In August we issued a client alert (“Salary sacrifice – VAT’s all folks?”) that included a brief note about HMRC’s revised guidance on how employers should value a bicycle that is sold to an employee at the end of the hire period. A number of clients have expressed concern that the range of acceptable disposal values (up to 25% of the cost of a new bike) will significantly undermine the benefit of the scheme for their employees.
Employers may be able to mitigate the effect of the Guidance by extending the hire period beyond the initial salary sacrifice period, i.e. deferring the purchase of the bike by the employee. It could then be transferred to the employee for a lower value in line with HMRC’s table of acceptable second hand values.