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

martyc5674

Quote:
Originally Posted by squire23
Sorry to be an idiot but I still don't get this ... Obviously I've missed something here.

yes, you deduct the €1000 from the employee's (gross) salary.

And hence contribute a little less TAX "too da guvurment!!" (AKA employers PRSI i think)
Marty.

blorg

squire23 wrote: »

Sorry to be an idiot but I still don't get this - as an employer what's the benefit to me in allowing one of my staff to participate. As far as I can see, I pay out €1000 & they get the tax credits for it. Obviously I've missed something here.

Generally the employee will pay the €1000 back through salary sacrifice, so there is no loss to the employer. This is generally done over 12 months but that is simply a maximum and it is up to you how you run the scheme. You can take it all out of the next paycheck if you have cashflow issues.

You actually gain a bit as you don't have to pay the employer's PRSI contribution on this money, so for a €1000 you save €85-107.50.

And you get a happier employee.

Beasty

squire23 wrote: »

Sorry to be an idiot but I still don't get this - as an employer what's the benefit to me in allowing one of my staff to participate. As far as I can see, I pay out €1000 & they get the tax credits for it. Obviously I've missed something here.

All the above, and you save PRSI on the amount of salary sacrificed

If you are a particularly generous and thoughtful employer though, you could give the bikes to your employees. They avoid any Benefit in Kind tax, and you still save the PRSI (although it costs you the price of the bikes)

EDIT - Blorg got there before me!

IM0

ah, so apart from an interest free loan effectively from the boss man, theres no real point to the scheme other than to help you budget to save for a bike really

dinneenp

1. you get a bike minus the vat (your work vat rate)
2. you cycle more (in theory)
3. less cars, less pollution, traffic
4. you're happy, others are happy, boss is happy cos you're happy and on time cos not stuck in traffic.
5. You ask boss how come there's no showers at work...
6. you ask boss how come there's no bike parking area at work...
7. your bike gets stolen/you get knocked down....

BostonB

dinneenp wrote: »

1. you get a bike minus the vat (your work vat rate)
....

Tax

Stark

I think you still have to pay VAT under the Irish version of the scheme.

squire23

nereid wrote: »

yes, you deduct the €1000 from the employee's (gross) salary.

But that's no different. I've still paid out €1000 euro for the bike - okay I can claim the VAT but either way I've still paid out €1000 with no incentive

RobFowl

squire23 wrote: »

But that's no different. I;ve still paid out €1000 euro for the bike - okay I can claim the VAT but either way I;ve still paid out €1000 with no incentive

The employee actually pays the money ultimately.

Stark

squire23 wrote: »

But that's no different. I've still paid out €1000 euro for the bike - okay I can claim the VAT but either way I've still paid out €1000 with no incentive

Employee motivation? Better someone comes to you looking to participate under the C2W scheme than coming looking for a salary increase.

Lumen

me@ucd wrote: »

ah, so apart from an interest free loan effectively from the boss man, theres no real point to the scheme other than to help you budget to save for a bike really

squire23 wrote: »

But that's no different. I've still paid out €1000 euro for the bike - okay I can claim the VAT but either way I've still paid out €1000 with no incentive

BENEFIT FOR THE EMPLOYEE

Under the scheme the employee pays for the bike from GROSS salary, which is untaxed money.

If you bike a bike privately (i.e. outside the scheme), you are paying for it with taxed (NET) salary, because it gets to your bank account after PAYE, PRSI, income levy, etc have been deducted.

BENEFIT FOR THE EMPLOYER

Employers PRSI is not paid on the benefit.
+Happier, healthier employees.

BostonB

squire23 wrote: »

But that's no different. I've still paid out €1000 euro for the bike - okay I can claim the VAT but either way I've still paid out €1000 with no incentive

Nothing to do with VAT. The person buying the bike out of their gross salary before tax. They don't pay tax on it.

The employer gets nothing out of it. They could always buy themselves a bike though.

Lumen

BostonB wrote: »

The employers gets nothing out of it.

Yes they do. The employer saves on employer’s PRSI on the value of the benefit (up to €1,000) provided to the employee.

BostonB

My bad. I stand corrected.

blorg

squire23 wrote: »

But that's no different. I've still paid out €1000 euro for the bike - okay I can claim the VAT but either way I've still paid out €1000 with no incentive

I am not sure what your issue is, yes, you do have to pay for the bike but you can take the entire cost back out of the employee's next pay check if you like (most employers do it over a longer period but there is no obligation), so you are only out the money for under a month?

