Bike to Work scheme - the Megathread - Read post #1 before posting

Beasty · 21-06-2011 8:14pm #1

Firstly this thread is not about which bike should you get under the BTW scheme – there are too many variables to try and cover this in a single thread. It is to provide a summary of the scheme, some do’s and don’ts and act as a single thread for all technical aspects of the scheme.

Any new threads created covering the rules and application of the scheme will either be locked or transferred to this thread. Please ensure you review the whole thread before posting a new query

Beasty · 21-06-2011 8:26pm

In summary:

Basically, you can get up to €1,000 of bike/accessories through your employer, either as a completely free benefit-in-kind (if your employer likes you); or paid for by deductions from your salary, saving you tax, PRSI and levies on the purchase price. There is a benefit to the employer as they save employers PRSI.

There is no obligation on your employer to operate it.
Your employer does not have to notify Revenue that they will operate the scheme, although they may be subject to Revenue audit on the operation of the scheme.
The scheme is only available to employees and company directors. The self-employed cannot avail of the scheme, as you must be on PAYE (employees of the self-employed can qualify). It must be available to all PAYE employees/directors of the company – it cannot be restricted to particular categories of staff or individuals
It's €1,000 every 5 years.
The bike must 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, Luas or 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.
Alternatively is can be used as a tax free benefit (gift) to the employee.
It does not include a replacement bike if you crash or if your bike is stolen.
If you spend only, say, €600 on the bike in the scheme then you're done, i.e. you cannot claim the additional €400 at any time within the 5 years. However if you claim €1,200 on the scheme the first €1000 is tax free and the balance is taxable (or deductible from your net pay).
The Revenue have issued a set of FAQs on the scheme which can be seen here

Beasty · 21-06-2011 8:29pm

The exemption will cover pedal bicycles and tricycles, and pedelecs (an electrically assisted bicycle which requires some effort on the part of the cyclist in order to effect propulsion). It will not cover motorbikes, scooters or mopeds.

The following safety equipment will be covered by the exemption:

Cycle helmets which conform to European standard EN 1078
Bells and bulb horns
Lights, including dynamo packs
Mirrors and mudguards to ensure riders visibility is not impaired
Cycle clips and dress guards
Panniers, luggage carriers and straps to allow luggage to be safely carried
Locks and chains to ensure cycle can be safely secured
Pumps, puncture repair kits, cycle tool kits and tyre sealant to allow for minor repairs
Reflective clothing along with white front reflectors and spoke reflectors

All the expenditure must be incurred in one go. It is not possible to spend part of the allowance on the bike and then at a later time look to spend the balance on safety equipment

Bike parts or frames do not qualify – it must be a complete bike plus the safety equipment identified above

Beasty · 21-06-2011 8:37pm

Assuming the employer is registered for VAT in Ireland, and the bike is bought from an Irish retailer, the position is straightforward. The retailer charges 23% VAT, and the employer cannot claim it back. The same situation arises where the UK retailer is registered for Irish VAT (eg Wiggle)

If the employer is registered for VAT in Ireland and the bike is bought from a UK (or other non-Irish) retailer that is not registered for VAT in Ireland (which is often the case, the main exceptions being Wiggle and ChainReactionCycles), the employer should provide the retailer with its Irish VAT number. The retailer should then not charge any VAT. However the employer should then self-account for Irish VAT at 23%, and is unable to recover it. If the employer does not provide it's Irish VAT number, you end up paying both UK VAT (on the initial purchase) and Irish VAT (under the self-accounting system) - there is a procedure to recover the UK VAT paid but it is very messy and time-consuming, so it's better not to go there!

In all the above examples, the net position is that irrecoverable Irish VAT at 21% is suffered. It is perhaps important to note that if you are looking at prices with 20% UK VAT that come to just under €1,000, the extra 1% may bring you above the €1,000 threshhold. In this case, only the excess is a taxable benefit in kind.

