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Response to HMRC EIM Updates 21667/a (6th August 2010)

Cyclescheme Response to HMRC EIM Updates EIM 21667/21667a updates (published 6th August 2010)

17 August 2010

First and foremost, don’t panic! 

Contrary to initial reactions to the publication of the updates, Cyclescheme would like to reassure our clients that we have a process in place that ensures our schemes continue to be compliant, whilst retaining their attractiveness to employees and employers alike.  (To view a copy of the updates please visit http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm).

• According to the updates, employers charging ‘disposal values’ lower than those described in the Valuation Table will be required to catalogue evidence of each bike’s condition and value at the time of offer of sale.
• Cyclescheme has developed a simplified 'Condition Assessment' (CA) process in response to the guidance that was published by HMRC in December 2009.
• The process provides the required evidence of the condition and value of the bike at the time of offer of sale.
• It is only in the absence of any evidence, employers need refer to HMRC’s Valuation Table for acceptable ‘disposal values’ as an ‘administrative easement’.
• Cyclescheme performs this free service for the majority of our clients whereby we handle the transfer of ownership of equipment to scheme participants at the end of the hire period.
• This service relieves employers of considerable administrative burden at the end of the hire period.
• As part of our service we contact all scheme participants near the end of their hire period and they report on the condition of the bike using our simple and comprehensive Bicycle Condition Guide.
• Scheme participants can complete this process online via the Cyclescheme Extranet.
• The condition categories have been established using our own extensive industry experience, consultation with our Independent Bicycle Dealer network, and a resultant ‘Store Survey’.
• The condition assessment is based on 4 condition categories, A, B, C & D.
• Once the condition has been ascertained Cyclescheme sends the participant an invoice for the market value.
• In accordance with HMRC guidance contained in EIM 21667a, Cyclescheme’s condition assessment process provides 'contemporaneous evidence of the amount for which that type of cycle in that sort of condition would have realised in a private sale'.
• In short, using our fully automated process negates the need to use HMRC's Valuation Table.
• Appreciating that the market value invoices may exceed current participant expectations and in order to maintain the scheme's economic attractiveness, participants may be given the option to extend the hire period with Cyclescheme.
• If the hire period is extended Cyclescheme will contact the employee and may offer ownership of the bicycle at the market value (MV).  The market value cannot be stated prior to the end of this period but should be less than the valuation arrived at for bikes in categories A, B and C in the condition assessment.
• Cyclescheme will be phasing in the Condition Assessment process by applying it to all vouchers ‘requested’ after Thursday 30th September 2010.
• Vouchers ‘requested’ prior to this date will be subject to the existing Cyclescheme market value process.

To request further details of our new Condition Assessment process please email us on info@cyclescheme.co.uk with the subject line ‘HMRC EIM Updates’, and please include the employer name and the following information;

- How many employees does your organisation have?

- Are you currently running a Cycle to Work scheme?

Best regards,

The Cyclescheme Team