Bike to Work scheme - the Megathread - Read post #1 before posting

Whatever_fools

Paddigol won't hand over €1,000 to his employer, he will have it processed through his payroll. He will agree (through salary sacrific agreement) that his company can make deductions from his gross salary to repay what they have spent on the bike. I am very conscious about not sounding smart here but if you knew how the scheme worked then you wouldn't be asking these questions!

Oh sorry, my mistake - I have re-read your post Raam - Paddigol won't make any savings if he just hands his employer a cheque. Apologies!

Paddigol

Thanks for the replies guys, appreciated.

Paddigol

Think I may have confused everybody here!!

I know handing over €1,000 sounds like I wouldn't be making any savings, but I thought it might work so as to re-adjust the tax I pay going forward, so my net pay would actually increase until I got the €300 back that way.

The reason I was thinking along these lines is;
1. In my ignorance I thought a bike that cost €1k would only be invoiced for €700, and it was the retailer who would recoup the €300 through tax savings.
2. Employer is conscious of cash flow.
3. I get paid weekly, so can't effectively repay the employer in one go.

It seems it doesn't/ can't work like that, and there has to be a salary sacrifice going the other direction.

As I say, tax ain't my forte! But I think I've got it figured out now. Hope I haven't opened a can of worms!

CramCycle

Paddigol wrote: »

3. I get paid weekly, so can't effectively repay the employer in one go.

The best you could do is sacrafice your wages entirely for 2/3/4 weeks whatever it takes (not prying) if cash flow is a problem.

This does mean you will have no wages for a time and your employer, if cash flow is that tight will be short for about a week, but is the only option.

EDIT: Actually, the other option is he could withhold your wages for a short period until he has the 1000euro taken out of it. Therefore there is no cash flow problem eg stop your wages until 1000euro gross is collected, pay the bike company, return to normal wages and have new bike.

This is awkward for you but should make no real difference to him, can you survive without pay for a few weeks though is the question you really need to answer.

chris.o

I can't seem to find any specific information about what happens to the outstanding balance on the bike to work scheme if you voluntarily leave your employer.

I am leaving the country in the next 3 months and I would really like to know what will happen. I don't want to ask my HR department because I don't want to let them know I plan to leave until the last month.

No way I will get the 900 euros I spent on the bike and lock back when and if I sell it. That and I just feel like I am going to get stung on the outstanding balance somehow.

Anyone have any info?

Lumen

Your employer will deduct the remaining balance from your final paycheck.

Raam

It's at the discretion of your employer. They will probably ask you to pay the balance in full.

chris.o

Meh I just found:

What happens if I leave my job or I'm made redundant?
The agreement to pay the Salary sacrifice is non-cancellable, so you will be obliged to pay the remaining amount in full, without any tax exemptions (i.e. from your net salary). The ownership of the bike will then be transferred to you.

FML

Raam

Tell them right now, that you want to pay the full balance from your next pay cheque. That way you get the tax free benefit.

Raam

Where did you find that text about the sacrifice being non-cancellable?

Beasty

chris.o wrote: »

The ownership of the bike will then be transferred to you.

If it's the Irish scheme you should already own it (not with the UK scheme though)

You use the salary sacrifice to buy the bike from your employer - the purchase takes place at the outset

Zak Flaps

Ok. Trying to get my head around this!!!
Would it go like this?

I see a bike I want, it costs €1000.
The shop gives me invoice for €1000.
I give invoice to my employer.
My employers have cash flow problem.
I give my boss €100.
He writes a cheque, i give that €1000 cheque to the shop.
I have my new bike.
The €1000 gets taken off my gross salary.
So I pay less tax.
My net will be approx €310 up. (figure from online BTW calculator)

Is this correct?

CramCycle

Zak Flaps wrote: »

Ok. Trying to get my head around this!!!
Would it go like this?

