(Tiny) update on bikes as benefit-in-kind

rflynnr

I've been pestering my employer about this since it was first mooted in the budget. They're been incredibly evasive about the whole subject, first asking me to wait for the Finance Bill and then, after that, to wait until the Finance Act because they argue there's still lots of questions to be answered about how it will work.

This has led me to actually read the Bill itself and the explanatory memoranda relating to it. This reveals two things:

1. The Finance Act has to be enacted by Feb 14 2009 so nobody's employer can put implementation off on grounds of ignorance after that date (and in all likelihood the bill will be enacted before that date).

2. The explanatory memo makes it clear that "the first 1000euro" spent by employers on bikes are eligible for tax relief. In other words, bikes costing more than 1000euro will be eligible under the scheme, it's just that the tax benefit will be limited to the first 1000euro spent on the bike.

Right (rubs his hands), let's see that dutchbike catalogue again...

blorg

Unfortunately the scheme is also completely voluntary, which I reckon is going to be what does me out of a new bike.

kenmc

blorg wrote: »

Unfortunately the scheme is also completely voluntary, which I reckon is going to be what does me out of a new bike.

Damn the recession - you can't even threaten to leave over it either

Hungrycol

Ok here's the deal:

-There is no obligation on your employer to operate it.
-Your employer does not have to notify Revenue that they will operate the scheme.
-Your employer wont be allowed a VAT reduction on the bike value. However the employer saves 10.75% Employers PRSI.
-It's €1000 every 5 years.
-The bike has to be bought by the employer, a receipt by the employee for a refund is not acceptable.
-The bike can be purchased anywhere and not confined to Ireland.
-Your employer should get you to sign a statement saying that you will use the bike primarily for commuting to work. Commuting to a train station or Luas, Bus stop is OK.
-There is no minimum days that you must commute to work on the bike.
-It can be a used as a salary sacrifice from your gross pay over a period of no greater than one year.
-Altertnatively is can be used as a tax free benefit (gift) to the employee.
-It does not include part for bikes.
-It does include reasonable safety equipment.
-It does not include a replacement bike if you crash.
-If you spend only, say, €600 on the bike in the scheme then your done, i.e. you cannot claim the additional €400 at any time within the 5 years. However if you claim €1200 on the scheme the first €1000 is tax free and the balance is taxable (or deductable from your net pay).
-Technically employee can claim it more than once if they change employments within the five years and the employers operate the scheme.

Type in Bicycle in the search on the Revenue Website and view the PDF document http://www.revenue.ie/revsearch/search.jsp

Chips Lovell

Here's a link to Revenue's PDF document explaining it. Hungrycol sums it up very well.

rflynnr

blorg wrote: »

Unfortunately the scheme is also completely voluntary, which I reckon is going to be what does me out of a new bike.

I know, hence my reference to end of the "ignorance defence". I have this terrible feeling that my own employer is going to look askance at this...

Gavin

Stuck that into the wiki, good summary

Raam

Hungrycol wrote: »

-If you spend only, say, €600 on the bike in the scheme then your done, i.e. you cannot claim the additional €400 at any time within the 5 years.

Does that mean you can only use it once within 5 years, no matter how much you spend?

Hungrycol

Raam wrote: »

Does that mean you can only use it once within 5 yeras, no matter how much you spend?

Yes. If you ask your employer to buy you a Dunnes Stores bike for €150 out the Bike to Work Scheme you cannot claim the remaining €850 until 5 years time when you can claim the €1000 again.

Chips Lovell

rflynnr wrote: »

I know, hence my reference to end of the "ignorance defence". I have this terrible feeling that my own employer is going to look askance at this...

I have a suspicion that the threshold for most employers getting involved is going to be very low. If I had to guess, even reading the Revenue guide to the scheme would count as "too much hassle" for some employers.

Hungrycol

el tonto wrote: »

I have a suspicion that the threshold for most employers getting involved is going to be very low. If I had to guess, even reading the Revenue guide to the scheme would count as "too much hassle" for some employers.

Yeah I agree there's more administration involved. Ask your local Green Party TD to send a letter to HR in your company. It could help.

I'm going to be administering it in the company I work in but given the recent weather it's likely it wont be popular until Spring/Summer time. I might suggest the employee gets a shopping list of items from the shop they want to buy the bike and bring it back to me and I'll arrange for them to receive a cheque payable to said bike shop. A bit like a proforma invoice.

TinyExplosions

I'm thinking if my place do it, I may use it to get a load of gear -shorts, jerseys etc etc, cos the next bike won't be purchase 'off the shelf'

AstraMonti

Please make it simple for me! Does it mean that you are getting 1000euros to get a bike or you are getting a tax relief for bikes up to 1000euros so you actually buy a bike without the 21.5% vat?

Ghost Rider

No. Effectively what it means is that your tax free allowance - i.e. the amount of your salary that you don't have to pay any income tax on - is increased by up to €1000, depending on the cost of the bike.

In short, what you save is the income tax you would pay on that €1000.

AstraMonti wrote: »

Please make it simple for me! Does it mean that you are getting 1000euros to get a bike or you are getting a tax relief for bikes up to 1000euros so you actually buy a bike without the 21.5% vat?

penexpers

el tonto wrote: »

I have a suspicion that the threshold for most employers getting involved is going to be very low. If I had to guess, even reading the Revenue guide to the scheme would count as "too much hassle" for some employers.

