Cyclescheme market value process
Cyclescheme ‘extended use agreement with continuation deposit’ process – advice for employees plus FAQs
Cyclescheme has launched a new Market Value process in response to the August 2010 HMRC Employment Income Manual (EIM) updates.
The Employment Income Manual updates provide a simplified method for the valuation of bicycles at the end of the period of use in the form of a ‘Valuation Table’.
Cyclescheme are pleased to announce a fully compliant Market Value solution to HMRC’s latest advice. This has been produced after discussions directly with HMRC and independent Tax experts. Our solution is based on three principles:
- Full compliance with current HMRC guidance;
- Minimising payroll and HR administration for employers;
- Maintaining the attractiveness of the scheme for you.
When the EIM Updates come into effect:
The process detailed below is effective immediately for any schemes where the initial 'Hire Period' (with the Employer) ended after 6th August 2010:
The August 2010 HMRC Employment Income Manual (EIM) updates did not contain an effective date for implementation. However, during recent discussions with HMRC it has been made clear that the new updates come into force from the date of publication, 6th August 2010.
Therefore, the new Cyclescheme process is effective immediately for any participants who have so far not received a secondary Extended Use Agreement from Cyclescheme regarding your options after the end of the hire period.
Whilst this is contrary to previously published advice, our new process will mean little change in the prospective value of bicycles at the end of the extended use period; in many cases the prospective value according to HMRC’s Valuation Table will be less than Market Values that have been charged in the past.
Benefits to you as a scheme participant:
- You can opt to have continued use of the Bicycle for a period of up to 4 years without the ownership transferring to you, in return for a one-off payment of the ‘Continuation Deposit’;
- Extending the period of use reduces the value of the Bicycle in line with the 4 Year valuations in HMRC’s table of 3% and 7% including VAT (depending on the original value of the equipment (below or above £500 respectively);
- Peace of mind that the process is compliant with HMRC guidance and the Valuation Table;
- You can participate in the scheme again once your initial hire period has ended, even if you extend the use period with Cyclescheme.
Things you need to know:
- No guarantee of offer of ownership can be given to you at any point before or during the initial hire period with your employer, or once you have entered into an Extended Use Agreement with Cyclescheme;
- At the end of the hire period with your employer, you may be given the option to take ownership of the bicycle or extend the period of use with Cyclescheme. The appropriate Market Value will be calculated using HMRC’s Valuation Table;
- If you choose to sign an Extended Use Agreement with Cyclescheme you may be given the option to take ownership of the bicycle at the end of the extended use period;
- You are free to participate in the scheme again once your initial hire period with your employer has ended, even if you sign an Extended Use Agreement with Cyclescheme;
- The ‘acceptable disposal value percentages’ in HMRC’s Valuation Table for bikes aged up to 4 years are 3% or 7% inclusive of VAT (depending on the original value of the equipment (below or above £500 respectively). Here’s an illustration of how the Market Values differ from previous calculations, with a 'material' difference shown below based on a £499.99 and £1000 example;
Old Valuation Example Ex VAT |
||
|---|---|---|
| Original Bicycle Value | £499.99 |
£1,000.00 |
| 12 Month Valuation | 5% |
5% |
| Market Value Payment ex VAT | £25.00 |
£50.00 |
| VAT @ 17.5% | £4.38 |
£8.75 |
| Total Payment By Employee inc. VAT | £29.38 |
£58.75 |
And With 20% VAT (as of 1st JAN 2011) |
£30.00 |
£60.00 |
New Valuation Example Inc VAT |
||
|---|---|---|
| Original Bicycle Value | £499.99 |
£1,000.00 |
| 4 Year Valuation | 3% |
7% |
| Market Value Payment inc VAT | £15.00 |
£70.00 |
Total Payment By Employee inc. VAT |
£15.00 |
£70.00 |
| And With 20% VAT (as of 1st JAN 2011) | £15.00 |
£70.00 |
Material Difference @ 20% VAT |
£15.00 |
£10.00 |
Market value frequently asked questions
Contact
Liz Drewett (x5816)