Can someone explain the details of the Cycle to Work Scheme?

dinneenp

From 1 January 2009, the provision of bicycles and associated safety equipment by employers to employees who agree to use the bicycles to cycle to work will be treated as a tax exempt benefit-in-kind. The exemption may only apply once in any five year period in respect of any employee. There will be a limit on the value of such purchases of €1,000 for each employee.

But can anyone explain how it'll work

Kinetic^

Basically, if you have a company car you're going to pay tax on it as a benefit in kind. Now the bike to work thing is a case of your company paying for a bike and/or equipment to the value of €1000.

Now, not a lot of employers are going to be running out to pay €1000 off the bat for stuff for their employee unless of course it's going to save them money. Perhaps on car park space rental.

Another angle I thought of is, that if you're going to buy a bike anyway and your boss ain't forking out 1k for a bike up front, ask your employer to give you €1000 less in that year (could be 1k less of a bonus or off your salary)and buy the bike for you. It'll save you more money if you're in the upper tax bracket but it's not to be sniffed at in the lower bracket either.

robinph

I thought it was just that you'll get the 21.5% of whatever you buy back through your employer once they sign it off and confirm to the government that you do indeed cycle to work, not that they are giving you the full €1000.

Kinetic^

robinph wrote: »

I thought it was just that you'll get the 21.5% of whatever you buy back through your employer once they sign it off and confirm to the government that you do indeed cycle to work, not that they are giving you the full €1000.

Maybe so. I'm not 100% sure. That was just my understanding of it.

robinph

There was something about getting the €1000 off the employer that he was wittering on about as well. But that sounded like it was just a way of getting a loan off the employer for the cost spread over a year which they would take straight back out of your wages.

freddie mac

my understanding that it will work similairly to the train & bus ticket scheme. The company buys the bike and/or related equipment for you and up to €1000 is tax deductible. The employer will save PRSI on the €1,000 and you will save you highest rate of tax (41%) and PRSI, so effectively getting a bike for half-price. Certain retailers may have to be approved for the scheme but this is all to be ironed out for Jan 1 2009 I think.

seamus

Normally when your employer provides benefits in kind, you have to pay tax on them (I think at the standard rate). In this case, your employer can offer you purchase of a bike as part of your benefits package, so you won't have to pay any tax on it.

For example, let's say your benefits this year are €500 in health insurance. You'll pay 20% (or 41%) on that €500. So in reality, your benefit package is used, but you also lose an extra €100 out of your pay packet. However, if next year your employer lets you buy a bike and some equipment with that €500, you won't pay any tax on it.

To the best of my knowledge, neither you nor your employer can reclaim the VAT on it.

It's worth discussing with your employer if you're thinking about buying a bike. The problem is that the savings on the purchase won't be all that tangible.

If you're on €25k/year and you buy a bike worth €1k from your net salary, then the cost of that bike to you, relative to your gross salary, is €1265.
However, if you purchase the bike through this scheme, then the cost of the bike is taken out of your gross salary, so you save that €265.

I hope I've explained it clearly

Does anyone know if this scheme will apply to gear and parts, or just to whole bikes and safety equipment?

Dodge

freddie mac wrote: »

my understanding that it will work similairly to the train & bus ticket scheme. The company buys the bike and/or related equipment for you and up to €1000 is tax deductible. The employer will save PRSI on the €1,000 and you will save you highest rate of tax (41%) and PRSI, so effectively getting a bike for half-price. Certain retailers may have to be approved for the scheme but this is all to be ironed out for Jan 1 2009 I think.

This wa my understanding of it too (although not sure on the effectively getting it for half price bit). The cost of the bike would be taken from your salary before any PRSI/PAYE therefor saving you paying the amount of PAYE/PRSi you'd have have paid on the cost of the bike)

Lumen

seamus wrote: »

Does anyone know if this scheme will apply to gear and parts, or just to whole bikes and safety equipment?

I wonder whether I can sell my (privately purchased) bike to a shop for €1, then buy it back upgraded with a PowerTap hub for €999?

freddie mac

If you can find a bike for close to €1,000 you would be buying this out of your gross salary as opposed to only having an equivalent €500 purchasing power out of your net take home salary (assuming a higher rate tax payer at 41% and employee PRSI of approx. 9%). This could be interpreted as "getting bike for half-price" but all really tax semantics. Most car drivers here at work think we are getting straight €1,000 cash but if only...

