Evans Cycles

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Why does there have to be a transfer of ownership?
 
The tax benefits available through the Cycle to Work Scheme are provided on the basis that employers are hiring bicycles to employees. There can be no promise or obligation that employees will own the equipment as this would result in a Hire Purchase Agreement, and the tax benefits would not apply.
 
What are the options for employers?
 
Because employers are the owners of the equipment it is their decision how to manage the end of scheme process. In practice most employers will choose to offer a transfer of ownership once the salary sacrifice term has completed. Any transfer of ownership will be undertaken in accordance with “Fair Market Value” guidance issued by HMRC. Evans Cycles Ride2Work offers several options to manage this process:
 
What happens if an employee leaves before their salary sacrifice is completed?
 
If an employee leaves before completing their salary sacrifice term, any balance remaining should be repaid from the employee’s final net salary, i.e. without the tax/NI savings. This reflects the early termination clause contained within the Ride2Work hire agreement. If the employee wishes to take ownership of the bike at the same time, the company can choose:
  • To collect the applicable FMV of 18% or 25% of the original value, dependent on whether the original value was below £500 or above £500 (as per HMRC table below)
  • To declare the FMV figure as a benefit in kind on a P11d
  • To transfer the equipment to Evans Cycles earlier within the Transfer4You arrangement
If you are collecting FMV please note:
Employers can choose to collect a lower amount of the final balance plus FMV in order to equal the total amount due to the company for the original purchase of the equipment. This way the employee is not charged more than is necessary and the employer is not out of pocket.
For example:
 
£1000 bike = £83.33 per month
Employee leaves after 9 months with an outstanding amount of £249. Employer could collect FMV (£250) in place of the outstanding balance.
Employee leaves after 5 months with an outstanding amount of £583. Employer could collect FMV (£250) and £333 outstanding balance.
 
There are no benefit in kind implications with not collecting the full salary sacrifice balance. FMV must be collected otherwise there are benefit in kind implications.
 
 
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