Cycle2Work Scheme demanding 110% of market value - ownership trap

J_DLdn

Hello all,

I am seeking some advice regarding the end of hire payment for a C2W scheme, and to forewarn of potential pitfalls for anyone else considering applying for a scheme.  

Last September I applied for a voucher under the C2W scheme for a new bike, which I happily received and have been using since. Monthly repayments were taken from my account as expected, at 1/12th of the overall value (taken before tax – which is where the savings are made). However, after only 3 months I accepted another job at a different organisation and, as the loan is technically with your employer, was forced to pay off the entire remainder of the loan at full market value in my last salary payment (which made for a challenging Xmas). As of January 2022, I had therefore paid 100% of the market value for my bike and equipment. I put the issue to rest, thinking that this was the end of the matter.

Nine months later I have been contacted by CycleScheme (the main provider of the service), who are now demanding that I still must pay a final payment, equivalent to 10% of the total value of the loan (in my case £120) to ‘Own it Later’, £420 to ‘Own it now’, or to return the bike to them. If I am to pay the Own it Later fee as they have request, I will have actually ended up paying the equivalent of 110% of the market value of the bike, without benefiting from the tax savings promised by the scheme. To own it now would be more like 133%. It is a bizarre situation given that I paid in full 9months ago, without any warnings of additional payments being required.

I have contested this with them and it is currently being escalated. However, the customer service operators I have spoken to so far have said that any scheme that lasts for more than 2 months will indeed be liable for this payment.

If anyone on the forum might be able to offer any advice to knowledge on the matter I would be incredibly grateful.

Also, if you or anyone you know are considering taking out a loan to purchase a bike through the scheme, I would strongly advise you to reconsider unless you absolutely sure that you will not be changing jobs in the next 12 months, otherwise are unlikely to save a penny and it may actually end up costing you more.

 Thanks in advance,

 JD.

Grey_Critic

Looking on the government website Q & As

The Question - What if I leave my company within my hire Agreement

Says

We completely understand that life can be unpredictable. If you were to leave your company or be made redundant in your hire period, the remaining gross balance would simply be deducted from your last payslip.

Surely you paid the whole thing off when you changed jobs?

sheramber

The CycleScheme website explains the ownership fee.

It is not part of the hire purchase agreement, which is what you would have paid off.

The fee is set by HMRC. wIthout that fee would incur a tax charge for benefit in Kind.

https://help.cyclescheme.co.uk/article/42-what-is-an-ownership-fee

[Deleted User]

This isn't new, it's always been the case that you lose the tax advantages when you leave the job and move to another one. Cyclescheme are a business and charge their fee as well

Herzlos

The scheme doesn't work that well if you leave employment during the first year, unfortunately.

However, when you paid off the balance, you'll have paid off the outstanding balance presumably which would have been 75% of the purchase price given you made 3 repayments already.

The way the scheme works is that you rent the stuff for 1 (own it now) or 3 (own it later) years and then buy it off them at the market value (which is about 10% of the new value). If you paid the 12 installments via the current employer you'll still have saved some money from new, but obviously changing employer and having to pay a large chunk of the bike without the tax free benefit will mean you're paying more.  It'll have been in the contracts you signed to get the scheme loan initially.


So yeah, this is completely above board, and you're left with the 3 options:

Buy it later for £120, so it's not technically yours for another 2 years, so you can't sell it.
Buy it now for £420, so it becomes yours and you can sell it.

Or give them it back and pay nothing.

Obviously the best thing to do would be to buy it later, as they won't check to see if you still have it in your possession in  2 years time when ownership changes.

tofu-eater_3

Thanks J-DLdn I appreciate the warning as I've been thinking about using this scheme