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

CramCycle

Fuzzy_Dunlop wrote: »

So basically the employer paying for the bike in the first place is a must. However they can pretty much take it out of your gross pay straight away after that if you and your employer want?

Yes, once its taken out of your salary in full within 12 months, it's all good. They can do that all in the first paycheque if they want.

pow07

Sorry for jumping in here, but I have a quick question Ref BTW

I got a bike from my last employer and they never actually per the cost through my pay, therefore I never paid for the bike.

Can I use the scheme again?

I take it revenue do not have me on there system as using the BTW, as it never went through my PAYE/PPS number.

Any advice would be good.

Thanks

mrcheez

Lucky git!

Sounds like you should be still eligible as the revenue didn't pay a proportion of the cost last time.

Beasty

Your employer does not have to charge you - it simply is a tax-free benefit in charge. You cannot however use the scheme again with the same employer for 5 years. There is quite a lot of discussion earlier in this thread over whether you can get a bike under the scheme from a new employer with differing views being expressed

@mrcheez - the Revenue have foregone tax on the benefit in kind so they, and in effect the rest of us taxpayers, have provided the required tax "subsidy" to pow07

Greethill

So if the employee and employer agree to pay off the cost of the bike over a shorter than normal term; for example 1000 out of first months salary instead of over 12 months, do they still save the same amount of tax on that as they would over 12 installments (52%) ??

Idleater

1000*.52 = ((1000/12) *.52) *12

du Maurier

CramCycle wrote: »

The scheme doesn't really work like that. You (well your company) pay fullprice for the bike.

This valus is deducted from your salary, either all at once or bit by bit over 12 months.

The savings are not discounts. What happens is because it is deducted off your gross salary, you pay less income tax, PRSI etc. i.e. so while it looks like 617 is missing from your wages, you are actually paying less tax. If you bought the bike from your net wages, you would have had to have paid income tax etc. on a greater amount to get the 617euro, to pay for the bike yourself.

Your employer in turn pays less Employer PRSI.

As for the one4all voucher, technically, your employer should be paying the bike shop directly, i.e you should never have the cash in your hands but sometimes with small companies this is impractical. Your employer should also receive an invoice and receipt for the bicycle and the accessories as a one4all voucher isn't covered, but if you furnish them with the receipt/invoice, it should be all rosy.

Hi there.

You seem to know what you're talking about as I'm at somewhat of a loss regarding what I signed up for.

Just briefly, the bike I purchased was 840. Divide that by 12, is 70, gross per month.

My apologies if this has been done in the thread, but I was under the impression I wouldn't have to pay the full gross but a net and that would be deducted monthly.

What I'm essentially 840/12=70. Not sure where I'm saving, and my other tax deductions seemed unchanged in my payslip.

Idleater

du Maurier wrote: »

Not sure where I'm saving, and my other tax deductions seemed unchanged in my payslip.

I presume the 70 per month was taken off your gross? If so, then you saved by not paying tax on it. Ie, if you didn't buy the bike, 70 extra would have been liable for tax. Assuming that you are on the higher rate, then you save that 42% and social charge etc.

If not, then your company haven't operated the scheme correctly.

du Maurier

Idleater wrote: »

I presume the 70 per month was taken off your gross? If so, then you saved by not paying tax on it. Ie, if you didn't buy the bike, 70 extra would have been liable for tax. Assuming that you are on the higher rate, then you save that 42% and social charge etc.

If not, then your company haven't operated the scheme correctly.

Thanks for your reply. Yeah, it's taken out of the gross. I was missing something there and I think you've made it clear to me. So when it's deducted from the gross, the savings thereafter ie, the 42%, (assuming it's the higher rate) is then calculated after?

dogsears

du Maurier wrote: »

So when it's deducted from the gross, the savings thereafter ie, the 42%, (assuming it's the higher rate) is then calculated after?

Lets assume gross is 500 and tax rate is 41%.

Without tax relief:

Gross 500, less tax 205 = 295. Then deducted 70 for bike, net = 225

With tax relief:

Gross 500 less 70 for bike = 430. Tax@ 41% on 430 = 176, net = 254.

The difference is (254-225)= 29. 70 @41% = 29

route66

du Maurier wrote: »

Thanks for your reply. Yeah, it's taken out of the gross. I was missing something there and I think you've made it clear to me. So when it's deducted from the gross, the savings thereafter ie, the 42%, (assuming it's the higher rate) is then calculated after?

Yes.

If €70 is taken from your gross earnings on your payslip - assuming you pay tax at the higher rate - your actual income will be smaller than an amount less than €35, taking PAYE, PRSI, social charges, etc into account.

I.E. the bike is costing you €35 per month.

whellman1030

I'm self-employed (have my own company) so how can I apply for the cycle to work scheme?

Also if I buy a bicycle in second hand in a shop or to a private will I be able to apply to the cycle to work scheme?

Third and last, where are the places in Galway where I can buy the cheapest mountain bikes? It's ridiculous because one bike here is 500€ and a cheap one in Portugal costs 60€.