This deduction comes out of the employee's pay before tax and PRSI so the employee is effectively buying a bike at up to 50% off depending on their tax band.

YOU save the employer PRSI contribution so for the sake of being without this money for a couple of weeks you get around €100.

It is also a benefit to your employee that they presumably will appeciate- and it's costing you nothing. It's actually saving you money.

What is the problem here?

Beasty

Just to finally clear up the VAT point. No VAT can be reclaimed on these bikes.

There are situations where employers can reclaim VAT on bikes (if the bikes are used exclusively within the business), but these are not the bikes this scheme is designed for.

Home to work travel is non-business for tax purposes. Hence there would normally be a Benefit in Kind charge if the employer provides bikes for home to work travel. This scheme exempts the benefit in kind from tax. The employer normally passes the net of tax cost on to the employee through the salary sacrifice mechanism. However the employer cannot reclaim the VAT.

Hence assuming the salary sacrifice mechanism is adopted;

The employee saves the income tax and employee PRSI on the cost of the bike
The employer saves employers PRSI

The Government (ultimately the general population of taxpayers) pays for this

Hence this is a subsidy for some taxpayers paid for by all taxpayers

Dr_Colossus

Does anyone know if there's a restriction on purchasing a second hand bike through the CTW scheme?
My employer is implementing a restriction anti competitive scheme where I can only purchase a bike with the CycleSuperStore and as such I've been looking at second hand bikes as an alternative since the value on road bikes there is rather appalling. I've spoken to a number of shops around Dublin regarding the scheme and how they implement it and some have sold second hand bikes under it.
My question therefore is if I find someone selling a good second hand bike for a good price could I try and negotiate a deal whereby we transact the exchange through the CycleSuperStore, ie they sell the bike to the store and I then immediately purchase it with the bike purchase going through their books. Obviously the CycleSuperStore will want their cut but for an immediate and prearranged sale I'm hoping this would be minimal (€100 sounds reasonable?) as I wouldn't be looking for any after sales service or guarantees. How likely do you think this is that 1) it's possible under the CTW scheme and 2) that the CycleSuperStore would be willing to do the transaction?
Has anyone done anything similar?
Thanks

Idleater

Dr_Colossus wrote: »

Does anyone know if there's a restriction on purchasing a second hand bike through the CTW scheme?

What you are talking about is possible but will require the cooperation of all parties. The difficulty arises on VAT, which is payable by the end purchaser on any item sold. IE if you buy something from a shop in a commercial transaction, you should be charged VAT.

The difficulty arises if you are buying an item second hand from someone but want to go through a shop (to avail of the CTW scheme). Now you agree a price (eg €1500) with the current owner, but in order for this to go legitimately through the shop's books, they must purchase the item from the person (for the €1500) but must charge you VAT for the scheme thereby costing you €1500 * 1.21.

There are other ways around this but they require cash in and cash out and voided transactions that will appear on books and be legit but technically be anomalies in the CTW scheme for someone.

hth,
L.

Lumen

nereid wrote: »

The difficulty arises if you are buying an item second hand from someone but want to go through a shop (to avail of the CTW scheme). Now you agree a price (eg €1500) with the current owner, but in order for this to go legitimately through the shop's books, they must purchase the item from the person (for the €1500) but must charge you VAT for the scheme thereby costing you €1500 * 1.21.

VAT is effectively charged on profit, if so the shop pays €900 for the bike and sells it for €1000, you pay €1000, the original owner gets €900, the revenue is paid 21% of €100 (€21), and the shop gets to keep €79.

I think.

Idleater

Lumen wrote: »

VAT is effectively charged on profit, if so the shop pays €900 for the bike and sells it for €1000, you pay €1000, the original owner gets €900, the revenue is paid 21% of €100 (€21), and the shop gets to keep €79.

I think.

Quite true - I am not a Tax expert nor have I actually gone through this process, but I did investigate its possibility. Best to have a "discussion" with the actual shop keep in any case as they will have to be party to the transaction etc.

Beasty

You cannot purchase 2nd hand bikes or equipment under the scheme

The legislation states requires the bicycle and bicycle safety equipment
provided to be "unused and not second-hand"

Lumen

Beasty wrote: »

You cannot purchase 2nd hand bikes or equipment under the scheme

The legislation states requires the bicycle and bicycle safety equipment
provided to be "unused and not second-hand"

Ah, and the legislation also states (as I think you said already)

(iii) bicycles or bicycle safety equipment, or bicycles and bicycle safety equipment, as the case may be, are made available generally to directors and employees of the body corporate.

