Cycle to work scheme

Cycle to Work scheme

September 15th, 2013

On 1 January 2009 the Irish government introduced a scheme to encourage people to cycle to work. The Cylce to Work scheme covers bicycles and accessories up to a maximum cost of €1,000. The bicycle must be purchased by your employer but the scheme can then operate either with your employer bearing the full cost of the bicycle, or by way of a salary sacriﬁce agreement in which you pay for it, tax free, over 12 months.

The Cycle to Work scheme is only available to residents in the Republic of Ireland. A different scheme works in Great Britain and Northern Ireland.

Participating in the bicycle scheme is easy. If your employer decides to take part, they simply buy the bike on your behalf and off you go. Its is up to you and your employer to decided whether they buy the bike outright for you or whether you pay for it via ‘salary sacrifice’. Either way you save on tax (see examples below).

The Cycle to Work scheme is flexible in its application in that your employer doesn’t have to specifically notify the Irish tax authorities that you’re availing of the scheme and there are no Government forms to fill out. However, your employer does have to maintain the normal records such as invoices and payment details associated with buying the bike.

We (Hemisphere Racing Limited) are on the official cycle to work supplier list for the OPW and are able to supply the Public sector as well as private sector employees.

Please note that the official Cycle to Work Scheme information page is now located at:http://www.procurement.ie/suppliers/contracts/78

If you would like to know more information, please email us directly.

Cycle to work scheme Bike to work scheme

How the Cycle to Work scheme works for PAYE employees

September 17th, 2013

The following should not be construed as tax advice. This is used for illustrative purposes only.

Example 1

Ciara earns €28,000 per annum. This means that she pays tax at the standard rate of 20% plus the Universal Social Charge ('USC'*) and 4% rate of Pay Related Social Insurance ('PRSI').

Ciara decides to buy a bike for €500 and benefit from the Cycle to Work scheme. Ciara pays €500 for the bike directly to us.

After the forms are filled out, Ciara's employer advises the Irish tax authorities that Ciara's annual income is reduced (for tax purposes only) to €27,500. Therefore she only pays tax on €27,500, not her actual income of €28,000. This results in Ciara saving €135 in tax (being €500 at 20% plus the USC plus PRSI). That is, Ciara's tax bill is reduced by €155 over the course of the year. The net cost of the bike is €345 (being €500 less the tax, USC and PRSI saved of €155).

Example 2

Aidan earns €25,000 per annum. This means that he pays tax at the standard rate of 20% plus PRSI and the USC.

Aidan decides to buy a bike for €1,000 and benefit from the Cycle to Work scheme. Aidan pays €1,000 for the bike directly to us.

After the forms are filled out, Aidan's employer advises the Irish tax authorities that Aidan's annual income is reduced (for tax purposes only) to €24,000. Therefore he only pays tax on €24,000, not his actual income of €25,000. This results in Aidan saving €310 in tax (being €1,000 at 20% plus the USC plus PRSI). That is, Aidan's tax bill is reduced by €310 over the course of the year. The net cost of the bike is €690 (being €1,000 less the tax, USC and PRSI saved of €310).

Example 3

Eimear earns €80,000 per annum. This means that she pays tax on €32,800 at the standard rate of 20% and the balance of €47,200 at the higher rate of 41%, PRSI and the USC.

Eimear decides to buy a bike for €1,000 and benefit from the Cycle to Work scheme. Eimear pays €1,000 for the bike directly to us.

After the forms are filled out, Eimear's employer advises the Irish tax authorities that Eimear's annual income is reduced (for tax purposes only) to €79,000. Therefore she pays tax on €79,000, not her actual income of €80,000. This results in Eimear saving up to €520 in tax (being €1,000 at 41% plus PRSI and the USC). That is, Eimear's tax bill is reduced by up to €520 over the course of the year. The net cost of the bike to Eimear is therefore €480 (being €1,000 less the tax, PRSI and USC saved of €520).

Example 4

Eimear earns €80,000 per annum. This means that she pays tax on €32,800 at the standard rate of 20% and the balance of €47,200 at the higher rate of 41% plus PRSI and the USC.

Eimear decides to buy a bike for €8,000 and benefit from the Cycle to Work scheme. Eimear pays €8,000 for the bike directly to us.

After the forms are filled out, Eimear's employer advises The Revenue authorities that Eimear's annual income is reduced (for tax purposes only) to €79,000. Therefore she pays tax on €79,000, not her actual income of €80,000. This results in Eimear saving up to €520 in tax (being €1,000 at 41% plus PRSI and the USC). That is, Eimear's tax bill is reduced by up to €520 over the course of the year. The net cost of the bike is €7,480 (being €8,000 less the tax, PRSI and USC saved of €520).

* Universal Social Charge

The USC is calculated for individuals as follows:

2% on income up to €10,036
4% on the next €5,980 of income and
7% on all remaining income.

Certain reduced rates are applicable.

Does the Cycle to Work scheme apply to the self employed?

September 20th, 2013

The following should not be construed as tax advice. Circumstances vary from individual to individual and you should seek advice from your tax adviser to address your specific circumstances.

The Cycle to Work scheme does not apply to the self employed. This is a scheme essentially for employees and it operates under the PAYE system.

What you, as a self employed individual should consider is whether you can purchase a bicycle and use it as a business related asset.

In this way you may be entitled to reclaim the VAT which you paid on purchasing the bicycle (if you are registered for VAT), then capitalise the bicycle as an asset, and then depreciate it over its useful life (which you might consider to be one or two years).

I use my bicycle for work purposes. Can I claim a deduction?

September 21st, 2013

The following should not be construed as tax advice. Circumstances vary from individual to individual and you should seek advice from your tax adviser to address your specific circumstances.

If you have a bicycle, and you use it for work related purposes, you should be able to claim a per kilometre allowance, which is currently €0.08.

If your employer allows you to claim a mileage allowance for motor vehicle usage, but not for the use of bicycles, you should speak with your employer and ask them to permit this claim.

You can find more details of this allowance in the Irish tax authorities' leaflet IT51 "Employees' Motoring/Bicycle Expenses" as set out in the following link: http://www.revenue.ie/en/tax/it/leaflets/it51.html