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Cycle to Work Scheme – Transfer of Ownership

Comment 5th August 2010

The cycle to work scheme is currently a hugely popular way of enabling employers to offer their employee's the chance of obtaining a tax free bike with most people saving in the region of 40% off the cost of a bicycle and accesories. In return the employee has to enter into a hire agreement with their employees over a set period and repay the cost of the bike (Minus VAT and with tax benefits) in equal monthly payments.

However, HMRC are threatening the very existence of the scheme.

HMRC's rules mean that an employer cannot state to the employee that they will either agree to enter into discussions to transfer the legal ownership of the bike before they sign up to the scheme, thus putting people off the scheme (who is going to want to pay up to a £1,000 for a bike without the guarentee of at least being made an offer to ownership in the future)

Secondly, HMRC state that the employee needs to pay what is known as a ‘fair market value' for the bike and accessories, otherwise further tax implications will apply for the individual concerned. The only problem is that they offer no guidance on how to do this other than that you cannot apply a rate of transfer on bikes across the board.

What instead they propose is that the bike is individually assessed, what this means in practice is that this increases the administrative burden associated with the scheme increasing costs and wasting resources by over complicating the process. They give no guarentee that this complies with their vague ruling thus reducing confidence in the scheme.

By also making the process more complicated and daunting than it needs to be it also makes the scheme less attractive to individuals wanting to sign up which will simply result in less people cycling and only contributing to this country’s huge carbon footprint.

It would be much simpler if a set of nationally agreed guidelines are drafted stating that a bicycle packages’ value after a defined time period is a % figure of the bicycle packages original retail value. This would make the scheme much easier to administer and it would save a enormous amount of time and effort from for organisations administering the scheme. As I say it is not just private sector businesses that run this scheme but public sector organisations too. This is one way government could actually bring about increased efficiency in the public sector.

Why does this matter?

The reason why bringing about this change is important is that the scheme encourages increased levels of cycling that:

Nationally

  • Fosters a cycling culture and encourages modal shift away from Car’s
  • Reduces Carbon Dioxide levels
  • Reduces Congestion
  • Reduces air pollution
  • Improves level of health/ reduction in obesity levels

For Organistaions

  • Improves staff morale/reduces turnover rate
  • Improves staff health/reduces staff absenteeism
  • reduces the amount of administrative work associated with the scheme saving vital resources.
  • Increases the liklihood that organisations retain this function meaning they keep crucial savings that can be reinvested (particulary in the public sector E.G savings made from the scheme can be reinvested in higways related works or turned into efficiency savings).

This is only one small area of the scheme and one instance of where HMRC has made the scheme a burden, I can think of many more. I plead that you look into this matter further to ensure that this scheme continues to function. Currently there are tens of thousands scheme’s in operation and HMRC guidance (or in some cases lack of)  is making it difficult for those organisations to continue to operate this scheme, already many organisations are starting to withdraw from the cycle to work scheme’s depriving individuals of this great scheme.

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