Cycle to Work - Maximum

[lejogger]

Last one from me, I'm repeating myself and that's breaking my #1 rule.

Nothing to do with scaremongering but, as I said, many people don't have your level of understanding.

What you said was wrong, I pointed that out, you agreed and yet you are still blathering on about it... whilst claiming that you aren't looking to cause an argument.

You may be repeating yourself, but you're doing so by not addressing the points that I have made. Yes I agreed that I should not have said 'your' bike, but I am certainly not 'blathering' on about anything by simply asking whether there is a justification for such a pedantic need to point out, and stick so rigidly to the worst case scenario that I can't find any reported cases of!
Saying that you're repeating yourself and this will therefore be your last post may make you feel better that you've got your last word in, and that you can now walk off home with your ball under your arm, but you refuse to acknowledge the points I raise in my post. Labelling them as 'blathering' rather than addressing or agreeing with them is not helpful to the forum. This is a discussion where hopefully we can answer the point of the thread and contribute a reasoned conversation that will help the forum users understand the scheme. It's not an argument between you and I.

The difference is important to the tax man. By your own admission, the simplified valuation method provides a residual value based on the original price of the bikes. The onus is, therefore, on the employers to ensure their systems record the original price to set the correct residual value.

I would say that the company has a responsibility to collect the salary sacrifice and provide details of the benefit in kind passed onto the employee. If the HMRC wishes to investigate and challenge an individual for non payment of tax then that is very much between the HMRC and the individual. How is a company ever going to know that an employee has a £1500 bike if they have only ever been invoiced for £1k? Does a company representative need to accompany all staff to the bike shop?

A change of tack and a straw man. My comment, which you originally contested, was that the valuation should be based on the original price.
I agree that there should be ways that the tax liability could be reduced but EIM21667a is not a set of guidelines, it is the HMRC laying out the way that the simplified valuation should be applied if it is appropriate.

Ok... but we're clearly discussing here a scenario that in my opinion lives outside of any HMRC valuation table. It's an unusual situation where the taxable benefit is only being made on 2/3 of the value of the bike, so while it can be reasonably expected that you should only have to pay tax on the portion of the bike that earned the savings, and any decently prepared and well researched appeal should justify this, the fact remains that this approach to the C2W scheme is not recommended because of the confusion that surrounds it. I don't agree with it, wouldn't recommend it, and don't allow it... my comments on the matter are merely my view on how the tax should be collected in the result of this situation occurring.

With tax savings of 20% and employees NI savings of 11% / 12%, less a tax charge on the residual value of 3.6%, I would suggest the best schemes would struggle to 30% for most people, without potentially dubious practices relating to the VAT. But, your non-provocation veneer wears ever-thinner as I suggested savings of 25%-30% were to be expected and you argue that "30% is "probably the minimum". Agreeing with what I wrote and yet still producing a diatribe to do so is a tad unusual.
Accusations of scheme bashing are also bizarre. Your previous post agreed with me when I said they were worthwhile, so how you feel I have gone from saying that they are worthwhile (which is what I did) to scheme bashing (which isn't what I've done anywhere) is a bit of a mystery.

In summary, you agree that what I originally said (the simplified valuation is based on the original price) was correct and the rest is, well, apparently not being provocative or argumentative but I'm not sure what else it could be.

My point here was to just emphasise that 25-30% is the minimum that should be expected providing the employer signs up to or creates a scheme which competes with the leading players - it can be over 50%. By again only focussing on the lower end, you portray a glass half empty attitude to the scheme that may mean people reading this forum may not realise that they could make substantially greater savings.

A standard rate taxpayer with no VAT savings and a 25% residual value should save 27% - more monthly savings can be calculated if the employee pays into a pension or pays back student loan etc should these be calculated on gross pay. (although these are not true savings - but useful for calculating how affordable the scheme is for a monthly budget) Yes it can be worse than this should the company insist on a payment for the bike on top of the salary sacrifice, but also, most companies can relaim the VAT on the cost of the bikes.

If you read back through my posts, I don't believe that you can prove grounds of provocation or find evidence of diatribe in the slightest. The tone of my posts has always been intended to discuss and contend the points raised in the thread, not to insult or argue or attack without reasoning. So yes I do agree with what you say in principle, but slightly object to your negative stance on a forum that intends to encourage people to take up and enjoy cycling, when I believe that this scheme is one of the best ways of achieving this.

16.7% is exactly correct to calculate the effect of removing the VAT.

Yes, a discount of 20% is a 16.7% reduction. I'll retract the statement and I apologise. I think it's just important to emphasise that this is on top of the tax and NI savings.

 

[Norm]

...but you refuse to acknowledge the points I raise in my post. Labelling them as 'blathering' rather than addressing or agreeing with them is not helpful to the forum. This is a discussion where hopefully we can answer the point of the thread and contribute a reasoned conversation that will help the forum users understand the scheme. It's not an argument between you and I.

