cycle scheme "market value"?

Colin said:

Hi.

I've made tentative approaches at work to get my employers on board with
the government tax-breaks cycle scheme. They've requested I get them
some more information, but I want to make sure it's worth it before we
both go to too much trouble. To my mind, it's worth making the most of
the scheme by going for an expensive bike that I could not normally
afford. I understand most of the scheme but what worries me (and why I'm
asking the assembled throng here) is the purchase of the bike at the end
of the scheme for a "fair market value". From their website, Cyclescheme
have established a fair market value payment of "approximately 5% after
12/18 months".

I was looking at getting an I.C.E. Trike, so the above figure seems a
little off to me: If someone offered me a 12 month old Trice for £100,
I'd [censored] their arm off, yet if I paid true market value at the end of
the salary sacrifice period, I'd probably end up paying more overall
than if I bought one outright, which means the scheme isn't worth going
for (especially as the tax breaks only apply to the first £1000 unless
your employer has a consumer credit agreement - mine doesn't).

Has anyone any experience of "final market value" wrt this scheme, or
any advice/tips to watch out for? I've searched this group on Google,
and found plenty of useful stuff, but this particular issue doesn't seem
to have been covered. I'm sure someone will say the tax man has no idea
the market value of a 12 month old Trice, but they're not daft and no
doubt go on original sale cost.

Market value seems be what the company says it is so far as I can work
out as a friend of mine has a company scheme that rates up to £1000 at
£20 +3% of the purchase price after 13months. He has not had any problems.

Sniper8052

Colin said:

Has anyone any experience of "final market value" wrt this scheme,
or any advice/tips to watch out for?

Nothing better than you've found, and I don't think you'll be able to
find anything.

This is partly because companies need to be cautious about specifying
it up front - technically, if they tell you up front "... and then you
make a final payment of blaah and it's yours" then the scheme is a
hire purchase arrangement, and is not eligible for the beneficial
tax treatment.

One possible work-around - you don't need to buy the bike from the
company at the end of the salary sacrifice. Taxation wise, your
salary sacrifice comes to an end, and teh company simply continues to
lend you a bike FOC, which doesn't count as a taxable benefit. If
you're remaining in the employ of the company, you can simply continue
to use the bike, which remains their property. You'll only need to
buy it if you want to leave and keep the bike. If that's some years
hence, it might be easier to say that a (say) six-year-old bike is
worth only 10 quid. Still a bit tricky with a Trice, I agree.

regards, Ian SMith
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"Ian Smith" <[email hidden]> wrote in message

Quoted message said:

the company simply continues to
lend you a bike FOC, which doesn't count as a taxable benefit.

Sounds like it would be benefit in kind on the P11D to me?

Jc

On 01/09/2007 20:32:43 Colin said:

Hi.

Quoted message said:

I've made tentative approaches at work to get my employers on board with
the government tax-breaks cycle scheme. They've requested I get them some
more information, but I want to make sure it's worth it before we both go
to too much trouble. To my mind, it's worth making the most of the scheme
by going for an expensive bike that I could not normally afford. I
understand most of the scheme but what worries me (and why I'm asking the
assembled throng here) is the purchase of the bike at the end of the
scheme for a "fair market value". From their website, Cyclescheme have
established a fair market value payment of "approximately 5% after 12/18
months".

Quoted message said:

I was looking at getting an I.C.E. Trike, so the above figure seems a
little off to me: If someone offered me a 12 month old Trice for £100,
I'd [censored] their arm off, yet if I paid true market value at the end of
the salary sacrifice period, I'd probably end up paying more overall than
if I bought one outright, which means the scheme isn't worth going for
(especially as the tax breaks only apply to the first £1000 unless your
employer has a consumer credit agreement - mine doesn't).

Quoted message said:

Has anyone any experience of "final market value" wrt this scheme, or any
advice/tips to watch out for? I've searched this group on Google, and
found plenty of useful stuff, but this particular issue doesn't seem to
have been covered. I'm sure someone will say the tax man has no idea the
market value of a 12 month old Trice, but they're not daft and no doubt go
on original sale cost.

Catrikes start at £1095.00 new.

--

Buck

Give a little person a little power and create a big problem.

http://www.catrike.co.uk

Colin wrote:
snip]

Quoted message said:

Has anyone any experience of "final market value" wrt this scheme, or
any advice/tips to watch out for? I've searched this group on Google,
and found plenty of useful stuff, but this particular issue doesn't seem
to have been covered. I'm sure someone will say the tax man has no idea
the market value of a 12 month old Trice, but they're not daft and no
doubt go on original sale cost.

