreed upon at the time of joining the scheme then my understanding of the scheme is that it would invalidate it as as a HMRC approved Cycle to work scheme.

Employers might say that they "may" give the option to purchase the bike at the end of the rental period and that an acceptable market value at the time is x pounds or x% of the bikes initial price. 12 months ago a fair market value was considered to be 5% after 12 months however this was not agreed upon by HMRC as their opinion remained conspicuous by its absence.

Unfortunately however they seem to have cottoned on over the last year or so how popular this scheme has become and how much money people are saving (therefore HMRC not receiving as much from us) and in the last few months released valuation guidelines of which the % fair market value in their opinion is much higher than 5%.

I don't think there is much you can do unfortunately .... unless the company agreed in writing with you that they would definitely sell you the bike for 5% after 12 months. If you look back over your paperwork i would suspect that this won;t actually be the case though.

BoGoF

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

Is the HMRC guidance. Seems to me they could still sell it you at 5% but the difference between that and the rate set down by HMRC will generate a taxable benefit on you.

diable

I was made redundant last year and after a few months they wrote me a letter asking for money, I told them they can have the bike back and they can collect it from Poland as that is where I am now residing, they let me keep it FOC lol

John_Pierpoint

Now you will get extradited for not paying the tax on it.:rotfl:

Horseunderwater

Radio 4 Moneybox program last Sat/Sun had something on this and how to get around the HMRC problem. Basically I think you can extend the hire period for a set time in some way and get to own it that way. The program presenter is Paul Lewis.

John_Pierpoint

The problem highlighted on R4 was that the company had paid too much for the bike; thus its written down value according to the table now published by HMRC (see link above) represented a sizeable taxed benefit in kind, especially for someone made redundant and thus forced to buy his bike earlier than expected. It compared the result with buying your own bike at a discount.
Beware of getting a posh bike costing the employer more than £500; after all it is meant to be a workhorse to get its rider to work sustainably and carbon free. A tiny contribution towards the UK's legal undertaking to be X% sustainable and Y% greenhouse gas reduced.

diable

John_Pierpoint wrote: »

Now you will get extradited for not paying the tax on it.:rotfl:

I lied, I was in the UK but just wanted to be awkward