The one situation where Irish VAT is not paid is where the employer is not registered for Irish VAT (not normally the case, but possible, particularly for low turnover or financial service companies). In this case the retailer charges UK VAT at 20%, but there is no mechanism for the employer to charge itself Irish VAT. Hence the VAT cost is 20% in this case.

Lemag · 22-06-2011 12:12am

THANK CHRIST!!!:p:pac:

ccull123 · 22-06-2011 9:15am

If your bike which you got on the BTW scheme is stolen are you allowed to automatically apply for a new one even if it is within the five years of the original purchase?

Beasty · 22-06-2011 9:30am

ccull123 wrote: »

If your bike which you got on the BTW scheme is stolen are you allowed to automatically apply for a new one even if it is within the five years of the original purchase?

No - it's once every 5 years - if you think about it, it's your bike, and you can insure against theft - there's no reason to allow you to benefit again

TheBlaaMan · 22-06-2011 12:28pm

Its probably also worth pointing out that its not only choice as to whether or not they particpate in the schem, but also the employers choice as to which retailers they deal with - this has been a bone of contention with some....!

Beasty · 22-06-2011 1:13pm

Don't want to cover off absolutely everything yet - ideally there will be the odd unanswered point that will allow us to bring this thread back to the front page occasionally and remind everyone of its existence;)

burger1979 · 22-06-2011 1:57pm

Can one employee in a company who has already bought a bike on the BTW scheme, 'use' another employee's allowance to get another bike? The other employee being fully aware of the situation and willing to let his/her allowance go to another person?

Cookie_Monster · 22-06-2011 2:00pm

burger1979 wrote: »

Can one employee in a company who has already bought a bike on the BTW scheme, 'use' another employee's allowance to get another bike? The other employee being fully aware of the situation and willing to let his/her allowance go to another person?

Sounds like tax fraud to me so I would assume not, I also cannot see the company going along with that.

However if the other employee was to go through the scheme and simply sell the bike to first employee afterwards I don't see what could be done about it.

Beasty · 22-06-2011 2:00pm

burger1979 wrote: »

Can one employee in a company who has already bought a bike on the BTW scheme, 'use' another employee's allowance to get another bike? The other employee being fully aware of the situation and willing to let his/her allowance go to another person?

No - it must be the intention of the employee who's "allowance" is being used to "mainly" use the bike for commuting - it cannot be bought with the "intention" of selling (or indeed giving) the bike to someone else

milltown · 23-06-2011 9:15pm

http://www.cyclescheme.ie/

This is the crowd that are running the nuts and bolts of the scheme for my job. I'm not sure what difference it makes but each employer has a unique code that gets entered into the calculator. I haven't noticed any difference in calculations with or without the code.

Anyway, might be of use to some who are trying to petition their job to provide the option but are getting "sounds like too much work" vibes from management/HR.

cdaly_ · 24-06-2011 10:00am

milltown wrote: »

http://www.cyclescheme.ie/

cyclescheme.ie wrote:

Cyclescheme FAQs

What happens if the bike gets stolen before it's paid for?

If the bike is stolen then you have effectively left the scheme and need to pay all outstanding monies from your net salary.

What happens if the bike gets damages beyond repair?

Since you can no longer cycle to work, you have effectively left the scheme and will need to pay all outstanding monies from your next available net pay.

These are intriguing statements and as far as I know are untrue. There is no monitoring of your use of the bike after your statement that you will use the bike mainly to cycle to work. You cannot 'leave' the scheme as such and the salary sacrifice can happily continue as per the original agreement.

milltown wrote: »

Anyway, might be of use to some who are trying to petition their job to provide the option but are getting "sounds like too much work" vibes from management/HR.

Note that most of these brokers charge up to 10% commission to the bike shop and so you lose any bargaining power you might have with the bike shop. They also do practically no work (and often, I'm told, delay the process). You're much better off explaining to management exactly what / how little they need to do to administer the process independently:

Pay the invoice you obtain from the bike shop
Deduct the amount from your salary before any taxes / levies etc.
Retain the invoice and salary sacrifice paperwork for the standard Revenue audit period
Do not reclaim VAT on the purchase

Then, when they have agreed that it's much more sensible this way, you don't mention 'cycle to work' to the bike shop, choose your bike, request an invoice, present that to your employer and return to the bike shop with a cheque...