I see a bike I want, it costs €1000.
The shop gives me invoice for €1000.
I give invoice to my employer.
My employers have cash flow problem.
I give my boss €100.
He writes a cheque, i give that €1000 cheque to the shop.
I have my new bike.
The €1000 gets taken off my gross salary.
So I pay less tax.
My net will be approx €310 up. (figure from online BTW calculator)

Is this correct?

It is if your boss pays you back the money you gave him to buy the bike, I presume you meant 1000 instead of 100euro, or are you making up the shortfall, ad will he refund you that shortfall. You will only save on what is deducted from your wages.

dogsears

Zak Flaps wrote: »

Ok. Trying to get my head around this!!!
Would it go like this?

I see a bike I want, it costs €1000.
The shop gives me invoice for €1000.
I give invoice to my employer.
My employers have cash flow problem.
I give my boss €100.
He writes a cheque, i give that €1000 cheque to the shop.
I have my new bike.
The €1000 gets taken off my gross salary.
So I pay less tax.
My net will be approx €310 up. (figure from online BTW calculator)

Is this correct?

No because you've suffered the cost twice (once when you gave your employer a cheque for €1,000 and again when €1,000 was deducted from your salary), and you only saved the tax.

Pretend it all happens on payday. Your employer writes a cheque for €1,000 for you to give to the shop, and pays you €1,000 less than usual. Your employer's cash flow is the same as if there was no bike purchase.

You save the €310 because the taxed salary is €1,000 lower, so in net terms you are €690 down (for which you got a bike) and your employer is exactly as they would have been otherwise.

Zak Flaps

dogsears wrote: »

No because you've suffered the cost twice (once when you gave your employer a cheque for €1,000 and again when €1,000 was deducted from your salary), and you only saved the tax.

Pretend it all happens on payday. Your employer writes a cheque for €1,000 for you to give to the shop, and pays you €1,000 less than usual. Your employer's cash flow is the same as if there was no bike purchase.

You save the €310 because the taxed salary is €1,000 lower, so in net terms you are €690 down (for which you got a bike) and your employer is exactly as they would have been otherwise.

Thanks a million dogsears. You explained that very well. Understand it now and will get on the case!! Nice one!

AdamOHare

Im thinking of getting a roadbike (need the exercise and hopefully make a few new friends).
I didnt even know there was a cycle to work scheme until one of the boys said it to me.
Im unemployed at the minute but start a FAS course in 7 weeks time.
I was hoping to have the bike before then but if it means I could save on tax and buy something with better specs then I'll definitley wait it out.
So does anyone know can I avail of this through FAS (its a year long course). Im looking on google but not getting any hits for FAS and cycle to work scheme. Just thought someone here might have an idea.

Beasty

You can only take advantage of the scheme if you are a PAYE employee, which I do not believe to be the case with a FAS course

CramCycle

Beasty wrote: »

You can only take advantage of the scheme if you are a PAYE employee, which I do not believe to be the case with a FAS course

The best bet here would be to take advantage of the other benefit of the cycle to work scheme, that is the large amount of decent second hand road bikes from people upgrading or not taking to the scheme.

Fathead

My company has just launched the scheme.

Can i add additional funds, IE sell my current bike and add the funds to the €1k allowance. Allowing me to purchase a circa €1,700 bike.

CramCycle

Fathead wrote: »

My company has just launched the scheme.

Can i add additional funds, IE sell my current bike and add the funds to the €1k allowance. Allowing me to purchase a circa €1,700 bike.

You can just use the scheme to buy the 1700 bike with the permission of your boss. You will only get the tax break on the first 1000, the rest is treated like BIK if I remember correctly.

seamus

Fathead wrote: »

My company has just launched the scheme.

Can i add additional funds, IE sell my current bike and add the funds to the €1k allowance. Allowing me to purchase a circa €1,700 bike.

The only thing which is "strict" in the whole scheme is that the company has to purchase the bike on your behalf. So strictly speaking the company can't give you a cheque for €1000 and you add a wad of notes to it - theoretically the entire amount has to come out of your salary.
So in principle you need the company to agree to it. In practice it's usually not a problem.

dogsears

CramCycle wrote: »

You can just use the scheme to buy the 1700 bike with the permission of your boss. You will only get the tax break on the first 1000, the rest is treated like BIK if I remember correctly.

