The Cycle to Work Scheme was introduced in 2009 to encourage more employees to cycle to and from work, thereby helping to lower carbon emissions, reducing traffic congestion and improving health and fitness levels.
Under the scheme an employer may provide an employee or director with a bicycle and/or cycle safety equipment to a maximum value of €1,000 (including VAT) without the employee being liable for benefit-in-kind taxation.
The scheme operates in a similar manner to the Travel Pass/Tax Saver Commuter Ticket Scheme whereby the employee or director repays the employer by means of salary sacrifice.The employee benefits by saving the PAYE, Employee PRSI and USC on the salary sacrificed while the employer benefits by saving the Employer PRSI on the salary sacrificed.
The bicycle and/or safety equipment must be used by the employee or director mainly for qualifying journeys e.g. the whole or part of a journey between the employee’s or director’s home and normal place of work or between the normal place of work and another place of work.
There are strict conditions for the scheme to be effective for tax purposes:
- There must be a bona fide and enforceable alteration to the terms and conditions of employment exercising a choice of benefit instead of salary.
- The alteration cannot be retrospective and must be evidenced in writing.
- There must be no entitlement to exchange the benefit for cash.
- The choice of benefit instead of cash can only be made once in a five year period.
- The choice of benefit instead of cash must be irrevocable for the relevant year in which it is made.
The full cost must be repaid within a period of 12 months or less.
The employer cannot reclaim the VAT associated with the purchase of the bicycle or safety equipment. If the cost exceeds €1,000, a benefit-in-kind income tax charge applies on the balance over €1,000.
The employer is also required to obtain a signed statement from the employee or director that the bicycle is for his or her own use and will be used mainly for travel to an from work or between places of work.
For further information, please contact us at 091 778911 or via website contact page