Uncle Mclovin · 24-06-2011 10:12am

From an employers point of view. Could you explain what they have to do once they get the invoice from the employee.

How do they make the savings? The employee doesn't pay tax, levies or PRSI on the value of the bike. Does the employer not suffer this then?

Beasty · 24-06-2011 10:16am

cyclescheme.ie have absolutely no official capacity in the BTW scheme, and as pointed out by cdaly_ above are essentially in it to make money (effectively out of the employee and employer)

Their statements that you "leave the scheme" in case of theft or damage beyond repair have absolutely no basis in law, although any employer can impose such conditions (ie that the balance is paid up) into their scheme if they wish (can't see why they would want to though) - I guess it's simply part of the "template scheme" offered to be "administered" by this independent company to allow them to make a profit out of you!

schemingbohemia · 24-06-2011 11:18am

Uncle Mclovin wrote: »

From an employers point of view. Could you explain what they have to do once they get the invoice from the employee.

How do they make the savings? The employee doesn't pay tax, levies or PRSI on the value of the bike. Does the employer not suffer this then?

No, and whats more the employer saves PRSI/USC on this as the employees wages are effectively reduced. For very little adminsitrative work the employer saves a few quid.

cdaly_ · 24-06-2011 2:55pm

Uncle Mclovin wrote: »

From an employers point of view. Could you explain what they have to do once they get the invoice from the employee.

Pay the invoice (directly to the shop or via the employee)
Have the employee complete a salary sacrifice document
Keep the invoice as normal

How do they make the savings? The employee doesn't pay tax, levies or PRSI on the value of the bike. Does the employer not suffer this then?

No. The employer writes down the employee's salary by the invoice amount. Tax, levies and PRSI are therefore not due on the invoice amount...

mcgratheoin · 24-06-2011 3:00pm

OK, so I work in a very accommodating small business and they said no problem to doing the bike to work scheme if I just present them with steps to do. I'm probably going to buy off the web, and possibly from a company that isn't registered for Irish VAT so can someone fill in the gaps in the list below;

Pick bike on the website and "add to basket" for want of a better phrase.
If necessary, contact the non-Irish VAT registered seller with the company's Irish VAT number and ask them not to charge UK VAT
Get someone in company to pay for bike (minus VAT) with company credit card
Pay Irish VAT on the bike when it arrives - do NOT claim back
Deduct up to 1000 euros from my salary before any taxes/charges/levies etc...
If bike is over €1000, deduct remainder from take-home salary
Ride off into sunset...

Questions about process

Is the company credit card the easiest way to pay for the purchase? I'm sure I read something about the company having to actually buy the bike for you, not just reimburse you for something you've bought yourself
How does the whole VAT thingy (step 2) work with UK companies - are they happy to not charge VAT if you present a VAT certificate to them or is it a pain in the backside?

Hungrycol · 24-06-2011 3:04pm

schemingbohemia wrote: »

No, and whats more the employer saves PRSI/USC on this as the employees wages are effectively reduced. For very little adminsitrative work the employer saves a few quid.

Just Employers PRSI 10.75% (not USC as this only an employee statutory deduction). You're right about them paying less in wages though so employee should be encouraged to utilise the €1000 tax free limit!

sham2 · 24-06-2011 3:26pm

I have to second what cdaly says above and recommend that where possible you avoid schemes like cyclescheme.ie that use a voucher system as they are creaming at least 10% off every sale. I found this out to my annoyance recently when I tried to bargain with some shops and they - rightly so from their POV - said they could not reduce the RRP as they were being charged by the scheme operators. Some of the shops in Cork wanted to get together and refuse to accept the vouchers. Heard no more on that.
10% seems insane for doing nothing. My company had 180+ bikes in the last round. That's easily the bones of 100k which they pocketed 10k for issuing a fliipin voucher. Mad as hell the more I think about it.
In the end I found a store that would give me the usual discount nonetheless. cyclesuperstore step up please and take a bow.

