Bike to Work Scheme - Dealing directly with Revenue

nogoodnamesleft

Hi All,

Im organising the bike to work scheme in the company where I work. There has been a good bit of interest from some of my collegues. Ive also sourced a bike shop through a mate of mine (we both used compete on road a few years ago so have a few contacts). Currently waiting on what type of bikes people would like as well as their measurements for the frame.

Im curious to know if anyone has dealt with revenue directly as opposed to through a crowd like biketowork.ie bikescheme.ie etc? Id rather have the saving passed on to the people in the company buying the bikes (so that they could get better bikes) and do the leg work regards paperwork etc than these private companies making their 10% cut.

Lumen

Aside from normal accounting procedures and internal tracking of which employees have availed of the scheme, there need be no additional "dealings" with the Revenue as far as I know.

petethedrummer

http://wiki.boards.ie/wiki/BikeToWork

Beasty

As Lumen says, there is no "dealing with the Revenue" involved. the scheme does not have to be notified to the Revenue, and there are no returns required. That said, the Revenue are perfectly entitled to enquire into any scheme (they could, for example, look to ensure the salary sacrifice arrangements have been correctly executed)

This really comes down to the employer ensuring they abide by the rules. The Revenue have issued a guidance document, which includes the following:

"There will be no notification process involved but the purchase of bicycles and associated safety equipment by employers for directors and employees will be subject to the normal Revenue audit procedure with the normal obligations on employers to maintain records (e.g. delivery dockets, invoices, payments details, salary sacrifice agreements between employer and employee, signed statements from employees that the bicycle/bicycle safety equipment is for own use and will be used for travelling to and from work)."

nogoodnamesleft

Lumen wrote: »

Aside from normal accounting procedures and internal tracking of which employees have availed of the scheme, there need be no additional "dealings" with the Revenue as far as I know.

Ok thats gud news so. :-) . So correct me if im wrong:

• Employee gets quote from Bike shop for the bike they want.
• They then give this to the accounts in the company who purchase the bike on behalf of the employee.
• Accounts pay bike shop for bike.
• Employee gets bike and pays outstanding amount to accounts from salary

One question though how do the accounting department account for the purchase price less tax for the bike(s)? Or does the bike shop just fill in a form and bike was sold under the scheme and thats it?

Lumen

nogoodnamesleft wrote: »

One question though how do the accounting department account for the purchase price less tax for the bike(s)? Or does the bike shop just fill in a form and bike was sold under the scheme and thats it?

See the VAT notes (authored by Beasty) in the linked Wiki article.

The bike shop doesn't need to fill in any forms, just provide the usual itemised invoice.

It's just as if the company purchased the bike for business purposes, except that the bike becomes the property of the employee and the VAT cannot be reclaimed.

edit: as I understand it, the amount to be repaid by the employee is the gross amount, including VAT. Note that the employer may gift the bike, repayment is not compulsory.

nogoodnamesleft

Cool, thanks guys. Lot clearer now didnt think it would be that simple.

mmclo

Is there a PRSI ceiling argument also? i.e. deduct it all in one go when paying the higher rate of PRSI if you are fortunate enough to encounter this. Of course it may be abolished in the budget. Of course such savings would be evened out over the year but might be an idea to purchase bike when PRSI is the highest?

Paul Kiernan

nogoodnamesleft wrote: »

Cool, thanks guys. Lot clearer now didnt think it would be that simple.

In fact it's so damned simple that I find it mindbogglingly infuriating that:

1. Employers limit it to specific suppliers and
2. (even more mindboggling) Employers use intermediaries who siphon off about 10%.

Phew, I've wanted to get that off my chest for a long time!

Beasty

mmclo wrote: »

Is there a PRSI ceiling argument also? i.e. deduct it all in one go when paying the higher rate of PRSI if you are fortunate enough to encounter this. Of course it may be abolished in the budget. Of course such savings would be evened out over the year but might be an idea to purchase bike when PRSI is the highest?

The salary sacrificed is not subject to PRSI or levies. Employee PRSI is capped, but the levies are not. The Health levy is fixed at 5% on earnings above the PRSI cap, but the Income levy increases as income increases. It really depends on exactly what your earnings are as to whether it is worth taking the salary sacrifice in 1 month, or spreading it out over 12.

I do not anticipate any net reduction in marginal tax rates (including PRSI and levies) for higher earners in the Budget (and increases cannot be ruled out), and hence there is unlikely to be a benefit to employees of waiting. Employer PRSI may be reduced, although this would probably take effect from 1 January. Hence there is a possible PRSI benefit to the employer of getting the salary sacrifice prior to 31 December. However all this is speculation, and for the amounts involved probably does not warrant too much consideration:)

Repolho

Paul Kiernan wrote: »

In fact it's so damned simple that I find it mindbogglingly infuriating that:

1. Employers limit it to specific suppliers and
2. (even more mindboggling) Employers use intermediaries who siphon off about 10%.

Phew, I've wanted to get that off my chest for a long time!

I think the reason for this is that on some accounting systems there is some work involved in setting up new suppliers. Therefore if a company has 20 people availing of the scheme and each of them buy their bikes in different shops the companies accounts department have to set up 20 new suppliers on their system, whose accounts then need to be maintained!

