Cycle scheme

[lemondash]

Good afternoon !!!

Has anybody on here taken out the Cyclescheme, i did last year. I was able to purchase a bike and pay it back through the company i work for over a 12 month month period. I have just made my last payment, so i was under the impress that the bike would rightfully be mine. I got this in an email.

As a bike owner, you may or may not be aware that the HMRC has recently “tightened up” the rules regarding the method for the valuation of cycles at the end of the hire period. This affects all bike owners whose hire period ends after 6 August 2010.



The changes are as follows:

• At the end of the initial 12 month hire period, Cyclescheme will write to you.
• You will be given the option to take ownership of the bicycle or to extend the hire period with Cyclescheme.
• The appropriate Market Value will be calculated using HMRC’s Valuation Table (details are attached).
• This amount is paid directly to Cyclescheme.

In the attachment in teh email, i look at the valuation table and because i took full advantage and i spent £999 on a bike and that means i now have to pay cyclescheme 25% of that original price. Where i slightly confused is that i was paying back £70 notes a month £70 * 12 = £860 so i only saved £140 but with teh extra £250 that i'm going to be asked to pay means that i paid more then the RRP.



My employer reckons there is nothing i can do as my agreement is with cyclescheme, is anybody else in the same situation ? or have i read somthing very wrong and just getting my Ars* up for no reason.

Thanks Lee

 

[Norm]

And, because your contract is with cyclescheme, no taxable benefit would be incurred if they were to give you the bike FOC.

Cyclescheme or Cyclescam?

 

[g00se]

This has been discussed a lot in the forums. Have a search and you'll find quite a few threads on this with some advise.

£70 a month seems a bit high - normally the saving is a lot more. Are you working in the public sector where VAT saving are not passed on for some areas (like the NHS)?

Normally, the contract is with the employer and not cyclescheme direct - maybe your employer has passed the bike back?

I would extend the loan period. You won't pay any more rental and the resale value of the bike will decrease over time.

You could also email cyclescheme direct with the question. They may have some advise too.

 

[mudplugger]

I pay £55 p.mth for 18 mths out of gross salary. If I didnt pay the £55 and that stayed as salary, I would loose 40% of it in tax. So thats £22 of the £55 the tax office are paying for me! Presumably, you pay tax? in which case you need to factor the relief into your calculation.

 

[g00se]

Hi,

I just checked the local intranet here about the cyclescheme payments.

For a £1000 bike, the company would have paid £851.06 (with a saving of £148.94 VAT)
The GROSS monthly deductions from salary would have been £70.92

For a basic rate tax payer, total employee payment would have been £587.23 (£48.94 per month NET)
For higher rate, the total would be £502.13 (£41.84 per month NET).

From the original post, it looks like you could have been mixing GROSS deduction before TAX with actual NET deduction.

If that's the case, it looks like the saving (if you pay the full £250 now) would be between £160 and £250.

 

[abbie]

I'm with cyclescheme.

I've been told by HR that at the end of the hire period (12m) I have the option to buy from cyclescheme. Should my bike be very worn condition the buyout would be 5%. I get to tell them the condition or sometimes they get the LBS to do the assessement.

 

[2Loose]

G00se is right, £70 pre-tax deduction effectively ends up as a £50 deduction from take home pay unles syou are on the higher tax rate, so you saved more than you thought.

As to the email, I do wonder what the option to 'extend the hire period with Cyclescheme' mentioned in the OP's email would entail.

Would the hire price continue at the same rate for another year or two, or be much reduced\negligable due to having already effectively paid the purchase price of the bike? I would await the email from cyclescheme to be sure.

 

[sadjack]

I have never had the opportunity to get a bike on this sceme. But I have read most of the threads with interest, never know I might get the chance in the future, if its still running!

Is it too simplistic to avoid the final payment farce to simply give the bike back and take a new one on the scheme? Is that allowed? Would be nice to have a new bike every year

 

[g00se]

G00se is right, £70 pre-tax deduction effectively ends up as a £50 deduction from take home pay unles syou are on the higher tax rate, so you saved more than you thought.

As to the email, I do wonder what the option to 'extend the hire period with Cyclescheme' mentioned in the OP's email would entail.

Would the hire price continue at the same rate for another year or two, or be much reduced\negligable due to having already effectively paid the purchase price of the bike? I would await the email from cyclescheme to be sure.

Our firm extends the 'loan' period but you don't pay any more. So once you've paid the full amount over the first 12 months, you pay no more for another year or two - and only pay the (much reduced) fair value after that.

 

[2Loose]

Our firm extends the 'loan' period but you don't pay any more. So once you've paid the full amount over the first 12 months, you pay no more for another year or two - and only pay the (much reduced) fair value after that.

I did wonder if it would be that simple.

 

[Norm]

Is it too simplistic to avoid the final payment farce to simply give the bike back and take a new one on the scheme? Is that allowed? Would be nice to have a new bike every year

You could do that but you'd be missing out in a couple of ways.

Firstly, you'd pay 65% (depending on personal circumstances) of the price of a new bike to rent it, and then have nothing at the end of the rental period.

Secondly, I think that even the most expensive guidance is for the price of a 12 month old bike to be 25% of the new value, which is a bit of a bargain, IMO.

Our firm extends the 'loan' period but you don't pay any more. So once you've paid the full amount over the first 12 months, you pay no more for another year or two - and only pay the (much reduced) fair value after that.

Indeed, the general theory seems to be not to charge once the initial rental period is complete.