(my emphasis)

Bigron78

Hi, Sorry for hijacking and reopening this thread but.......

I'm purchasing a bike on the BTW Scheme. Costing €1300. Employer are paying €1000 and I'm paying the excess of €350. Details say Im liable for tax, BIK etc on the excess of €350. Does anyone know how this is calculated and is there any way of avoiding it??

teufelswerk

Beasty wrote: »

You cannot purchase 2nd hand bikes or equipment under the scheme

The legislation states requires the bicycle and bicycle safety equipment
provided to be "unused and not second-hand"

You can buy just about anything under the scheme in practice. The problem with the second hand bikes is that they are usually only traded through the store with the bike shop taking a cut. As for "bicycle and bicycle safety equipment", I've seen the 1000 euros spent on protein bars before so there's definitely some flexibility there with the administration in practice

teufelswerk

Bigron78 wrote: »

Hi, Sorry for hijacking and reopening this thread but.......

I'm purchasing a bike on the BTW Scheme. Costing €1300. Employer are paying €1000 and I'm paying the excess of €350. Details say Im liable for tax, BIK etc on the excess of €350. Does anyone know how this is calculated and is there any way of avoiding it??

You shouldn't be liable for anything on the excess, check with the person administering this in your workplace as this is not how the tax system works on this.
Worst case scenario, get the bike shop to split out the 1350 as 1000 and 350 on the receipt. This should not be an issue for them. Hope this helps

serendip

Bigron78 wrote: »

Hi, Sorry for hijacking and reopening this thread but.......

I'm purchasing a bike on the BTW Scheme. Costing €1300. Employer are paying €1000 and I'm paying the excess of €350. Details say Im liable for tax, BIK etc on the excess of €350. Does anyone know how this is calculated and is there any way of avoiding it??

Unless there's some unusual circumstance, benefit in kind does not come into it. You're paying the 350 excess with your own after-tax money.

teufelswerk

nereid wrote: »

Quite true - I am not a Tax expert nor have I actually gone through this process, but I did investigate its possibility. Best to have a "discussion" with the actual shop keep in any case as they will have to be party to the transaction etc.

The Cycle shop would have no input credit so would have to charge 900*1.21 to even break even on this transaction. As far as I know, the cycle shops tend to trade the bikes through the shop and take a cut between the seller and purchaser.

Stark

BIK should only be an issue if your employer is paying the 350 excess for you. If it's coming out of money that you've already been taxed on, then you don't need to pay BIK.

Beasty

teufelswerk wrote: »

You can buy just about anything under the scheme in practice. The problem with the second hand bikes is that they are usually only traded through the store with the bike shop taking a cut. As for "bicycle and bicycle safety equipment", I've seen the 1000 euros spent on protein bars before so there's definitely some flexibility there with the administration in practice

I presume you accept this is illegal?

As mentioned (several times) already, it's new bikes and specified safety equipment that qualifies. This is nothing to do with the retailer - they do not take part in the scheme (although they may help an employer administer one). It's the employer and employee that must satisfy themselves they are operating within the law.

The Revenue can (and indeed will) audit some of the schemes, as part of their standard audit process into payroll taxes. Although they have indicated a "light-touch" will be applied, if they find evidence of abuse they will seek to collect the correct tax due. Indeed it only takes one disgruntled ex-employee to notify them of abuse to potentially trigger an audit into the specific scheme, and potentially the wider tax affairs of the employer and/or employee involved. If there is evidence of widespread abuse, the ultimate sanction would be to remove the scheme altogether.

Those abusing the scheme are effectively stealing from the rest of us that pay all our taxes as required by law. Some people may consider this a "petty" crime, but it is a crime nonetheless.

teufelswerk

I am in no position to comment regarding the legality of such transactions for a number of reasons:
1. I was not party to the transaction so am not aware of the full facts.
2. I haven't seen any case law in relation to the bike to work scheme and would be surprised if such exists.
3. Saftey equipment has not been explicitly defined and until that is I would not wish to accuse anybody of a wrongdoing. However you must have contadictory evidence if you are prepared to call it a crime.

There is also a major paper trail flaw with the potential and frankly doubtful revenue audit of the scheme, of which I'm sure you are aware. Unless Revenue wait outside your office watching people dismount their bikes the audit of the scheme would be completely skewed.