Dodge

freddie mac wrote: »

(assuming a higher rate tax payer at 41% and employee PRSI of approx. 9%)

This was the assumption I was challenging about the half price thing.

Lumen

A link from a site mikethebike posted on the helmet poll thread:

http://www.goeco.ie/news.html

Looks like it's bike AND (optional) safety equipment, not a bike OR safety equipment. "Reflective clothing" is in though, which might make Assos stuff only "very expensive" rather than "cripplingly expensive".

Main problem I foresee is that the employee has to at least intend to use the bike for commuting, which means if you buy a €150 "cheapest in Halfords" special along with €850 of locks, lights, helmets and "reflective" clothing you'll still have to ride in on the sh*tter (until it gets "stolen", I suppose).

There is nothing mentioned about the bike being new though - I saw an interesting range of used customer bikes for sale in CycleSuperstore yesterday.

Chips Lovell

I've a piece about the scheme in the Sunday Business Post today.

Dodge

Lumen wrote: »

Main problem I foresee is that the employee has to at least intend to use the bike for commuting, which means if you buy a €150 "cheapest in Halfords" special along with €850 of locks, lights, helmets and "reflective" clothing you'll still have to ride in on the sh*tter (until it gets "stolen", I suppose)

Gormley has already stated there's no way they can police this.

copacetic

el tonto wrote: »

I've a piece about the scheme in the Sunday Business Post today.

thanks for that, interesting:

"Unlike a similar scheme in Britain, which requires that a bike be purchased from an approved range of shops, the Department of Finance said that a bike could be bought anywhere, including on the internet from abroad"


This is good, it means we shouldn't see any price rises here to fit in with the new scheme.

I see a new bike on the horizon in January. A trek soho with belt drive or a Giant city speed.

rubadub

Lumen wrote: »

I wonder whether I can sell my (privately purchased) bike to a shop for €1, then buy it back upgraded with a PowerTap hub for €999?

I was certain they would have approved shops to stop this. But that article says

Unlike a similar scheme in Britain, which requires that a bike be purchased from an approved range of shops, the Department of Finance said that a bike could be bought anywhere, including on the internet from abroad

That is great news for legit purchases but opens themselves up to huge loopholes. e.g. my high viz Hugo Boss suit, and a bunch of fake receipts. My €500 tube that I got a free ipod with.

kevinonearth

are workers in the public sector entitled to apply?

blorg

I wouldn't see any reason why not; the stumbling block for me is likely going to be persuading my employer to participate, have about a snowballs chance in hell on that one I reckon.

SerialComplaint

blorg wrote: »

I wouldn't see any reason why not; the stumbling block for me is likely going to be persuading my employer to participate, have about a snowballs chance in hell on that one I reckon.

I don't think this will be an issue. I would expect that you can claim the tax relief via Revenue, regardless of what your employer does. Cooperative employers might allow you to spread the cost over the year, but you should still be able to claim the tax relief regardless.

Chips Lovell

rubadub wrote: »

That is great news for legit purchases but opens themselves up to huge loopholes. e.g. my high viz Hugo Boss suit, and a bunch of fake receipts. My €500 tube that I got a free ipod with.

Any employer is subject to audit on the scheme. They have to satisfy themselves that the purchase is legimate and could get pulled up by Revenue if they are found to be facilitating this kind of lark.

kevinonearth wrote: »

are workers in the public sector entitled to apply?

Yes.

SerialComplaint wrote: »

I don't think this will be an issue. I would expect that you can claim the tax relief via Revenue, regardless of what your employer does. Cooperative employers might allow you to spread the cost over the year, but you should still be able to claim the tax relief regardless.

I was told by the Department of Finance last week that the employer has to cut the cheque, regardless of whether it is you or they ultimately paying for the bike.

SerialComplaint

el tonto wrote: »

I was told by the Department of Finance last week that the employer has to cut the cheque, regardless of whether it is you or they ultimately paying for the bike.