Limiting it to certain shops or using intermediaries reduces the administrative burden on accounts departments.

Paul Kiernan

Repolho wrote: »

Limiting it to certain shops or using intermediaries reduces the administrative burden on accounts departments.

Well they're just being lazy then. What's the most time it could take per supplier to add them to the computer system, 30 seconds, 1 minute, 5 minutes? Considering the employee can get the bike they want at the price they want I think it shows a complete lack of respect to the employee to force them to do otherwise.

nogoodnamesleft

To make sure the employee gets a good deal im doing most of the leg work organising this. Anyways had a word with accounts and the company I work with are VAT exempt (VAT 13B Cert)

So since the company is essentially buying the bikes as a business purchase less VAT. Can the VAT saving be passed on to the employees buying the bikes adding an additional saving of 21.5 percent ?

Or does the employee have to pay the VAT regardless when they purchase?

Beasty

nogoodnamesleft wrote: »

To make sure the employee gets a good deal im doing most of the leg work organising this. Anyways had a word with accounts and the company I work with are VAT exempt (VAT 13B Cert)

So since the company is essentially buying the bikes as a business purchase less VAT. Can the VAT saving be passed on to the employees buying the bikes adding an additional saving of 21.5 percent ?

Or does the employee have to pay the VAT regardless when they purchase?

Are they VAT exempt (in which case no VAT can be recovered on any purchase), or are they registered for VAT, but making zero-rated supplies (in which case VAT can be recovered on items purchased for business use)?

Either way, the VAT is not recoverable on the bike purchase, as it is not for business use

Repolho

Paul Kiernan wrote: »

I think it shows a complete lack of respect to the employee to force them to do otherwise.

Remember the finance people are employees too!

mmclo

Beasty wrote: »

The salary sacrificed is not subject to PRSI or levies. Employee PRSI is capped, but the levies are not. The Health levy is fixed at 5% on earnings above the PRSI cap, but the Income levy increases as income increases. It really depends on exactly what your earnings are as to whether it is worth taking the salary sacrifice in 1 month, or spreading it out over 12.

I do not anticipate any net reduction in marginal tax rates (including PRSI and levies) for higher earners in the Budget (and increases cannot be ruled out), and hence there is unlikely to be a benefit to employees of waiting. Employer PRSI may be reduced, although this would probably take effect from 1 January. Hence there is a possible PRSI benefit to the employer of getting the salary sacrifice prior to 31 December. However all this is speculation, and for the amounts involved probably does not warrant too much consideration:)

I think there has been some talk of the PRSI ceiling being abolished.

Beasty

mmclo wrote: »

I think there has been some talk of the PRSI ceiling being abolished.

But this is irrelevant in deciding whether to join the scheme now, or after 1 January

If you are above the cap and enter the scheme now you pay no PRSI on the salary sacrificed

If the cap is abolished, under the scheme you would pay no PRSI on the salary sacrificed.

Hence the overall impact is the same either way - you pay no PRSI on the salary sacrificed

boniver

nogoodnamesleft wrote: »

To make sure the employee gets a good deal im doing most of the leg work organising this. Anyways had a word with accounts and the company I work with are VAT exempt (VAT 13B Cert)

So since the company is essentially buying the bikes as a business purchase less VAT. Can the VAT saving be passed on to the employees buying the bikes adding an additional saving of 21.5 percent ?

Or does the employee have to pay the VAT regardless when they purchase?

The VAT exemption cannot be availed of under this scheme. Your comapany will still have to pay VAT on the invoices raised by the bike shop. We had a similar situation with one of the companies that used our shop for the scheme - I checked it direct with Revenue and the above is what I was told.

digger2d2

The company (although quite large) that I work for are just not interested in getting involved in this scheme...Very frustrating, I've spelt everything out for them and even offered to administer 'in my own time' - Does anyone know if the Greens had a Plan B for those of us who want to avail but can't get our employers on-side?

Lumen

digger2d2 wrote: »

Does anyone know if the Greens had a Plan B for those of us who want to avail but can't get our employers on-side?

Clearly not.

-K2-

The employer can simply write a cheque for the bike shop, no need for supplier setups etc..

This is how I setup the scheme in my company.

petethedrummer

ElectronEng wrote: »

The employer can simply write a cheque for the bike shop, no need for supplier setups etc..

This writing a cheque sounds complicated... will I need extra training for my finance department?

-K2-

petethedrummer wrote: »

This writing a cheque sounds complicated... will I need extra training for my finance department?

Ah, clearly a fatal flaw in my suggestion.

Lumen

ElectronEng wrote: »

The employer can simply write a cheque for the bike shop, no need for supplier setups etc..

This is how I setup the scheme in my company.

In my limited experience of accounting software, you have the option of either "setting up a supplier" or tracking a transaction as a one-off.

It makes absolutely no difference to your revenue submissions, since VAT etc is tracked on a per-item basis, it's just to do with reporting features (e.g. tracking multiple purchases with a single supplier) and convenience (not having to re-enter stuff).

If I ever find the idiot who designed Sage Instant Accounts I'm going to punch him in the balls.

digger2d2

Lumen wrote: »

Clearly not.

Very true Lumen