Cycle to Work Scheme & Changes to HMRC Guidance on Transfer of Ownership

jodie1978

Hi, Apologies if this thread is in the wrong place!

Can anyone help me - last Feb i signed up to the Cycle 2 Work scheme, chose a bike, picke dit up for the shop & have since had correct deductions of £45 before tax from my salary.

However, this morning i have received a letter saying that "Since the start of the scheme, there have been significant changes to the HMRC Guidance on Transfer of Ownership.

When i signed up to the scheme, i was advised that at the end of the 12 months i would be able to pay a sum of 5% of the bikes original value, in order to buy the bike from my employer.

Instead of the of the 5% i now have to pay 18% - equating to £148 instead of £35.

The letter says my options are
1) to give the bike back
2) Pay 5% = £35 plus Benefit in kind of £113
3) pay 18% = £148

I have paid £45 per month for 11 months with 1 payment still to go, so don't feel inclined to give the bike back - thats an expensive hire fee! But equally, i will struggle to find £148 within the month!

Can anyone tell me:
1) Should I have been informed in writing that changes were being made and 2) Can they change the terms of the agreement halfway through?

If i had known that i would have to pay this much at the end, i honestly dont think i would have signed up.

Any advice would be gratefully received! Thanks, j x

MrsManda

I think the changes have been allowed because there was nothing which specified in the rules that the employee could buy the bike at 5% of it's original value, rather that the T&Cs stated that the employee could buy the bike at a fair market value.
Which was interpreted as 5%.
(I don't have my original sign up details to hand so cannot confirm this)
The HMRC has therefore now clarified what 'fair market value' means.
This site may be useful:
http://www.clarkslegal.com/Article/701/Cycle+to+work+scheme+%22fair+market+value%22+clarified+by+HMRC

Blitz01

Although you do not have to pay any more money out at the end of 12 months, your employer can extend the 'hire period'.
Each year after the 12 months, the bike will depreciate to an eventual value of £0. (After 5 years most likely).

Don't forget, the depreciative value is based on each individual case, so if there is any damage, the value in years 2, 3 & 4 will be lower than if the bike is in perfect condition.

Just keep it, and then offer to buy after say 3 years.

cit_k

Off topic, but that seems rather a lot for a bike?

jodie1978

I go with the old addage, "you buy cheap, you buy twice" - also, i ride it a lot so i wanted the right bike, and because i have the right bike i use it more!!

Anyway, £500 for a bike is nothing - check out the Time trial bikes!!