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So got a London Road on cycle to work back in April 2015. The frame has cracked and Planet X are saying as it's out of warranty they can't/won't do anything about it. As it was bought a few years ago it's covered under the Sale Of Goods Act (SOGA) so I see that as a massive uphill battle, although I will persist.
The company I work for run their own C2W scheme in-house. I spoke to the guy who runs it about getting a new bike. He's said that I'll have to "buy" the current bike off them before I can get a new bike. He's based the cost on the pricings from HMRC depreciation calculator ( https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/457866/cycle-to-work-guidance-update.pdf) and it comes out at 12% or £101. My thoughts are that as the frame is broken the residual value of the bike is not 12% but significantly less. However the HMRC guidance doesn't seem to cover this eventuality.
As I see it I have a few options:
1. Pay the cash to get out of my scheme and get a replacement bike
2. Argue the toss and pay less as the frame is broken, pay less cash to get out of my scheme and get a replacement bike
3. Just hand the bike back and end the hire as is
4. Technically I'm covered by the Consumer Credit Act (section 9 here https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/11305/cycle-to-work-guidance.pdf) with my employer so I could go down that route.
Personally I'm thinking option 2 as I want to use a lot of the parts on a spare frame but can't find ay evidence to say that I should be charged less than 12%, apart from common sense. Although I am thinking stuff it and just return the broken bike.
Whadya think?
AFAIK, on the Cycle2Work scheme you're responsible for maintaining a bike and if required replacing any damaged or stolen parts
You have to pay market value. HMRC provide a standard formula for working our what market value is which if you/your company follow they won't argue with. You CAN make a specific case to argue what the true market value is, unfortunately whilst HMRC will ultimately be the arbiters of that (well actually a Tax Tribunal would) you need to persuade your employer, and for the sums involved and the potential hassle involved they probably can't be bothered. You could establish market value by getting it valued at two independent bike shops, but don't be surprised if you have to pay for the privilidge. Alternatively you could suggest the company takes the bike back and sells it on ebay (fully disclosing the damage).
You can argue with your work as it is down to them ro set the final value, the hmrc advice is guideline only. Equally it could work against you as it's ultimately work more than 1001quid in parts even with a cracked frame.
Personally I'd suck up the 101 and get another ctw bike. Selling the bits on the bike to cover the costs.
I would have thought you'd have a hard time arguing that the parts aren't worth the £100. However i do agree that it should be less than a bike with a good frame and the same parts.
HMRC guidance is here and says:
If employers chose to use lower values, it would remain open to HMRC to challenge these and the employer or employee (as appropriate) would need to be able to provide evidence in support of these values i.e. to demonstrate that the employee could have realised no more than these sums from sale or disposal of the cycle. We would expect evidence of a lower value to include:
- a photograph of the cycle demonstrating its condition along with a description of any important aspects of its condition that are not evident from photographic evidence,
So I think a photo of the cracked frame should cover them there, but presumably your employer has calculated your rental payments on the assumption that you'll pay 12% at the end, so if you don't, they end up out of pocket. Technically it's their bike and so it's their responsibility to argue the toss with PX.
Thanks all. As you say doing the maths I think I'll just have to put on my big boy trousers and pony up the cash.
How much are you paying each month?
Maybe just give them the bike back, walk away and buy one on a 0% CC.
I'd question the "you have to buy the London Road bike" before getting another bike through your employer's Cycle2Work scheme. The salary sacrifice covers you hiring the London Road, with weekly/monthly deductions from your wages over an agreed period, while the bike is technically owned by your employer.
Once you have covered the hire deductions over the set time period, you can choose to transfer ownership of the bike to yourself, it is not compulsory as far as I'm aware.
Why would you want to transfer ownership of a broken framed London Road to yourself, unless the rest of the bike components are in amazing condition after almost 3 years?
If you have used this London Road for over half of your weekly commutes over the last ~34 months, the components are going to be worth pennies!
So I think a photo of the cracked frame should cover them there, but presumably your employer has calculated your rental payments on the assumption that you’ll pay 12% at the end, so if you don’t, they end up out of pocket. Technically it’s their bike and so it’s their responsibility to argue the toss with PX.
AFAIK its actually not allowed for a company to account for any final payment in the rental, so therefore most won't to avoid getting caught out - there's no rules to say you can't charge 88% of value say but someone would ask questions if it was the case that all bikes happened to have 100% of the original value between rent and final payment.
Best bet is to go back with the bit above about evidence and cut a deal I would say. £50 off for a crack thats not warranty? Sounds fair, after all HMRC will have assumed in their calculation that although the bike would be subject to wear and tear its still in one piece, or likely to stay that way.
We self administer. I can't remember the exact wording but we basically set it up so that four more years of rent at £1 per year after the first year plus the residual value at 5 years are all paid at the end of year one. So just check the guidance for the 5 year residual and add £4. This worked out very nominal from memory.
Surely your salary sacrifice would end 12 months after you originally got the bike? So you would have stopped “renting” in April 2016
how did your company handle things at the end of the rental? And are they saying you can’t rent another one?
I thought the whole premise, worthwhile or not, was that it is your responsibility to maintain the bike so that you could indeed hand back a functional bike at the end of the period?
Not that you can hand back a pile of wreckage after 12 months (or more) or argue that you now want to keep said pile of wreckage for less money than "fair market value" of the 'bike' (a fully functional version)
That said, everywhere I have worked has allowed a new application every 12 months without having to transfer ownership before the new application can be made. So long as you keep hold of the bike(s) until their market value depletes to zero over a number of years as per HMRC guidelines (table with bike value and depreciation by year).
*Warranty issue aside.
Then again, if the warranty is only a couple of years then maybe "fair wear and tear" in this case could actually be a broken frame as they might not expect it to last much more than the warranty?
i am not even sure On - one expect them to last that long
[my lawyers have advised me to point out that is a joke and the QC is, rightly, the stuff of legends]
What colour are the forks? 😉
AFAIK its actually not allowed for a company to account for any final payment in the rental, so therefore most won’t to avoid getting caught out – there’s no rules to say you can’t charge 88% of value say but someone would ask questions if it was the case that all bikes happened to have 100% of the original value between rent and final payment.
No, there's absolutely nothing that constrains what rental fees the company charges you. Remember it's *rental* not a hire purchase scheme. What the scheme can't do is guarantee to let you buy the frame at the end (although in practice they all do), or require you to buy it, so if the company does set the rental at 88% the final 12% is at risk, because the employee may choose to not buy it.
Could you avoid all that and just buy a second hand replacement frame? Depends how important a new bike is to you ...
Have you not already finished the rental period? Many schemes asked for a final rental extention fee after the first year which then lasts another two or so years...
So I would have expected them to be letting it deprecate down to zero value by April of this year anyway...
In fairness it's not yours OP it's a company asset, a broken one, it was probably not worth the asking price when functional, so why on earth would you want to buy it now?
Interesting question; as a company owned asset, would it not be covered by the businesses own insurance?
This all sort of illustrates why C2W is a bit shit now...
Are you sure it's covered by Sale of Goods Act? The bike purchase would be a business to business transaction.