Cycle to work scheme not so good now :-(

[Banjo]

Just chatting with the guy in our LBS who told me that the Cycle to work scheme is being tampered with, apparently the final payment is going up from the present 5% of purchase price to 25%

May now not be worth the hassle for basic rate taxpayers.

Cant quite understand it as I thought the final payment went to your employer not HMG ?

 

[Vidor06]

I think this article sets out the current situation pretty well.

http://www.guardian.co.uk/money/2010/aug/13/cycle-to-work-scheme-tax

It would appear that the bike should always have been sold to the employee for market value, at the end of the year, but that most employers were setting market value at 5% after a year. If I bought a £1000 bike now and needed to sell it in a year and was told it was only worth £50 I wouldn't be too happy. So HMRC are just enforcing the pre-existing conditions more rigourously.

 

[Becs]

Bugger. My employer said "after 12 months the bike is yours", otherwise I wouldn't have bothered getting ripped of by Evans and bought a cheaper bike outright from my LBS! I don't know anyone that's even paid 5%! Scheme sounds like a bit of a waste of money now.

 

[Peter10]

My company have always enforced the full 25% which is why I gave it a miss.

 

[Matty]

Yep. I've thought for a while that the scheme was only just worth doing (am 8 months in) and this kills it. Get a last years model off t'internet for a huge reduction.

Shame really.

 

[Eddie]

What about if your company is willing to accept lower monthly payments as a consolation.

At the moment:

Value of bike/12 = monthly payment

Instead

Value of bike - 25%/12 = monthly payment

Would this not make more sense? With this new scheme isn't your employer making a profit from it?

 

[Norm]

Would this not make more sense? With this new scheme isn't your employer making a profit from it?

Indeed. It makes you wonder why no-one suggested exactly that three months ago when the news that HMRC were going to start being a bit more strict was first discussed.

 

[BenScoobert]

i guess they cant backdate it, my contract says it will be no more than the monthly payment, I'll file it in a safe place

 

[Paul_L]

surely the way to look at it, even though the higher final payment is a pain, is you're still buying a bike for less than 0% interest over a 12 month period?

 

[potsy]

There was a small piece on R4 today about the scheme,only heard snippets but the 'expert' said the 25% final payment was only in a small number of cases.
Might have to go on listen again to hear it properly.

 

[Norm]

i guess they cant backdate it, my contract says it will be no more than the monthly payment, I'll file it in a safe place

To be honest, I'd either read up on the scheme or burn the contract or, preferably both. In fact, if it is as you say, do yourself a favour and never mention the contract to anyone "official" who asks about it, because the contract, if it is as you say, will actually increase your tax charge. I'm feeling charitable so I'll summarise problems with your post.

First, HMRC could back date it if they wanted.

Secondly, they don't have to backdate it, because the scheme rules have always said that the sale must be at market value or it will be a taxable benefit.

Thirdly, the company can charge what they like, but the difference between the sale price an employee pays and the market value of an asset will always be a taxable benefit.

But fourthly, and most critically, if there is any form of agreement about the sale price in the contract, it is not a rental contract but a hire purchase contract and the whole thing is taxable anyway.

So, please, if you do want to file the contract in a safe place, make sure it stays there.

 

[Banjo]

I couldnt get on the scheme when I bought my Scott so took out a Tesco Credit card free interest for a year deal and bunged it on that.Probably the best way to go now if any 0% deals available as you are completely free to buy from where you like so able to bargain a bit harder as well.

Dont be too tempted by LBS interest free deals as my experience is that you can get the bike cheaper if you dont use the 0% deals they offer.