Update, July 2020:
The July Jobs Stimulus Plan has amended the ‘Cycle to Work Scheme’; the allowable expenditure will rise from €1,000 to €1,500 in respect of ‘ebikes’, and €1,250 in respect of bicycles. The scheme will allow the purchase of a new bicycle every 4 years (until now it was 5).
The Cycle to Work Scheme was introduced to encourage employees to cycle to work. It offers a tax incentive to employees and employers, whereby an employer purchases a bicycle and equipment for an employee without it constituting a benefit in kind.
An employer and employee can also agree a salary sacrifice to cover the cost of the bicycle and equipment.
General Rules of the Scheme
- Employers are not obliged to offer a cycle to work scheme but if they do, it must be offered to all employees.
- There is a limit of €1,000 per employee including safety equipment such as cycle helmets, lights, locks, mirrors, repair kits and reflective clothing.
- Employees can only avail of the scheme once every five years.
- The bicycle must be mainly used for travel to and from work, for either the full journey or part of the journey. Employees will be asked to sign a statement stating this.
- Employers cannot claim VAT back on the bicycle or equipment.
How it Works
Once an employee has selected their bicycle and equipment, the employer pays for it.
Note that the employee cannot pay for the bicycle and get reimbursed from the employer.
Once the conditions of the scheme have been satisfied, no benefit in kind charge arises.
Under the scheme, it is possible for the employer and employee to agree to a salary sacrifice to cover the cost of the bicycle and equipment.
The employer adjusts the employee’s gross salary (before tax) for a period up to 12 months to cover the cost of the bicycle and equipment.
The employee’s salary will be reduced for this period but so will the tax, USC and PRSI charges. The net effect is that the employee will receive the value of the bicycle and equipment tax free.
It is important to keep proper records of the scheme, including invoices, delivery records, salary sacrifice agreements and statements from employees regarding the use of the bicycle for travel to work. These may be required in the event of a Revenue audit.
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