Revised Tax Benefits
The Cycle to Work Scheme was introduced in the last recession in 2009.
It has now been broadened as part of the July Stimulus measures announced by the Government to help offset the consequences of the Covid-19 pandemic on the economy.
The scheme put no upper limit on the value of the bicycle which can be purchased but the amount allowable under the tax incentive had a ceiling of €1,000.
An increased allowable expenditure under the Cycle to Work scheme from €1,000 to €1,500 in respect of ‘ebikes’, and €1,250 in respect of other bicycles, has been introduced forthwith.
Cycling to work a great way of keeping fit and beating traffic. And in Tramore and Waterford there aren’t the same dangers as in heavily congested large cities and towns.
The scheme offers significant savings for the purchase of a bicycle and related equipment — up to 48% off the retail price, depending on your tax rate — and is very easy to access, providing your employer is offering the incentive.
This means that a bike and accessories with a retail price of €500 may only cost you €260 after the tax savings.
The scheme also offers savings for employers who operate it as their employers contribution of PRSI will reduce.
HOW IT WORKS
- The employer can purchase a bike along with safety accessories for their employee without the employee being liable for benefit-in-kind tax.
- Typically the employee will repay the employer with a salary sacrifice over the following 12 months.
- The tax relief on the purchase of a bike plus accessories is limited to the revised thresholds.
- Bikes will be owned by the employee
- The cycle to work scheme can only be availed of once every five years.
- The employer will be exempt from paying the PRSI on the value of the bike/accessories.
- The employer cannot claim the VAT on the purchase.
- Typical savings are up to 51%.
In addition to bicycles, the scheme covers a range of equipment, such as:
- Bicycle helmets conforming to EU standard
- Bicycle lights
- Pumps, puncture repair kits, tool kits etc.
- Reflective clothing, reflectors, and cycle clothing; panniers
- Luggage carriers & straps
- Cycle clips, bells, mirrors, etc.
How do I pay for the bicycle?
Usually your employer pays the supplier for the bicycle and sets up a ‘salary sacrifice’ arrangement from your salary over an agreed time frame (which cannot be more than 12 months). This generally means that you visit the shop, select the equipment you wish to buy and have the shop invoice your employer directly for the cost. Note that the tax exemption does not apply if you pay for the bicycle and are reimbursed by your employer – they must pay for the bicycle.
The repayment for the bicycle and equipment is then deducted from your gross salary (this means before income tax, PRSI, pension levies or Universal Social Charge are deducted). These deductions can be made weekly, fortnightly or monthly depending on your salary payment arrangement.
Your employer can also buy the bicycle on your behalf and not require you to pay for it. In this instance, you will be exempt from benefit-in-kind taxation to a cost of €1,250/1,500 (bikes/ebikes). If the cost of the bicycle exceeds this amount a benefit-in-kind charge will apply to the balance.
How often can I use the scheme?
You can only avail of the scheme once in a five-year period. This applies even if you do not purchase equipment up to the €1,250/1,500 limits. The tax year in which the bicycle or equipment is provided counts as the first year. So, if you used the scheme in 2016 (regardless of the month) you would be entitled to the relief again during 2021 (from January).
You must use the bicycle and safety equipment mainly for qualifying journeys. This means the whole or part (for example between home and train station) of a journey between your home and your normal place of work. Employers do not have to monitor this but you will be asked to sign a statement saying that the bicycle is for your own use and will be mainly used for qualifying journeys.
If you are an employee or employer and have any further questions, please feel free to to call in and talk to Maurice, or contact Tramore Cycle Services via this website /Facebook/phone and we will reply directly.