I have had the same debate with our finance director. The key thing as
far as getting the company onside is to stress that they have no
liability whatever even if they decided the market value was zero. The
only possible liability is your income tax on the difference between
what they let you have the bike for and its "true" worth. The chance of
this ever being assessed by anyone must be close to zero.

Also, you can let the lease run-on after the final salary sacrifice
payment and only worry about residual value if you want to sell the bike
or planned to change jobs. In this way, the company carries on "owning"
the bike, which continues to depreciate until you finally decide you
want it to be yours.

I do agree that the otherwise admirable CycleScheme are being a bit
elusive here: their numbers are fine for bikes in general but not, say
for Bromptons or Trices!

I am not a lawyer or accountant.

Peter
--
www.amey.org.uk

Josey nospam@josey said:

"Ian Smith" <[email hidden]> wrote in message

Quoted message said:

the company simply continues to
lend you a bike FOC, which doesn't count as a taxable benefit.

Sounds like it would be benefit in kind on the P11D to me?

It isn't.

That's the whole point. That's how the scheme works. That's why it's
a good deal - the company gives you a bike. If you satisfy certain
conditions wrt using it for transport to work, it's not a taxable
benefit.

regards, Ian SMith
--
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|o o|
|/ \|

Colin said:

Hi.

I've made tentative approaches at work to get my employers on board
with the government tax-breaks cycle scheme. They've requested I get
them some more information, but I want to make sure it's worth it
before we both go to too much trouble. ..........

I was looking at getting an I.C.E. Trike, so the above figure seems a
little off to me:

The other thing to watch are: how your employer proposes to charge you for
this bike and the "most commuting/business travel" usage rule.

My reading of the payment/value rules is as follows:
If employer just buys the bike, and then lets employee use it there is no
limit on the value of the bike.
BUT if there is some sort of credit deal, which there often is through the
brokers who offer to run these schemes, there is a limit of £1000, beyond
which credit licensing becomes necessary (and more awkward for employer).
My interest is in using the first route, but then I own 50% of the company
which might pay me this way.

The "most commuting" rule is harder to hit. And I suspect breached in many
many cases. But, theoretically, the bike is to be used for at least half of
journeys to work, or journeys for work.
In my case, I could do this, most of my journeys (by mile!) for the company
are to the local post office, which I do by bike.

http://www.dft.gov.uk/stellent/groups/dft_susttravel/documents/page/dft_susttravel_038228-01.hcsp

- Nigel

--
Nigel Cliffe,
Webmaster at http://www.2mm.org.uk/

"Ian Smith" <[email hidden]> wrote in message
news:[email hidden]...

Quoted message said:

Josey nospam@josey said:

"Ian Smith" <[email hidden]> wrote in message

Quoted message said:

the company simply continues to
lend you a bike FOC, which doesn't count as a taxable benefit.

Sounds like it would be benefit in kind on the P11D to me?

It isn't.

That's the whole point. That's how the scheme works. That's why it's
a good deal - the company gives you a bike. If you satisfy certain
conditions wrt using it for transport to work, it's not a taxable

I thought "simply continues to lend you a bike FOC" implied AFTER the scheme
was over. Scheme over = taxable benefit?

Jc

Josey nospam@josey said:

"Ian Smith" <[email hidden]> wrote in message
news:[email hidden]...

Quoted message said:

Josey nospam@josey said:

"Ian Smith" <[email hidden]> wrote in message

> the company simply continues to
> lend you a bike FOC, which doesn't count as a taxable benefit.

Sounds like it would be benefit in kind on the P11D to me?

It isn't.

That's the whole point. That's how the scheme works. That's why it's
a good deal - the company gives you a bike. If you satisfy certain
conditions wrt using it for transport to work, it's not a taxable

I thought "simply continues to lend you a bike FOC" implied AFTER
the scheme was over. Scheme over = taxable benefit?

No. As I said, that is the scheme. The 'scheme' is: the company
lends you a bike. That it, that's all it is, there is no other
requirement. If the employer is lending you a bike, the scheme is not
over. If the scheme is over, the employer is not lending you a bike.

If you can find a nice enough employer, they might go along with this.
Most, however, require that you enter a salary sacrifice at the same
time, but taxation-wise that has nothing to do with it - that's just
something else you're doing at the same time. The two elements are
separate issues as far as the taxman is concerned.

regards, Ian SMith
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Nigel Cliffe said:

The "most commuting" rule is harder to hit. And I suspect breached
in many many cases. But, theoretically, the bike is to be used for
at least half of journeys to work, or journeys for work.

