Taxsaver Question - which is the best option?

soupdrinker · 27-01-2013 10:35am #1

A friend of mine is currently in negotiations for a new job and is discussing salary.

The Employer is offering him x salary plus the cost of the bus fare. He is currently trying to work out the most efficient way to purchase the ticket?

Am I right in saying:
a) He can accept the x salary and the employer purchases the annual taxsaver ticket from the taxsaver website but how does the employee save on tax for this? If his annual salary is €25K and annual ticket is €1K, should he just let the employer purchase the annual ticket and let him get paid the €25K normally.

b) From the employee point of view, would he be better off asking initally for the salary of x plus the cost of the annual ticket, then take a 'salary sacrifice' of say the €1K and let the employer purchase the annual ticket? With the salary sacrifice of €1K, one twelfth of this is deducted from the gross salary each month, the employee doesn't pay tax etc on this and the Employer saves on ER PRSI - is this how the salary sacrifice works? The cost of this for the Employer is the same, original offered salary plus bus ticket as technically he is repaying the cost of the ticket to the Employer, so its only costing the employer the salary and ticket?

From the Employee point of view, is there any difference tax wise to either of these two options? Which option would be better for the Employer?

I know to comply with the conditions of the taxsaver scheme, it can't be retrospective so thats why he is trying to work it out now, before any contract / agreement is made.

Thanks in advance

LXFlyer · 27-01-2013 1:24pm

If the employer buys the ticket for the employee through the taxsaver scheme, then the employee is getting a bigger benefit.

Think about it - the employee is not having to pay for the ticket by salary sacrifice, they are not going to pay tax, PRSI or USC on the cost of the ticket as it is through the taxsaver scheme irrespective of the fact that there is no salary deduction. It's an effective bonus. For the employee it is a no-brainer.

soupdrinker · 27-01-2013 2:31pm

But say the employer is willing to pay a salary of 25K plus €1K for the bus ticket (total cost to employer is €26K), would the employee be better off agreeing a €26K salary, let the employer buy the ticket through the scheme (1K) and then 'sacrifice' the €1K salary to repay the employer? This is still only costing the employer €26K (26 salary, 1K ticket less €1K been refunded back to them through salary) - is the employee / employer going to save more tax this way - or is it all the one really?

Thanks in advance

otterj · 16-07-2013 10:47am

lxflyer wrote: »

If the employer buys the ticket for the employee through the taxsaver scheme, then the employee is getting a bigger benefit.

Think about it - the employee is not having to pay for the ticket by salary sacrifice, they are not going to pay tax, PRSI or USC on the cost of the ticket as it is through the taxsaver scheme irrespective of the fact that there is no salary deduction. It's an effective bonus. For the employee it is a no-brainer.

is USC exempt from this I cannot find any definitive answer on the the revenue website. It says its exempt from tax and prsi but no mention of USC whereas the taxsaver.ie website states that USC is exempt??

LXFlyer · 16-07-2013 11:05am

It reduces your gross pay for the purposes of USC - so yes you save on it too!

Taxsaver Question - which is the best option?

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