Cycle to Work Scheme Information

 

The Cycle to Work Scheme was introduced in 2009 to encourage greater usage of bicycles for journeys to and from work. The scheme offers significant savings for the purchase of a bicycle and related equipment - up to 50% off the retail price, depending on your tax rate - and is very easy to access providing your employer is offering the scheme.

This means that a bike and accessories with a retail price of €500.00 may only cost you €250.00 after the tax savings. The scheme also offers savings for employers who operate it as their employers contribution of PRSI will reduce.

 

Here are some common questions relating to the scheme - if you have any further questions please feel free to contact us via this website and we will reply to you directly.

Q. I’ve heard about this tax relief for buying a bike to cycle to work, what is it all about?

A. This is a Government initiative that enables your employer to buy a bicycle and bicycle accessories for you, without you being liable for benefit in kind taxation. For a tax payer at the top rate, this equates to a minimum saving of 47% on the cost of a new bike.

Q. What’s the purpose of the scheme?

A. The goal of the scheme is to encourage more employees to cycle to and from work. As well as reducing traffic congestion and lowering carbon emissions, more people cycling to work will improve health and fitness levels.

Q. Is it just the bike that is covered by the scheme, or does it include things like locks and lights?

A. In addition to the bike, the scheme covers a range of equipment such as helmets, lights, locks, bells, mirrors, cycle clips, panniers, luggage carriers & straps, pumps, puncture repair kits, cycle tool kits, reflective clothing and reflectors

Q. Is there a limit to the amount I can spend on the bicycle and equipment?

A. Yes, if the total value of the purchases is over €1,000, the difference is subject to benefit in kind taxation.

Q. If I want to participate, is my employer obliged to get involved?

A. No, participation in the scheme is voluntary and it is up to your employer. However, where an employer does agree to implement the scheme, it must be offered to all employees on an equal basis. 

Q. Who pays for the bicycle?

A. The bicycle must be bought by your employer. The scheme can then operate with either your employer bearing the full cost of the bicycle, or by way of a salary sacrifice agreement.

Q. How does the salary sacrifice operate?

A. Under a salary sacrifice arrangement, you agree to forego or sacrifice part of your salary every pay period (weekly/fortnightly/monthly as the case may be), in order to cover the cost of the bike and equipment provided by your employer. The amount of salary you sacrifice will be exempt from tax, employee’s PRSI and income levies. It will also be exempt from your employer’s PRSI. The salary sacrifice arrangement must be completed within a maximum period of twelve months.

Q. I’m a full time student. Can I avail of the scheme?

A. No, the scheme is operated by employers and is therefore only open to employees and directors.

Q. Do I pick out the bicycle and equipment from the shop myself?

A. It is for employers to decide how they will operate the scheme.  Some employers may allow their employees to select the bicycle and equipment from the retailer of their choice and the employer can then organise appropriate invoicing and delivery arrangements with the retailer.  However, other employers may offer more limited options to employees.  An employer could, for example, allow an employee to choose only from the range available from a single retailer.

Q. Can I buy the bicycle and get a refund from my employer?

A. No. Your employer must purchase the bicycle/equipment.

Q. Why can’t I buy more than one bike every five years?

A. The tax relief on the cost of a bicycle and equipment is allowed once in each period of five years.  This reflects what would be regarded as a reasonable lifespan for a bike.  

Q. If I change employers, does that restart the five year period?

A. No, the five year limit applies for employees, regardless of the company they're with.

Q. Will there be any minimum number of days the bike must be used?

A. There will be no minimum amount of days a bicycle should be used. However, the bicycle must be used mainly for journeys to and from work or between work places

Q. If the employer opts for the ‘salary sacrifice’ model, during the 12 month salary ‘sacrifice’ period who actually owns the bike, the employer or the employee ?

A. On the basis of a signed agreement in which they accept the bicycle equipment and a reduced salary in the structure of their remuneration package, the employee owns the bicycle. Ownership will similarly transfer to the employee if the employer purchases the bicycle for the employee. 

Q. Are electric bikes covered under the scheme?

A. Electric bikes (also known as 'pedelecs') are eligible for the scheme. These include a bicycles or tricycles which are equipped with an auxiliary electric motor having a maximum continuous rated power of 0.25 kilowatts, of which output is progressively reduced and finally cut off as the vehicle reaches a speed of 25 kilometers per hour, or sooner if the cyclist stops pedaling.

Q. I'm an Employer and I would like to offer the scheme to my employees - what's involved?

A. The scheme is very simple for companies to operate and involves no return to Revenue or need for third party involvement (i.e. Travelhub, Cyclescheme, Bike 2 Work etc).  Once the employee has selected their bike and approved accessories they will bring an invoice from the shop to the employer. The maximum amount this invoice can be for is €1000.00 but there is no lower limit to avail of the scheme. The employer should have the employee sign a salary deduction form for the amount of the invoice in full and agree a term for repayment (no more than 12 months). A  deduction for this agreed amount should be set up on the business payroll system from this employees Gross Pay before tax. This would be similar to a pension deduction. Once the salary deduction form has been signed the company should pay the shop for the bike.  The employee will benefit from full tax relief on the deduction and the employer will recoup the full amount the business has paid out on the employees behalf. The business must not reclaim the VAT element of the Invoice (which must be shown seperately on the invoice) as the bicycle does not represent supplies to the business. The full amount including VAT will be repaid to the company via the salary deduction. Altitude is happy to offer advice to any business or employer looking to offer the scheme. By dealing directly with the shop, your employees will gain all the benefits of being cash customers. Using third party voucher companies will remove this benefit as the shop will have to pay a commission to these third party providers.