I think the only point was that you said that the bikes are always sold to the employees. I'm fairly certain that there was one instance reported on here where a chap paid in more and, at the end of the rental period, the boss kept the bike for himself but I didn't think it was important or relevant. You said "your bike", I said that word concerned me, because it isn't, you agreed, the rest is... well, choose your own word.

My point here was to just emphasise that 25-30% is the minimum that should be expected providing the employer signs up to or creates a scheme which competes with the leading players - it can be over 50%. By again only focussing on the lower end, you portray a glass half empty attitude to the scheme that may mean people reading this forum may not realise that they could make substantially greater savings.

The first scheme that I experienced, run by Balfour Beatty, would have resulted in net savings under 10%. With the issue of EIM21667a, many have been required to buy the bike for the 18% or 25% valuation, and they are only saving around 10% and would probably consider even 25%-30% as optimistic.

I'm not focussing on the lower end, I'm recognising that most people are not higher rate tax payers and I'm still saying that schemes are worthwhile as they can realise savings of 25-30%. I could say that, depending on the scheme rules and personal circumstances, savings could be somewhere between nothing and 50%, but I consider it to be more useful to say that you could expect savings of 25%-30% because that is where, IMO, most people could end up. You again seem to acknowledge this, so I'm not sure how it is pessimistic.

So yes I do agree with what you say in principle, but slightly object to your negative stance on a forum that intends to encourage people to take up and enjoy cycling, when I believe that this scheme is one of the best ways of achieving this.

Negative? Read the stuff that I've written on CC exploding the myths, promoting C2W schemes, arguing against those who say they aren't worth it.

Help me to spread your knowledge amongst those who have little or no idea what they signed up to, help me to explain the guidelines and the regulations, help me to advise people who want to set up and manage schemes of their own, but don't tell me that I'm being negative for saying that I still think that the schemes are worthwhile.

 

[lejogger]

Help me to spread your knowledge amongst those who have little or no idea what they signed up to, help me to explain the guidelines and the regulations, help me to advise people who want to set up and manage schemes of their own, but don't tell me that I'm being negative for saying that I still think that the schemes are worthwhile.

Of course not, and I acknowledge that you are pro C2W. There was a post on here saying that they thought the schemes were a complete waste of time and this was definitely not you, but may have caused me some confusion in the numerous replies.
It's a good thing that we're both clearly passionate about this, and obviously I'm happy to contribute to threads helping those who need clearer understanding.

Lets just never talk about helmets, earphones or RLJing!!

 

[APK]

Are we not missing the point here with "residual value of the bike"? My understanding is that the C2W scheme effectively does not involve bikes, it involves vouchers which can then be exchanged for bikes, so if I get a £1,000 voucher, that is the only info the employer will get, and that is what they will base the residual value calculations on, if I chose to spend another chunk of my own money, they would not be aware?

 

[Downward]

Interesting stuff from HMRC. They state you pay fair market value on the bike but schemes charge you fair market value of the voucher.

Does this mean the schemes have now changed their minds with the fair market value ruling and what about the Final figure I paid on £700 voucher even though my bike was only £450 ?

 

[lejogger]

Are we not missing the point here with "residual value of the bike"? My understanding is that the C2W scheme effectively does not involve bikes, it involves vouchers which can then be exchanged for bikes, so if I get a £1,000 voucher, that is the only info the employer will get, and that is what they will base the residual value calculations on, if I chose to spend another chunk of my own money, they would not be aware?

The wording of the HMRC guidance states the residual value is calculated based on the original cost of the bike. In this way, Norm is correct in saying that if you follow this guidance you would expect to pay the residual value of the original full price of the bike.

Where I think my opinion differs slightly from Norm is that I would state that your example of paying an additional £500 yourself would put you outside of the simplified valuation method... and there is no clear guidance as to what to do in your situation therefore writing to or visiting the HMRC and getting some clarification from a tax official is really the only thing you can do to know for sure.

If you did nothing and paid a residual value on the basis of the voucher then you are leaving yourself open to investigation... which I believe you could most probably successfully appeal, but is a risk all the same.

 

[lejogger]

Interesting stuff from HMRC. They state you pay fair market value on the bike but schemes charge you fair market value of the voucher.

Does this mean the schemes have now changed their minds with the fair market value ruling and what about the Final figure I paid on £700 voucher even though my bike was only £450 ?

All schemes should now be fully compliant with the new guidelines. I think the whole purpose of introducing them is because there was no blanket percentage attached to any of the schemes, so this brings about a bit more clarity.
I'm not sure how you would stand now without some more detail about your scheme. Generally though the percentage paid was related to the original price of the bike but HMRC considered it to be too low as the real market value was a lot higher than the 5% - 10% generally used.

 

[Norm]

Of course not, and I acknowledge that you are pro C2W. There was a post on here saying that they thought the schemes were a complete waste of time and this was definitely not you, but may have caused me some confusion in the numerous replies.
It's a good thing that we're both clearly passionate about this, and obviously I'm happy to contribute to threads helping those who need clearer understanding.