Nearly: it is to be used for half the journeys to work, or half its
use must be journeys to work. You could ride to work once a month,
and that would be fine as long as you don't ride it anywhere else more
than that.

Also, you don't need to make teh whole journey by bike - we have
someone that rides to the house of another employee and gets a lift in
from there. This counts - teh bike is used for the journey to work.
The test is the same as that for provision of a works bus tax free:
http://www.hmrc.gov.uk/manuals/eimanual/eim21850.htm:
"The service is provided to transport employees on“qualifying
journeys that are:
* between home and a workplace. This includes journeys that are
completed only partly on a works bus. For example, an employee may
drive a car to a pick-up point and complete the journey by works bus,"

It's also worth noting that nipping to teh shops at lunchtime for your
own purposes counts as a qualifying journey.

Also, teh tax-inspectors guidance says don't enquire too closely:
http://www.hmrc.gov.uk/manuals/eimanual/eim21664.htm:
"Employees are not expected to keep detailed records of time spent
cycling or miles travelled for the purpose of this 'main use' test.
Accept that the test is satisfied unless there is clear evidence to
suggest that less than half of the use of the bicycle or equipment is
on qualifying journeys. If it is clear that there is substantial use
of the bicycle for qualifying journeys, do not make special enquiries
about the extent of any other use."

regards, Ian SMith
--
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|o o|
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Nigel Cliffe said:

The "most commuting" rule is harder to hit. And I suspect breached in many
many cases. But, theoretically, the bike is to be used for at least half of
journeys to work, or journeys for work.

I thought that the requirement was 'half of the journeys made using this
bike have to be for work', not 'half of the journeys for work have to be
made using this bike'.

The difference is not subtle.

In article said:

Nigel Cliffe said:

The "most commuting" rule is harder to hit. And I suspect breached in many
many cases. But, theoretically, the bike is to be used for at least half of
journeys to work, or journeys for work.

I thought that the requirement was 'half of the journeys made using this
bike have to be for work', not 'half of the journeys for work have to be
made using this bike'.

The difference is not subtle.

http://www.hmrc.gov.uk/pdfs/ir176.htm#j and
http://www.dft.gov.uk/stellent/groups/dft_susttravel/documents/page/dft_susttravel_038228-01.hcsp
agree with you. It's mostly used for qualifying journeys, not used for most.

Alan Braggins said:

In article said:

Nigel Cliffe said:

The "most commuting" rule is harder to hit. And I suspect breached
in many many cases. But, theoretically, the bike is to be used for
at least half of journeys to work, or journeys for work.

I thought that the requirement was 'half of the journeys made using
this bike have to be for work', not 'half of the journeys for work
have to be made using this bike'.

The difference is not subtle.

http://www.hmrc.gov.uk/pdfs/ir176.htm#j and
http://www.dft.gov.uk/stellent/groups/dft_susttravel/documents/page/dft_susttravel_038228-01.hcsp
agree with you. It's mostly used for qualifying journeys, not used
for most.

Al C-F seems to be correct. I recall reading an earlier guidance paper
(possibly from one of the scheme companies, rather than government) which
explained "most" in the more general way I had covered it, but the official
paper is the one above.

Examples of companies who seem to have my (wrong) interpretation:
http://www.cyclescheme.co.uk/
"....a bike purchased under Cyclescheme should be used for at least 50% of
the trips you do to work. "

--
Nigel Cliffe,
Webmaster at http://www.2mm.org.uk/

In article <[email hidden]>,
[email hidden] says...

Quoted message said:

In article said:

Nigel Cliffe said:

The "most commuting" rule is harder to hit. And I suspect breached inmany
many cases. But, theoretically, the bike is to be used for at least half of
journeys to work, or journeys for work.

I thought that the requirement was 'half of the journeys made using this
bike have to be for work', not 'half of the journeys for work have to be
made using this bike'.

The difference is not subtle.

http://www.hmrc.gov.uk/pdfs/ir176.htm#j and
http://www.dft.gov.uk/stellent/groups/dft_susttravel/documents/page/dft_susttravel_038228-01.hcsp
agree with you. It's mostly used for qualifying journeys, not used for most.

Thats how I read it too. Under this guidance (at least 50% of the usage
for work purposes), then (morally, at least) I'd be restricted to
leisure usage of about 30 miles a week - not the best use of a fine
machine when long rides (and possibly Audaxing) beckon.