mrsFitz · 28-06-2011 11:12pm

Do Bike shops charge a fee if you use one of the Bike/Cycle to work voucher schemes? instead of directly from them?
Thanks for the replies

sham2 · 29-06-2011 12:20am

mrsFitz wrote: »

Do Bike shops charge a fee if you use one of the Bike/Cycle to work voucher schemes? instead of directly from them?
Thanks for the replies

I can tell you from my own experience that they don't - per se. If you buy directly from them with cash then you are more than likely going to get some kind of deal or % off. Make sure you ask though. My experience with the voucher was a lot of complaints from the shops about them having to pay the scheme operators a fee which in effect cancels out their opportunities to offer deals to customers.
Although as I've said in a previous post there was one which gave me a healthy discount with the voucher. Shop around if you can.

mrsFitz · 29-06-2011 11:38am

thanks for your answer, I am kinda on the other side of the fence.
I started a bicycle shop in May and during the week had an employee from ebay wanting to buy a bicycle trough one of these voucher scheme's, when I did my calculations I ended up with a €20 profit margin on a €500 euro bike (it was on special reduced from €649)

So I am now looking in to getting involved in these schemes but would have to either up all my prices by 10% (at least) to cover the cost of these. Or put up a note to say when buying through a voucher scheme there is a 10%11%12% agency fee on top of everything (depending on which voucher scheme is used), and I was wondering how my comp-colleagues deal with this.

kona · 06-07-2011 6:44pm

The cycle to work scheme, is a tax benefit that you get if you purchase a bike with the intent to use to commute to work. There is no minimum time needed to be spent cycling the bike, so read into this whatever way you want.

The saving is made in your before tax or gross pay. Its usually deducted over a 12 month period. Once you avail of the scheme you cannot re-apply for another five years. Depending on what tax band you are in, the upper tax band saves 51% and the Lower tax band saves 23%. The maximum allowed on the scheme is €1000. Anything over is taxable, usually you just get a cheque for €1000, and pay the balance in cash.

I.E

John is in higher tax band. The €1000 he receives, he only pays back e490

Mary is in the lower band of tax. The €1000 she receives, she pays back e770

This scheme really is a no brainer, if your working and you want a bike. Working doesnt include, retired, on the dole, or sitting on your arse all day(yes some people do try).
If you are self employed unfortunatley you cant get the scheme, but you could buy a gift voucher and write that off for tax(hint

)

The scheme covers a (singular)Bike and all the usual accessories found in a bike shop, it doesnt include, Kids bikes, Toys, Alloy wheels, bags of potatoes, a case of vintage jameson or a turf fired VW passat or anything like that( yes people think they can, or are entitled, to pull a fast one).

To avail of the scheme you need to get a quote off a bike shop, usually takes between 20 - 40 mins depending on the amount of attention you need. Some companies are awkward and will only deal with certain bike shops. Its up to you the customer to find this out, bike shops can only tell you things from experience, they dont know who deals with who.

Public service are super lethargic and super awkard (suprise suprise

) expect to wait twice as long as private sector and make sure the bike shop has a bank account that can have funds EFT into the account.

Lead time can anything from 1 week to 8 weeks from experience.

If you change your mind, please tell the bike shop, we dont like holding sellable stock for some joker, neither do other customers who are dissapointed we could be sold out, when were holding a bike for nobody.

If you are saving a minimum of 23%, please dont waste the scheme on a poor cheap bike, get something decent around the e300 mark.

Hope that answers all the main questions.

funkyjebus · 06-07-2011 7:00pm

Just to add, as its a common misconception, there are no restrictions on where you purchase your bike (well maybe it has to be in the E.U. i'd imagine), therefore you can use an online retailer / company (e.g. wiggle, canyon, planet x, etc). However your employer may have their own restrictions or use a third party admin company (e.g. Bike to Work Ltd.) who will most likley have restrictions.