Where I think my opinion differs slightly from Norm is that I would state that your example of paying an additional £500 yourself would put you outside of the simplified valuation method... and there is no clear guidance as to what to do in your situation therefore writing to or visiting the HMRC and getting some clarification from a tax official is really the only thing you can do to know for sure.

I'm not sure our opinion differs all that much. As I said previously, there are ways around it and completely avoiding the simplified method would be one, as would be, for instance, using the vouchers to buy the frameset and the "top up" to buy the wheels and drive train.

Are we not missing the point here with "residual value of the bike"? My understanding is that the C2W scheme effectively does not involve bikes, it involves vouchers which can then be exchanged for bikes, so if I get a £1,000 voucher, that is the only info the employer will get, and that is what they will base the residual value calculations on, if I chose to spend another chunk of my own money, they would not be aware?

You see, this is the sort of misinformation which we need to correct.

The C2W scheme has absolutely nothing to do with vouchers. Don't worry, APK, you are not alone as many people think that the "cyclescam-style" voucher scheme is the only option. They are not and they are a long way from being the best alternative. A C2W scheme can be set up and run very easily and, cyclescheme aside, most C2W scheme don't use vouchers. Your implementation, APK, might be about vouchers but that is just one (very poor, IMO) alternative.

And, fundamentally, a scheme operated under the Cycle to Work Scheme regulations is and must be, all about your employer renting bikes to you for a fixed sum and a fixed period.

 

[killiekosmos]

I got a bike via C2W before HMRC issued the simplified valuation guidance. I was thinking about getting another one but it is less beneficial with the residual value to pay.

By my estimates my employer could show a profit from C2W.

I rent a bike from my employer over a year and I pay the value of the bike back to my employer over 12 months. I save on tax, NI and emplyer gets his initial outlay back. I then have to pay the residual value, so this eats into my savings (tax and NI) but gives my employer a profit on the transaction.

I was planning to suggerst to my employer that he could consider (not commit) giving the bike away at end of year to the member of staff renting it and let the member of staff declare a benefit in kind to HMRC (and pay tax on the notional residual value).

This way, employer gets initial outlay back but employee makes greater savings and so could encourage more users.

Does this make sense? Is it allowable? Does anyone do this already?

 

[Norm]

Does this make sense? Is it allowable? Does anyone do this already?

Yes, I think that there are even several references to schemes which do this on this thread.

The employer does profit. Depending on the exact scheme details, they save 13.8% of the sacrificed salary through employers' NI savings, 16.7% through VAT that they can reclaim, they get the whole of the VAT inclusive value of the bike back from the employee through the rental payments and they then claim up to 25% through selling the bike at the end of the rental period.

But I have no issue with that. The other side of the deal is that the employer has to set up a scheme, including ensuring that it complies with the regulations and having someone who keeps up-to-date with changes, deal with whining employees who don't like the scheme (there will be someone who complains, no matter what the scheme rules are), they have to track the bikes as they do other company assets, make an up-front, lump-sum payment, fund an interest free loan, face the risk of the employee doing a runner or getting the bike nicked and the potential headache of selling a second hand bike which has been abused through the rental period.

 

[lejogger]

Does this make sense? Is it allowable? Does anyone do this already?

+1 for everything Norm says.
This is what I persuaded our Director of Finance to do and it was no issue to him at all. They miss out on the 5% payment that would have been made had the 'old system' still been in place, but it's peanuts to an organisation like ours. The only downside was that I had persuaded him to use the profits from the disposal fee to fund facilities improvements for staff cycling to work - showers, storage etc, and now we don't have this funding in place... but probably a worthwhile sacrifice to keep the cost of the scheme down.

 

[tradesecrets]

I seen an advert in MBUK that a retailer was willing to sell bikes on the C2W over the Grand limit ..


whilst i myself have always believed that the true limit is a grand .. it's kinda confusing

 

[lejogger]

I seen an advert in MBUK that a retailer was willing to sell bikes on the C2W over the Grand limit ..


whilst i myself have always believed that the true limit is a grand .. it's kinda confusing

If you're tempted, it's probably worth reading this thread through fully... you'll see that it's possible, but not recommended and potentially complicated.

 

[Norm]

If you're tempted, it's probably worth reading this thread through fully... you'll see that it's possible, but not recommended and potentially complicated.

That's a good summary.

Another option is to get a job for company which has had a consumer credit licence issued by the OFT. That might be a bit extreme, though.

 

[killiekosmos]

, they get the whole of the VAT inclusive value of the bike back from the employee through the rental payments and they then claim up to 25% through selling the bike at the end of the rental period.

Can I check this with you? I thought on my previous bike I pad back, over 12 installments, the cost of the bike ex VAT as my employer (a publc authority) can rclaim VAT

Thanks for the other comments.