What with the market value being high at the end of the loan period for
a recumbent trike, the tax breaks only applying on £1000, not the full
cost (as my employer doesn't have a consumer credit agreement), and the
restriction on the number of leisure miles, I think this scheme would be
of little (if any) benefit to me - which is a shame. Looks like I'm
going to have to stuff fivers in a jam jar until I can afford to buy one
outright - I may be some time 🙁

--
Colin

Coincidence is the alibi of the Gods

(remove FOOT to reply)

Colin said:

In article <[email hidden]>,
[email hidden] says...

Quoted message said:

In article said:

I thought that the requirement was 'half of the journeys made using this
bike have to be for work', not 'half of the journeys for work have to be
made using this bike'.

The difference is not subtle.

http://www.hmrc.gov.uk/pdfs/ir176.htm#j and
http://www.dft.gov.uk/stellent/groups/dft_susttravel/documents/page/dft_susttravel_038228-01.hcsp
agree with you. It's mostly used for qualifying journeys, not used for most.

Thats how I read it too. Under this guidance (at least 50% of the usage
for work purposes), then (morally, at least) I'd be restricted to
leisure usage of about 30 miles a week - not the best use of a fine
machine when long rides (and possibly Audaxing) beckon.

There used to be guidance that stated both definitions. The relevant
act (ITEPA 2003) simply says there is no liability if the cycle is
used mainly for qualifying journeys, and does not provide a definition
of mainly, nor any test to justify the statement. So, as is common
in tax legislation, you'll find out what the law is when the judge
delivers his verdict...

As posted elsewhere in the thread, the guidance to tax inspectors is
that if the bike has 'substantial' use for journeys to work, then
don't worry. It explicitly says mileage logs and records are not
required.

regards, Ian SMith
--
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|o o|
|/ \|

Colin said:

In article <[email hidden]>,
[email hidden] says...

Quoted message said:

In article said:

Nigel Cliffe wrote:

>The "most commuting" rule is harder to hit. And I suspect breached in many
>many cases. But, theoretically, the bike is to be used for at least half of
>journeys to work, or journeys for work.

I thought that the requirement was 'half of the journeys made using this
bike have to be for work', not 'half of the journeys for work have to be
made using this bike'.

The difference is not subtle.

http://www.hmrc.gov.uk/pdfs/ir176.htm#j and
http://www.dft.gov.uk/stellent/groups/dft_susttravel/documents/page/dft_susttravel_038228-01.hcsp
agree with you. It's mostly used for qualifying journeys, not used for most.

Thats how I read it too. Under this guidance (at least 50% of the usage
for work purposes), then (morally, at least) I'd be restricted to
leisure usage of about 30 miles a week - not the best use of a fine
machine when long rides (and possibly Audaxing) beckon.

An audax ride is one journey. A long ride is also one journey. 5
minutes to the station is also one journey. And five minutes back again
is another.

In my world, at least.

Ian Smith said:

There used to be guidance that stated both definitions. The relevant
act (ITEPA 2003) simply says there is no liability if the cycle is
used mainly for qualifying journeys, and does not provide a definition
of mainly, nor any test to justify the statement. So, as is common
in tax legislation, you'll find out what the law is when the judge
delivers his verdict...

As posted elsewhere in the thread, the guidance to tax inspectors is
that if the bike has 'substantial' use for journeys to work, then
don't worry. It explicitly says mileage logs and records are not
required.

So, it's just matter of conscience.

I think I was born fitted 'for but not with' one of those.

Al C-F <[email hidden]> wrote in
news:[email hidden]:

Quoted message said:

An audax ride is one journey. A long ride is also one journey. 5
minutes to the station is also one journey. And five minutes back again
is another.

In my world, at least.

Unfortunately, the DfT mention the time spent using the bike rather than
the number of journeys. So if you did ten, half-hour commuting trips and
one six-hour audax ride in a week the majority of the use would be for non-
qualifying purposes.

From http://tinyurl.com/mcv3g posted upthread:
In this case, 'mainly' means that more than 50% of time using the
cycle and safety equipment must involve a qualifying journey.

However, AIUI there are enough clues to suggest that HMRC aren't going to
look too carefully provided you aren't obviously "trying it on". So the
example I gave earlier in this post would probably not give rise to the
taxman's wrath. That said, I am not an accountant and this isn't advice.

Will Cove wrote on 12/01/2007 21:17 +0100:

Quoted message said:

Unfortunately, the DfT mention the time spent using the bike rather than
the number of journeys. So if you did ten, half-hour commuting trips and
one six-hour audax ride in a week the majority of the use would be for non-
qualifying purposes.

And how many cyclists have found HMRC following them round on their
bikes with a stopwatch to check their usage?

--
Tony

"...has many omissions and contains much that is apocryphal, or at least
wildly inaccurate..."
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