On a further note on the public sector, it can take 2/3 months from submission to payment and you are restricted to ths list of retailers.

studiorat · 06-07-2011 7:26pm

kona wrote: »

If you are saving a minimum of 23%, please dont waste the scheme on a poor cheap bike, get something decent around the e300 mark.

best advice there^

It's often not as good a deal as you think, I think people should shop around a bit before jumping on-board a scheme like this.

Given that a person on the lower tax band pays back €770 from a €1,000 bike it doesn't always make sense. Particularly if you employer has restrictions on where the bike can be purchased etc. I think more often, people are tempted to spend the full €1,000, where they wouldn't have before.

The there's often deals available that are easily that €230 cheaper. By all means consider it but remember you could also use something like the credit union. And have more of a choice.

Beasty · 06-07-2011 8:55pm

Threads merged

Beasty

Vélo · 06-07-2011 8:58pm

Uncle Mclovin wrote: »

From an employers point of view. Could you explain what they have to do once they get the invoice from the employee.

How do they make the savings? The employee doesn't pay tax, levies or PRSI on the value of the bike. Does the employer not suffer this then?

They save on the employers prsi which stands at 10.75%.

austinbyrne21 · 06-07-2011 9:31pm

Just a quick question lads...

What's the story if a portion of a person's salary is in the higher tax bracket and the rest is in the lower?

kona · 06-07-2011 9:36pm

austinbyrne21 wrote: »

Just a quick question lads...

What's the story if a portion of a person's salary is in the higher tax bracket and the rest is in the lower?

Its taken out of your gross pay, so you will save before you are even taxed, so you save the maximum all the time.

austinbyrne21 · 06-07-2011 9:44pm

kona wrote: »

...so you save the maximum all the time.

Am I then correct in thinking that, for example, if I was to get a bike and accessories to a total of €1000 that I'd only pay the €490? From your example in your earlier post. Or would I have to pay a mixture of the €490 and €770, the 2 different tax brackets?

Don't know if I'm making sense... Think I lost myself.

kona · 06-07-2011 10:43pm

austinbyrne21 wrote: »

Am I then correct in thinking that, for example, if I was to get a bike and accessories to a total of €1000 that I'd only pay the €490? From your example in your earlier post. Or would I have to pay a mixture of the €490 and €770, the 2 different tax brackets?

Don't know if I'm making sense... Think I lost myself.

you will get 1000/12 = 83 taken out of your gross pay. The saving will be when that deduction reduces the amount of tax you pay.

say you earn 1k a week

1k - 83 - 917

then its 917 - PRSI , USC etc etc as opposed to 1k - PRSI, USC etc etc

pinkypinky · 07-07-2011 3:22pm

Could someone please clarify whether the USC is in the deductions or not?

Some websites say it is and some don't and most are still set up for the tax system last year, with income & healthy levies.

I pay tax at the lower rate and the total cost of bike plus equipment was €339.

Thanks.

TinyExplosions · 07-07-2011 3:52pm

pinkypinky wrote: »

Could someone please clarify whether the USC is in the deductions or not?

Some websites say it is and some don't and most are still set up for the tax system last year, with income & healthy levies.

I pay tax at the lower rate and the total cost of bike plus equipment was €339.

Thanks.

Yes, the USC is included in the deductions, as is all other taxes. The bike comes out of your gross pay.

DJL292 · 08-07-2011 11:14am

Hi Guys,

I want to avail of the BTW scheme, as my employers are involved.

However, I just recently finished my degree and Ive started a job last month. The job is a type of graduate internship for a duration of about 6 months. I get paid on a monthly basis.

From my last pay slip I noticed that although my income is above the PRSI threshold of 370e and above 500e weekly, the only taxes were deducted from my gross salary was the 2% USC. So, Im wondering is this because of the graduate status

I asked my company and they were very vague about it, and the accounts dept are yet to come back to me YAWN!!

What Id like help with is that is it worth availing of the BTW Scheme for a 2% saving???

