Transport - Government Cycle to Work Scheme
- FAQs
Q. I've heard about this tax relief for buying a bike to cycle to
work, what is it all about?
A. This is a Government initiative that enables your employer to buy
a bicycle and bicycle accessories for you, without you being liable
for benefit in kind taxation. For a tax payer at the top rate, this
equates to a minimum saving of 41% on the cost of a new bike.
Q. What's the purpose of the scheme?
A. The goal of the scheme is encourage more employees to cycle to
and from work. As well as reducing traffic congestion and lowering
carbon emissions, more people cycling to work will improve health
and fitness levels.
Q. Is it just the bike that is covered by the scheme, or does it
include things like locks and lights?
A. In addition to the bike, the scheme covers a range of equipment
such as helmets, lights, locks, bells, mirrors, cycle clips,
panniers, luggage carriers & straps, pumps, puncture repair kits,
cycle tool kits, reflective clothing and reflectors
Q. Is there a limit to the amount I can spend on the bicycle and
equipment?
A. Yes, if the total value of the purchases is over €1,000, the
difference is subject to benefit in kind taxation.
Q. If I want to participate, is my employer obliged to get
involved?
A. No, participation in the scheme is voluntary and it is up to your
employer. However, where an employer does agree to implement the
scheme, it must be offered to all employees on an equal basis.
Q. From when does it take
effect?
A. The scheme can be applied for from January 1st 2009
Q. Who pays for the bicycle?
A. The bicycle must be purchased by your employer. The scheme can
then operate with either your employer bearing the full cost of the
bicycle, or by way of a salary sacrifice agreement.
Q. How does the salary sacrifice operate?
A. Under a salary sacrifice arrangement, you agree to forego or
sacrifice part of your salary every pay period
(weekly/fortnightly/monthly as the case may be), in order to cover
the cost of the bicycle and equipment provided by your employer. The
amount of salary you sacrifice will be exempt from tax, employee's
PRSI and levies. It will also be exempt from your employer's PRSI.
The salary sacrifice arrangement must be completed within a maximum
period of twelve months.
Q. I'm a full time student. Can I avail of the scheme?
A. No, the scheme is operated by employers and is therefore only
open to employees
Q. Do I pick out the bicycle and equipment from the shop myself?
A. It is for employers to decide how they will operate the scheme.
Some employers may allow employees to select the bicycle and
equipment from the retailer of their choice and the employer may
then put in place appropriate invoicing and delivery arrangements
with the retailer. However, other employers may offer more limited
options to employees. An employer could, for example, allow an
employee to choose only from the range available from a single
retailer.
Q. Can I buy the bicycle and get a refund from my employer?
A. No. Your employer must purchase the bicycle/equipment.
Q. Why can't I buy more than one bike every five years?
A. The tax relief on the cost of a bicycle and equipment is allowed
once in each period of five years. The scheme is designed in this
way partly to limit its cost to the Exchequer. However, it also
reflects what would be regarded as a reasonable lifespan for a
bicycle.
Employer Questions
Q. I've had a few employees contact me about the scheme. What steps
must I take to avail of it?
A. You must decide firstly, whether to participate in the scheme,
which would involve offering bicycles and biking equipment to
employees. These can be provided to the employee as a tax-exempt
benefit of his/her employment or under salary sacrifice
arrangements.
Q. How does the tax relief operate for employers?
A. The employer, having decided to participate in the scheme,
purchases the bicycle / equipment on behalf of the employee without
the employee being liable to taxation on the benefit-in-kind.
The employer can also implement the scheme according to a salary
sacrifice arrangement. This would involve the employee agreeing to
forego or sacrifice part of his or her salary in each pay period in
order to cover the cost of the bicycle/ equipment. Under the scheme,
any salary sacrifice arrangement must be completed within a maximum
period of twelve months.
The employer saves on employer's PRSI on the value of the benefit
(up to €1,000) provided to the employee. The employee saves on
income tax, employee's PRSI and levies on the value of the benefit
received from the employer.
Q. What is the difference for the employee and employer between
operating the salary sacrifice model and the benefit-in-kind
exemption model?
A. Both models, i.e. both ways of implementing the scheme (benefit
supplied by employer or salary sacrifice), involve a benefit-in-kind
exemption. However, where there is no salary sacrifice, the employer
bears the entire cost.
Q. Is there a difference in monies saved or time over which the bike
is paid for?
A. Whether the scheme is implemented in a particular employment by
way of a BIK-exempt benefit from the employer to the employee, or by
way of a salary sacrifice agreement between employer and employee,
the amount of tax, PRSI and levies saved by the employer and
employee is exactly the same in both cases. However, where salary
sacrifice agreements are entered into between the employer and the
employee, the arrangement must last for a maximum period of twelve
months.
Q. If I am getting the bicycles and equipment delivered to my
workplace, is the cost of delivery covered by the tax relief on the
scheme?
A. Yes, provided the maximum value of the benefit, including
delivery charges, does not exceed €1,000. The relief is limited to
€1,000 - where the cost exceeds this amount, a BIK charge will apply
to the balance.
Q. Can the employer claim back VAT on any of the purchases?
A. No, the tax benefits of the scheme operate only on the benefit in
kind exemption.
|