HMRC guidelines regarding the Fair Market Value payment, August 2010
- In August 2010, HMRC clarified their interpretation of what they consider to be the Fair Market Value of a bicycle should the employer choose to pass the bike on to an employee who had previously hired the bicycle on The Bike to Work / Cycle to Work Scheme.
- Despite reports in the media questioning the future of the Scheme, the fundamental mechanics of the Bike to Work Scheme, where the employer purchases the bike and hires it to an employee via a tax-saving salary sacrifice, remain unchanged.
- With small changes in processing the transfer of ownership, both the employee and the employer can continue to make similar savings to those that were available before HMRC published their August 2010 guidelines. That is, employees can still save between 32% and 42% (depending on tax bracket) on the cost of a new bike, and employers can still make substantial savings on their National Insurance contributions.
- If you would like to explore the best options available to you, within the HMRC guidelines, please contact our Bike to Work Hotline on 0131 319 2400 Ext 124.
You will discover that the Bike to Work Scheme is still alive and well at Edinburgh Bicycle Co-operative.
HMRC announcement regarding salary sacrifice and VAT, August 2011
Until August 2011, the hiring of a bicycle under a salary-sacrifice scheme such as Edinburgh Bicycle Co-op’s Bike to Work Scheme was not subject to VAT.
In August 2011, HMRC issued new guidelines that stipulated that the hiring of a bicycle under a salary sacrifice scheme will be subject to VAT from January 2012. From this date onwards, an employer will have to pay VAT on the value of the hire of a bicycle and safety equipment that an employee is hiring on the scheme.
It is the case that employers will still be able to reclaim VAT in the normal way at the initial point of purchase, using the invoice provided by Edinburgh Bicycle, but it would be sensible to keep this reclaimed VAT to pay the VAT charge to HMRC during the hire period.
This change will not affect salary sacrifice relating to hire agreements signed on or before 27th July 2011.
For further information regarding the HMRC ruling, please click on the link below.
As ever, Bike to Work is a unique staff benefit in that it also saves the employer money. As such, Bike to Work remains worth investigating whether or not you have enjoyed the benefits of the Scheme in the past.
Any employer in the UK can set up their own Bike to Work Scheme in partnership with Edinburgh Bicycle Co-op. If you would like to find out more, simply complete your details on this form to request a brochure.