Or have I gor this wrong? Its either a 23% or a 51% saving????

Beasty · 08-07-2011 11:22am

DJL292 wrote: »

Hi Guys,

I want to avail of the BTW scheme, as my employers are involved.

However, I just recently finished my degree and Ive started a job last month. The job is a type of graduate internship for a duration of about 6 months. I get paid on a monthly basis.

From my last pay slip I noticed that although my income is above the PRSI threshold of 370e and above 500e weekly, the only taxes were deducted from my gross salary was the 2% USC. So, Im wondering is this because of the graduate status

I asked my company and they were very vague about it, and the accounts dept are yet to come back to me YAWN!!

What Id like help with is that is it worth availing of the BTW Scheme for a 2% saving???

Or have I gor this wrong? Its either a 23% or a 51% saving????

You probably are just using your tax credits accumulated in the year to date. It depends on how much you will earn during the full year, as you will get relief at your marginal tax rate, so you need to estimate your expected tax for the year to see if it's worth it. If you pay back over 12 months, part of it will be in the next tax year when, assuming the same level of employment income, you should certainly get basic rate relief as well as saving USC/PRSI

kona · 08-07-2011 12:47pm

DJL292 wrote: »

Hi Guys,

I want to avail of the BTW scheme, as my employers are involved.

However, I just recently finished my degree and Ive started a job last month. The job is a type of graduate internship for a duration of about 6 months. I get paid on a monthly basis.

From my last pay slip I noticed that although my income is above the PRSI threshold of 370e and above 500e weekly, the only taxes were deducted from my gross salary was the 2% USC. So, Im wondering is this because of the graduate status

I asked my company and they were very vague about it, and the accounts dept are yet to come back to me YAWN!!

What Id like help with is that is it worth availing of the BTW Scheme for a 2% saving???

Or have I gor this wrong? Its either a 23% or a 51% saving????

Unless you are willing to pay the balance up front, I cant see them doing it for you , especially for somebody on a temporary contract.

This issue particularly affects teachers and people in the PS, who are working on temp contracts. I know many teachers who the DoE and VEC have refused the scheme for.

DJL292 · 08-07-2011 1:08pm

kona wrote: »

Unless you are willing to pay the balance up front, I cant see them doing it for you , especially for somebody on a temporary contract.

This issue particularly affects teachers and people in the PS, who are working on temp contracts. I know many teachers who the DoE and VEC have refused the scheme for.

My workplace said I can avail of it, as the scheme is open to any employee regardless.

Im just not sure of the saving in PRSI/USC, as only deduction I get is a 2% USC weekly.

kona · 08-07-2011 1:20pm

DJL292 wrote: »

My workplace said I can avail of it, as the scheme is open to any employee regardless.

Im just not sure of the saving in PRSI/USC, as only deduction I get is a 2% USC weekly.

Its quite simple, they take the deduction from your gross pay. So if your being taxed 2% at the moment until you eat up your tax credits, then you will only save 2%, if you dont pay tax at the moment how can you save on it?

DJL292 · 08-07-2011 2:21pm

kona wrote: »

Its quite simple, they take the deduction from your gross pay. So if your being taxed 2% at the moment until you eat up your tax credits, then you will only save 2%, if you dont pay tax at the moment how can you save on it?

That makes perfect sense now,

Thank you!

Beasty · 08-07-2011 2:44pm

... but if you are paying tax at 23% by the end of the current tax year (ie once your credits are used up), you will effectively save at that rate - less of your total income is actually subject to tax at that rate

DJL292 · 08-07-2011 3:08pm

Beasty wrote: »

... but if you are paying tax at 23% by the end of the current tax year (ie once your credits are used up), you will effectively save at that rate - less of your total income is actually subject to tax at that rate

Okay I understand. So, really the ideal time to avail of the scheme is the week I start to pay PRSI 4% and Income tax 23/41%, as until then Ill only have deductions of 2% USC.

Also, is the incentive for employers is that they save 10.75% in PRSI on the employee? Not that the 10.75% PRSI goes toward the payment of the bike.

