If an employee leaves before the end of their Cycle to Work hire period, they must pay the employer the balance of the amount outstanding. This will be deducted from the employee's final net pay. The employee will no longer be able to benefit from the tax exemption.
Please note, that this transfer of ownership is the subject of a separate agreement and isn't governed or influenced by the Hire Agreement the employee would have signed for this scheme.
The transfer of ownership still needs to happen and it is up to employer to decide how they would like to do this. Some suggested options are:
- Process Managed Extended Hire. If the scheme is set with this End of Hire option, the employee is still eligible to extend the hire at zero cost at the estimated end of Agreement. The record will appear in the Managed Extended Hire list in SmartPay.
- Take the Fair Market Value (FMV) when taking the final payment. FMV can be calculated using the HMRC Valuation Matrix table.
- P11D Process - The employer can submit a P11D form for the transfer of ownership. To reduce the FMV that this is calculated on, it can be submitted at the estimated end of agreement rather than when the employee left the business. This amount would also need to be reflected on the P60 along with any other salary sacrifice for the employee.
Please note, Reward Gateway does not provide tax advice and the above information is publicly available through the relevant HMRC channels.