End of life problem posed by HMRC

Background:
The Cycle-to-work scheme offers a tax-free benefit to employees in the form of cycles loaned to them by employers in exchange for a salary sacrifice (s244 of the Income Tax (Earnings & Pensions) Act 2003).  However, with new HMRC guidelines in the Autumn of 2010 on valuations on cycles at the end of the salary sacrifice period, complexities arose that temporarily halted schemes and our customer needed advice and a structure that would assist in dealing with the additional employee cost.

The Requirement:
Our customer, a global car manufacturer, had concerns as to how to handle the new “end of life” regulations for cycles. The funding by AFM enabled a cash-neutral situation with AFM paying suppliers for certificates and recovering costs in line with salary sacrifice dates and and amounts, however, the new rules threatened some of the benefits.

The Solution:
We proposed a solution based around our lease capability and, in a joint discussion with Deloitte, outlined the structure and supplied draft documentation. In various sessions, AFM Solutions, the customer and its tax advisers agreed a way forward and assisted in preserving the anticipated employee savings in NI and Income Tax. The customer now runs 2 schemes annually

The Benefits for the Cycle-to-work Scheme Manager:

  • The Scheme Manager entrusted the whole exercise to AFM Solutions, allowing us to sort out the legal and tax issues direct
  • We then documented the structure, enabling the reinstatement of a successful employee scheme

The Benefits for the Customer:

  • Our research and eventual advice was free
  • We drafted documents and legal and tax briefings, alleviating the problem for the customer
  • The customer then implemented a ready-made solution under a positive opinion from Deloitte