Thank you again!!!

Beasty · 08-07-2011 4:08pm

DJL292 wrote: »

Okay I understand. So, really the ideal time to avail of the scheme is the week I start to pay PRSI 4% and Income tax 23/41%, as until then Ill only have deductions of 2% USC.

Also, is the incentive for employers is that they save 10.75% in PRSI on the employee? Not that the 10.75% PRSI goes toward the payment of the bike.

Thank you again!!!

No - it makes no difference - you pay tax on your cumulative income

Looking at tax alone, and forgetting USC etc, let's assume you will earn €2,000 each month for 6 months (July to December), and you have tax credits for the full year of €2,400

Without the scheme you earn €12,000, with tax due (at 23%) of €2,760, reduced by tax credits of €2,400 to €360
net pay = €11,640

If you buy a bike for €1,000 under the scheme, and repay over 6 months:
Gross taxable pay = 12,000 - 1,000 = €11,000, with tax due of €2,530, reduced by the tax credits to €130

Hence you have saved tax of 360 - 130 = €230 (ie 23% of €1,000)

DJL292 · 12-07-2011 11:57am

Beasty wrote: »

No - it makes no difference - you pay tax on your cumulative income

Looking at tax alone, and forgetting USC etc, let's assume you will earn €2,000 each month for 6 months (July to December), and you have tax credits for the full year of €2,400

Without the scheme you earn €12,000, with tax due (at 23%) of €2,760, reduced by tax credits of €2,400 to €360
net pay = €11,640

If you buy a bike for €1,000 under the scheme, and repay over 6 months:
Gross taxable pay = 12,000 - 1,000 = €11,000, with tax due of €2,530, reduced by the tax credits to €130

Hence you have saved tax of 360 - 130 = €230 (ie 23% of €1,000)

Thank you for the very detailed explanation!!

It does makes sense now! I think!

Seaswimmer · 28-07-2011 1:27pm

I am familiar with the cycle to work scheme so this is a specific question/issue.
Our company recently introduced the scheme and I applied for my cert up to a value of €1000. Today i got approval but the monthly cost is €93.62 for 12 months.
This comes to a total of €1123.44. When i queried it with Cyclescheme (who are running the scheme on the companys behalf) they said that the company had used the services of a financing company and this was the extra charge. It does not go to Cyclescheme.
I have raised it with the company and am awaiting an answer but i am trying to find out if this is normal or has anyone else on here had this experience.

Thanks in advance..

Lumen · 28-07-2011 1:31pm

This is not normal.

CardBordWindow · 28-07-2011 1:34pm

Sounds very suspect!

Refuse to pay a cent until it's all been cleared up!!

dubmess · 28-07-2011 1:50pm

These intermediaries like biketowork.ie and I'm sure cyclescheme.ie have their own charges. When we (OnTrack) do a sale through biketowork.ie we are charged 8% plus vat by them for their service. We have to pass that on to the customer.

I didn't think that could go over the €1000, but I guess as that is a charge outside of the bike scheme it's possible.

Even still, €1000 plus 8% plus 21% is about an extra €96, not €123.

Beasty · 28-07-2011 1:50pm

Certainly unusual - I've never come across this before

Thinking aloud about it, the "salary sacrifice" results in a loan from the employer to the employee which is usually interest-free, and repayable over a period (normally 12 months)

Is there anything to stop the employer charging interest (or the "cost" of funding the loan)? - I don't think so

However off the top of my head the interest rate does appear very high with an APR of getting on for 25%. An employee who could get funding cheaper than this (or has cash that's earning naff-all interest) would be better off doing a one-off salary sacrifice to fund the purchase

munsterleinster · 28-07-2011 2:09pm

If they're organising the finance they can charge what the want?
Seems to be about 22% interest though!

Feck em... If you can afford it, take the hit and pay immediately so there's no interest.

If you can't afford it, take out a loan to tie you over. It'll certantly be cheaper than the rate they're charging.

Bike to Work scheme - the Megathread - Read post #1 before posting

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