If the excess over €1,000 is reimbursed by the employee to the employer, as seems to be pretty much what Fathead is hoping to do, there is no BIK. Otherwise yes any excess over the €1,000 is a BIK.

gears

I've just started with a new company and one of the first things I wanted to do was get a bike through the scheme, unfortunately they don't want to work with the system as they say it would be too costly for the administration of it..... Yeah..
Is there a way you can still buy a bike through the system where you do any admin yourself or how can I get around this?

Mr.Fred

I'd say they have no interest in the hassle of it. I assume you want to pay for the bike over the full 12 months instead of a once off payment.

If you choose the once off payment option there there's no real admin to speak of.

dogsears

gears wrote: »

I've just started with a new company and one of the first things I wanted to do was get a bike through the scheme, unfortunately they don't want to work with the system as they say it would be too costly for the administration of it..... Yeah..
Is there a way you can still buy a bike through the system where you do any admin yourself or how can I get around this?

It certainly can be done with very little admin but there is absolutely no obligation on an employer to operate the scheme if they don't want to for whatever reason. The tax break only works where the employer gets involved, so if they don't want to, you're stuck.

Many employers only want to offer benefits to their entire workforce (if at all), so if this company has lots of employees, there probably is a cost in terms of hassle, even if not in direct cash. In addition, where several employees want to use the scheme, likelihood is at least some of them would prefer the option to spread payments over 12 months rather than pay once off, so companies usually need to offer that otherwise take up would be small.

If the company only has a few employees, it might be easier to implement in a simplified way.

Lumen

There is no way around it, apart from the obvious (persuasion or changing employer).

The scheme is entirely optional.

greenmat

Is there not a saving for the employer too, i.e, Employers PRSI? Surely that offsets any negative aspect of the scheme for them.

Mr.Fred

Perhaps a saving on a 100+ employees taking part in the scheme but then the admin costs would more than likely out weigh any saving if they all opted for the monthly payment plan.

If your employer doesn't want to offer the scheme afraid there's sweet fa you can do.

coastwatch

The best worst excuse I've heard for employer not offering the scheme, "not enough room on the payslip for the new monthly deduction"

gears

dogsears wrote: »

It certainly can be done with very little admin but there is absolutely no obligation on an employer to operate the scheme if they don't want to for whatever reason. The tax break only works where the employer gets involved, so if they don't want to, you're stuck.

Many employers only want to offer benefits to their entire workforce (if at all), so if this company has lots of employees, there probably is a cost in terms of hassle, even if not in direct cash. In addition, where several employees want to use the scheme, likelihood is at least some of them would prefer the option to spread payments over 12 months rather than pay once off, so companies usually need to offer that otherwise take up would be small.

If the company only has a few employees, it might be easier to implement in a simplified way.

There are quite a few employees which is one of the main reasons why they are saying no to the scheme alright.

So if I'm reading this right,
I can pick a bike
Get an invoice
Go to my employer
Get a cheque from them payable to the bike shop.
The employer deducts this amount from gross salary
Result I pay less tax as a result of buying the bike.

Or perhaps my knowledge of tax is all wrong.

CramCycle

gears wrote: »

Result I pay less tax as a result of buying the bike.

Or perhaps my knowledge of tax is all wrong.

Precisely, your employer also makes a small saving from PRSI contributions etc. Those claiming that it is a huge admin cost either have incompetent admin staff or are paying their staff to much.

The invoice is the proof to the employer that the cheque is being used to buy a bike and is therefore compliant with the scheme. That is about the only difficult thing for them to do.

dogsears

CramCycle wrote: »

Those claiming that it is a huge admin cost either have incompetent admin staff or are paying their staff to much.

Whatever the reason, overcoming pre-existing resistance to a BTW scheme can be difficult.