Well a lot of employers still regard the tax saver scheme as "too much hassle".

blorg

el tonto wrote: »

I have a suspicion that the threshold for most employers getting involved is going to be very low. If I had to guess, even reading the Revenue guide to the scheme would count as "too much hassle" for some employers.

Certainly this is going to be the case with my employer, the financial aspect will have nothing to do with it, it will be the hassle etc. They are very inflexible and bureaucratic; getting anything done here takes months to years.

Hungrycol

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TinyExplosions wrote: »

I'm thinking if my place do it, I may use it to get a load of gear -shorts, jerseys etc etc, cos the next bike won't be purchase 'off the shelf'

Technically that's not allowed and not in the "spirit" of the scheme. It's designed to encourage people who drive to work to consider cycling instead.

Having said this the prospect of getting ASSOS stuff nearly half price is very very inticing indeed. I would argue that better clothing makes me more comfortable on the bike therefore safer on the roads Remember though it has to be bought in one lump sum.

TinyExplosions

Hungrycol wrote: »

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Technically that's not allowed and not in the "spirit" of the scheme. It's designed to encourage people who drive to work to consider cycling instead.

Having said this the prospect of getting ASSOS stuff nearly half price is very very inticing indeed. I would argue that better clothing makes me more comfortable on the bike therefore safer on the roads Remember though it has to be bought in one lump sum.

That's kinda my thinking, but sure will see what happens... buying a grands worth of Assos in one go would be a nice experience!

alfalad

I'm assuming though that even if you buy the bike in the UK, your company would have to pay in Euro? Anyone know would that be correct? Or does your company translate the €1,000 at the rate on the day you buy and issue the cheque in Sterling?

Hungrycol

The payment has to reflect the actual cost of the bike in Euros.

Best to ask UK bike shop in question if they price the bike and accept euros given their nominated exchange rate for the bike in question. If it's a euro cheque though it will cost the bike shop in the UK additional fee to cash it at their bank. Given the strength of the Euro at the moment they'd be mad to say no.

Hungrycol

Hungrycol wrote: »

However the employer saves 10.75% Employers PRSI.

I think I missed this - where is it specified?

LDB

I'll be setting this up for my employer so I'll be writing the policy etc. I'd be happy to share this with anyone who is looking to convince their employer. It might make it easer for them if its all documented and explained and packaged for them.

with everything going on for year end I have a plan to put this in place by mid January so bear with me!

penexpers

Myth wrote: »

I think I missed this - where is it specified?

If an employer deducts wages at source then they don't pay employers PRSI on it.

alfalad

Just spoke to two bike shops up north who would be happy to take a euro cheque and have in fact gone so far as to say they would give one pound for one euro!

Hungrycol

alfalad wrote: »

Just spoke to two bike shops up north who would be happy to take a euro cheque and have in fact gone so far as to say they would give one pound for one euro!

Excellent

penexpers

penexpers wrote: »

If an employer deducts wages at source then they don't pay employers PRSI on it.

It's the % that I don't understand though.

davenewt

^^^ I think this is the issue for most... the question is what will employers save, financially? Are we talking just a small % of an employee's salary?

i.e. if it's not financially attractive for employers, they're hardly going to put the extra admin work into running the scheme for employees...

christeb

Bike Radar have picked up on the story here

penexpers

Myth wrote: »

It's the % that I don't understand though.

10.75% is the standard employer's PRSI rate afaik.

rflynnr

christeb wrote: »

Bike Radar have picked up on the story here

Yes they have but they've got bits of the details wrong. All interested in an accurate and comprehensive picture should refer back to hungrycol's excellent outline on page 1 of this thread.

dub_skav

I think that it is possible many employers will feel that the effort isn't worth it. However, they could easily be shamed into it as this is seen as a "Green" initiative.

Small companies may not mind negative press, but I'd say any large company could easily be persuaded to do it

von Neumann

Are electically assisted bicycles covered by this scheme or is it only pushers?

Just so I'm clear,

If you spend 1000e on a bike, and your tax is

Standard rate (20% + 8% Prsi/health) then you pay 720euro saving 280euro

Top rate (40%? + 8% Prsi/health) then you pay 520euro saving 480euro

Thanks in advance,
I always find tax confusing .

penexpers

Electric bikes are excluded.

Your tax calculations are correct.

Hungrycol

von Neumann wrote: »

Are electically assisted bicycles covered by this scheme or is it only pushers?

Just so I'm clear,

If you spend 1000e on a bike, and your tax is

Standard rate (20% + 8% Prsi/health) then you pay 720euro saving 280euro

Top rate (40%? + 8% Prsi/health) then you pay 520euro saving 480euro

Thanks in advance,
I always find tax confusing .

Nearly:
Standard Rate (if you earn under 36400pa) is indeed 20% but your PRSI is approx 6%, 26% in total would be a good measure.
The Marginal Rate it's 41% (everything you earn above €36400) and PRSI is 6% up to your cumulative earnings of €52000 and 2% thereafter.
I'm not sure if you also save on the new Income Levy of 1% on earnings above €18304pa. I think you do.

On the employers PRSI bit. It's standard at 10.75% if you're in private employment. If you work for the Guards or teach then you could be on a different PRSI code which may also change the amount of PRSI chanrged. For the majority of us it's PRSI Class A1 whereby Employers PRSI is 10.75% on all your earnings after any AVC's (Pension Contributions) or Salary Sacrifices (Bus & rail tickets would be another example in the same vein as the Bike Scheme).

Sorry in a rush..... no time for spell check so sorry....

blorg

Pedal assist electric bikes are allowed, but they have to be of the type that only assists while pedaling.