What cheque - the cheque to purchase the bike, or the tax relief refund cheque to the employee?

copacetic

SerialComplaint wrote: »

What cheque - the cheque to purchase the bike, or the tax relief refund cheque to the employee?

you won't be getting a refund cheque, employer pays, then takes cost from your wages pre tax.

Chips Lovell

SerialComplaint wrote: »

What cheque - the cheque to purchase the bike, or the tax relief refund cheque to the employee?

the cheque to buy the bike.

SerialComplaint

Looks like they are following a similar model to the taxsaver commuter tickets, which must be purchased by the employer http://www.taxsaver.ie/db/faq.asp - I wonder would this stand up to an appeal or ombudsman review? It seems inherently unfair that the employee is dependant on employer cooperation.

blorg

It's a tax-free benefit in kind, ultimately they can run the tax system whatever way they like you know. A regressive income levy isn't exactly "fair" either.

SerialComplaint

blorg wrote: »

It's a tax-free benefit in kind, ultimately they can run the tax system whatever way they like you know.

Yes and No - Look at today's reports of the Ombudsman taking to task a pile of local authorities for failing to have a fair waiver system on refuse charges. If the system is fundamentally unfair (in this case, dependant on employer cooperation), there are ways of challenging - we don't have to be victims.

blorg wrote: »

A regressive income levy isn't exactly "fair" either.

Indeed, though the unfairness in this case is around the implementation, not the policy itself.

Sean02

Will this scheme be introduced before Christmas?. This will be a fantastic way for many company directors sort out santa's bikes at PAYE'S expense!!!.

blorg

The tax-free bus/train/tram ticket system is similarly dependent on employer co-operation, this is no different.

@Sean02- AFAIK the scheme starts 1 Jan 2009 although I may be wrong on this.

Hungrycol

Think you might be right Blorg. Most likely to coincide with the beginning of the tax year.

I'd say a lot of employers will run it whereby you go out and buy the bike and "safety" Assos gear and have your employer reimburse you based on the receipt either through payroll or expense claim. Presumably your employer will also require Revenue approval to operate the scheme in the first place.

Employers will also have to put policies and procedures in place to operate this and with for larger organisations this make take some time. For example you'd be suprised you could get "My wife and I cycle to work can I get both of us a bike under the scheme and I'll repay the full amount of both bikes, her employer doesn't operate the scheme" - said in all seriousness.

Remember folks it's only something you can get once every 5 years although if you change employments I don't know how that can be monitored.

rubadub

Hungrycol wrote: »

Remember folks it's only something you can get once every 5 years although if you change employments I don't know how that can be monitored.

I still don't get this 5 year bit. Do you have to submit all receipts at once? is there a time limit?

e.g. I could buy my 500 bike now, then over the next 4 years tot up 500 on spare parts, tyres, new safety clothing, locks etc, and then submit the lot in 5 years as 1000. For somebody on a borderline higer tax bracket they might wait a few years for a pay rise so they can avail of the higher tax bracket too.

I expect I would be buying my bike online via credit card, would I just be handing in a C/C statement with the euro amount.

If my bike gets nicked in the first the month I get it (highly likely!), am I obliged to get another and cycle it to work for the next 5 years? That is another loophole open to be exploited, lad cycles to work on his sons bike a few times so the accounts say it is legit, and then claims it was nicked. Maybe the gardai will actually have to take bike theft seriously for once!

Lumen

rubadub wrote: »

If my bike gets nicked in the first the month I get it (highly likely!), am I obliged to get another and cycle it to work for the next 5 years? That is another loophole open to be exploited, lad cycles to work on his sons bike a few times so the accounts say it is legit, and then claims it was nicked. Maybe the gardai will actually have to take bike theft seriously for once!

I think you're overcomplicating. This is not a right to a never ending source of tax-free bikes. It's a one-in-5-years tax-free benefit. If you lose it, you can buy another, but don't expect tax relief on it.

There are all sorts of reasons a person might not use that bike for the five years (moving further away, developing back problems, having children, theft, write off the bike in an accident, buys a better bike etc). The condition is only that the person must intend at the time of purchase to use it on an ongoing basis.