Sometimes companies have committees that interact with management on matters such as benefits, environment etc. Perhaps OP could apply pressure through something like that, if his new company has these. If so, the PRSI benefit should certainly be pointed out, as well as the fluffier things like a more contented workforce etc.

gears

dogsears wrote: »

Whatever the reason, overcoming pre-existing resistance to a BTW scheme can be difficult.

Sometimes companies have committees that interact with management on matters such as benefits, environment etc. Perhaps OP could apply pressure through something like that, if his new company has these. If so, the PRSI benefit should certainly be pointed out, as well as the fluffier things like a more contented workforce etc.

I hadn't thought of the PRSI. To be honest I've been self employed for years and only just getting back to work for someone else so just getting used to the penal new tax rates. From what I can see Employer PRSI is 10.75% of earnings above €500/wk if this is correct the employeer would save €107.50 of every €1000 spent by an employee on a bike???? Again my tax calculations may be wrong.

Mr.Fred

gears wrote: »

Employer PRSI is 10.75% of earnings above €500/wk if this is correct the employeer would save €107.50 of every €1000 spent by an employee on a bike????

As good as that sounds if the employer doesn't want the hassle you may aswell be banging your head against the wall.

The best thing to do is put it all together in a package and present it to him and if you've an accounts dept run it by them first and let him know that accounts said it wouldn't be an issue.

gears

Mr.Fred wrote: »

As good as that sounds if the employer doesn't want the hassle you may aswell be banging your head against the wall.

The best thing to do is put it all together in a package and present it to him and if you've an accounts dept run it by them first and let him know that accounts said it wouldn't be an issue.

You'd think that saving over €100/ employee would be enough of an incentive to operate the scheme. But I'll put it all together and see what happens. Thanks for the help.

Mr.Fred

gears wrote: »

You'd think that saving over €100/ employee would be enough of an incentive to operate the scheme. But I'll put it all together and see what happens. Thanks for the help.

you would think it alright but your employer is probably thinking about the hours you've spent planning this,sneaking online during work hours to drool over the latest piece of carbon, how long did accounts spend changing payroll.. etc etc.. before you know it that €100 saving has cost him €50

That's why I'd recommend laying it all out step by step and with as little fuss as possible. If they've said no once they may not even entertain you but no harm in trying I guess. My employer wouldn't have a bar of it but I plan on broaching the subject again once funds allow

kev-bt

How ye lads, I was reading through the forum there and I didn't come across the answer I was looking for.

I understand the system i.e. pick a bike and get the employer to pay it and I pay it back through my Gross Wages. Our secetary here isn't sure how to go about setting it up for paying back.

How does the company apply for the scheme i.e. how do they get to pay back €1000 tax free?

Does she have to contact revenue?

What I don't understand is that is just seems to be an agreement between employee and employer of how to pay it back, if that is so then what is stopping them offering a benefit worth €2000 rather than €1000 (I'm not suggesting this just trying to understand how to get it set up on payroll).

Does the bike shop have to state in the invoice that the bike is part of the cycle to work scheme?

Thanks in advance!

Beasty

There are no special arrangements with the Revenue or bike shop. Basically the employer pays for the bike then deducts the cost from gross salary (either in 1 go or spread over 12 months). If your marginal tax/levy rate is 52% and the bike costs 1,000 the employer deducts 1,000 from your gross salary but you only see a net (after tax) reduction of 480 in your take-home pay

Bottom line is you have paid 480 for a bike worth 1,000 and your employer has also saved a bit of PRSI

kev-bt

Beasty wrote: »

There are no special arrangements with the Revenue or bike shop. Basically the employer pays for the bike then deducts the cost from gross salary (either in 1 go or spread over 12 months). If your marginal tax/levy rate is 52% and the bike costs 1,000 the employer deducts 1,000 from your gross salary but you only see a net (after tax) reduction of 480 in your take-home pay

Bottom line is you have paid 480 for a bike worth 1,000 and your employer has also saved a bit of PRSI

Thanks for your reply. Just from an employers point of view is it just a standard thing they set up on their payroll to deduct the costs? They want to know every little detail before they agree to the scheme!

