Cycle To Work grant scheme
The Minister for Finance has introduced the Cycle to Work scheme that will enable many people living a short distance from work or a train station to reduce their dependence on car use.
The use of the bicycles purchased by employers will be free of Benefit In Kind (BIK) tax and will be fully tax deductible by employees that avail of the scheme.
A very useful guide on the BIK exemption for bicycles and electric cycles has been prepared by the Revenue Commissioners and can be downloaded here.
A summary of the scheme is given below.
- Commencement: The exemption (from BIK) will apply to expenditure incurred by an employer on or after 1 January 2009.
- Allowable Journeys: Whole or part (e.g. between home and train station) of a journey between the employee’s or director’s home and normal place of work, or between his or her normal place of work and another place of work.
- Tax Exemption: €1,000 on the amount of expenditure an employer can incur in respect of any one employee or director.
- Exemption from income tax in respect of the benefit-in-kind can only be availed of once in any five-year period by an employee or director.
- Bicycles include: - The exemption will cover pedal bicycles and tricycles, and pedelecs (electric assisted pedal bicycles). It will not cover motorbikes, scooters or mopeds.
Safety equipment included:-
- 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
Employer - Points
- The employer must purchase the bicycle/safety equipment.
- Employer can purchase the bicycle & safety equipment
- No notification process (to tax office) & no documentation required.
- Normal obligations on employers to maintain records (e.g. delivery dockets, invoices, payments details, salary sacrifice agreements between employer and employee,
- Purchases are liable to vat which is not recoverable
Employee - Points
- Maximum allowable exemption from BIK is €1,000 in a 5-year period
- Exemption is only permitted once in the 5-year period
- Exemption applies to safety equipment alone if associated to cycle to work
- Signed statements from employees that the bicycle/bicycle safety equipment is for own use and will be used for travelling to and from work
- Employee repays the employer over 12 month (maximum) by way of “Salary Sacrifice”
Tax implications
- Repayments to employer are fully tax deduct able, where:-
- There is a bona fide and enforceable alteration to the terms and conditions of employment (exercising a choice of benefit instead of salary).
- The alteration must not be retrospective and must be evidenced in writing.
- There must be no entitlement to exchange the benefit for cash.
- The choice exercised (i.e. benefit instead of cash) cannot be made more frequently than once in a 5- year period.
- The choice exercised (i.e. benefit instead of cash) must be irrevocable for the relevant year for which it is made.