Beasty

kev-bt wrote: »

Thanks for your reply. Just from an employers point of view is it just a standard thing they set up on their payroll to deduct the costs? They want to know every little detail before they agree to the scheme!

Should be easy enough to make an djustment to gross pay, but they need to be careful it doesn's affetc anything else that is calculated by reference to gross pay (such as pension contributions). It's down to whathever system they use

There is also a bit of admin as the employee needs to sign the salary sacrifice document and confirm they will use the bike mainly for commuting. They do get the PRSI saving (and a happier employee!) in return though

dogsears

kev-bt wrote: »

what is stopping them offering a benefit worth €2000 rather than €1000 (I'm not suggesting this just trying to understand how to get it set up on payroll).

They could do that but the additional €1,000 would be taxable.

hoogeebear

Hi,

Is it possible to find out off Revenue (or another source) when I am due to apply for bike to work scheme? I used BTW sometime in 2009 (bike stolen after 3 weeks!).

Be great if I could find out exactly when I can apply again....

Thanks!

Jack.

dogsears

hoogeebear wrote: »

Hi,

Is it possible to find out off Revenue (or another source) when I am due to apply for bike to work scheme? I used BTW sometime in 2009 (bike stolen after 3 weeks!).

Be great if I could find out exactly when I can apply again....

Thanks!

Jack.

If you're sure about first using the scheme in 2009, then you can use again anytime from 1 Jan 2014. You can only use the scheme once in a 5 year period but as the scheme operates in full calendar years the 5 year period basically means the year of first use plus the next 4, so 2009 plus 2010-2013. Your 5 year period ends 31-12-2013.

billyhead

hoogeebear wrote: »

Hi,

Is it possible to find out off Revenue (or another source) when I am due to apply for bike to work scheme? I used BTW sometime in 2009 (bike stolen after 3 weeks!).

Be great if I could find out exactly when I can apply again....

Thanks!

Jack.

You could find out of your HR/personnel section when exactly you availed of it initially. I am not sure about the 5 year period stsrating again on the 1st of Jan. No one really knows for certain because no one has availed of it a second time around.

dogsears

billyhead wrote: »

I am not sure about the 5 year period stsrating again on the 1st of Jan. No one really knows for certain because no one has availed of it a second time around.

With respect, I am sure. Its not necessary to wait until someone's used the scheme a second time. The rules have already been written down. Unless they're amended (no chance) or repealed (not likely but not out of the question) it'll be Jan 1.

Having said that, as most people are aware of a 5 year issue, but few people are aware of the specific words of the legislation, I think there could well be confusion in HR depts, tax offices etc in respect of the first flood of eligible people. It would be useful if Revenue clarified this on their FAQ on the topic. I'm going to write to them and will report back (if I get a response).

Cee-Jay-Cee

Any teachers or people working for dept of education able to clarify something for me in relation to BTW scheme: the dept circular states that all payments from salary must be completed by the last pay date in November of that calendar year so does that mean that the maximum period in which to pay is 11 months or can one apply on the 1st December and therefore have the full 12 months in which to spread the payment over?

RasTa

Could anyone who has purchased in this manner before tell me what to do.

MOD VOICE: Nope, as per site rules, tax fraud is a crime and discussion there of is not allowed

RainyDay

Could you be more specific about your question - do you mean 'Could anyone who has purchased in manner designed to defraud the Revenue Commissioners before tell me what to do?'

MOD VOICE: They could but I would not be impressed, I have a sore shoulder and lifting a hammer could be irritating :pac:

Lemlin

Just one question I've had asked by a friend recently. If one half of a couple is on the higher tax bracket, and the other on the lower tax bracket, if they both go for the bike to work will both benefit from the higher tax rate savings if their combined income is more than 64k? e.g. when you add their incomes and divide by two, it's more than the 32k which is tax band.

Idleater

Yes if they are jointly assessed, no otherwise.