Beasty

whellman1030 wrote: »

I'm self-employed (have my own company) so how can I apply for the cycle to work scheme?

Also if I buy a bicycle in second hand in a shop or to a private will I be able to apply to the cycle to work scheme?

Third and last, where are the places in Galway where I can buy the cheapest mountain bikes? It's ridiculous because one bike here is 500€ and a cheap one in Portugal costs 60€.

If you are unfamiliar with a forum ceck the Charter and in the cas the FAQs (which are in the same thread) and you will be able to see if we have a megathread (as is the case here)

Thanks

Beasty

Beasty

whellman1030 wrote: »

I'm self-employed (have my own company) so how can I apply for the cycle to work scheme?

Also if I buy a bicycle in second hand in a shop or to a private will I be able to apply to the cycle to work scheme?

Third and last, where are the places in Galway where I can buy the cheapest mountain bikes? It's ridiculous because one bike here is 500€ and a cheap one in Portugal costs 60€.

If you are self-employed you do not pay PAYE and cannot participate in the scheme. If you are the employee of a company you are not self-employed and are subject to PAYE and therefore can participate (but must make it available to any other employees of the company)

The bike must be new and complete - check the first page of this thread for a summary of the scheme

whellman1030

Beasty wrote: »

If you are self-employed you do not pay PAYE and cannot participate in the scheme. If you are the employee of a company you are not self-employed and are subject to PAYE and therefore can participate (but must make it available to any other employees of the company)

The bike must be new and complete - check the first page of this thread for a summary of the scheme

Yes I pay PAYE. So how can I aplly to the scheme beeing self employed?

Idleater

whellman1030 wrote: »

Yes I pay PAYE. So how can I aplly to the scheme beeing self employed?

Like every other paye worker, you go to a bike shop, pick out a bike, get an invoice from the shop, give that to your accounts / btw admin, they pay the bike shop and deduct the amount from your paye wages.

Beasty

whellman1030 wrote: »

Yes I pay PAYE. So how can I aplly to the scheme beeing self employed?

You are not self-employed if you pay PAYE (you may be a "one-man company" but you are definitely not "self-employed")

You do not "apply for" the scheme, just follow what Idleater says above

Paddigol

CramCycle wrote: »

The scheme doesn't really work like that. You (well your company) pay fullprice for the bike.

This valus is deducted from your salary, either all at once or bit by bit over 12 months.

The savings are not discounts. What happens is because it is deducted off your gross salary, you pay less income tax, PRSI etc. i.e. so while it looks like 617 is missing from your wages, you are actually paying less tax. If you bought the bike from your net wages, you would have had to have paid income tax etc. on a greater amount to get the 617euro, to pay for the bike yourself.

Your employer in turn pays less Employer PRSI.

Really sorry to be a pain in the ass with more questions. I just can't get my head around the whole tax thing. Not my forte! So apologies if you/ others think this has already been explained...

So I chose a bike for €1,000.
It's 'sold' to me on the basis that I only pay approximately 30% or €700.
But the reality is I still have to pay 1,000 for the bike, whether in one up-fornt payment or in installments over 52 weeks.
The employer might sign the cheque, but I still effectively pay the full €1,000 back - an interest free loan in other words?

Have I got that right?

_Puma_

You physically get 1000 euro taken out of your pay cheque but you pay 300 euro less tax subsequently.

Beasty

Paddigol wrote: »

Really sorry to be a pain in the ass with more questions. I just can't get my head around the whole tax thing. Not my forte! So apologies if you/ others think this has already been explained...

So I chose a bike for €1,000.
It's 'sold' to me on the basis that I only pay approximately 30% or €700.
But the reality is I still have to pay 1,000 for the bike, whether in one up-fornt payment or in installments over 52 weeks.
The employer might sign the cheque, but I still effectively pay the full €1,000 back - an interest free loan in other words?

Have I got that right?

You pay €1,000 of your gross pay. If your marginal tax rate is, say, 30% your reduction in take-home pay is €700 - you own a bike worth €1,000 and it's cost you €700 (ie you have saved €300 compared to buying the bike outside the scheme)

Whatever_fools

If you opt for a €1,000 bike your employer will pay €1,000 for that bike. You will agree to repay €1,000 to your employer over a set period of time. Say for example 10 months. So, every month for 10 months you will see €100 (€1,000 / 10) deducted from your Gross Salary and your PAYE, PRSI and USC will be applied to the balance. This €100 deduction will result in you taking home €50 less if you're on the higher tax bracket or €60 less if you're on the lower tax bracket (approx). This is where you make your savings.

Paddigol

Thanks for the replies.

I can't find anything on the Revenue/ citizens information web sites that say you are prohibited from simply giving your employer a cheque for €1,000 in return for their cheque to the bike company - is that permitted?

I only ask because my employer is willing to participate but, as cash flow is very tight, only on the basis that I refund them in full up front.

How will that affect my income tax/ pay?

Raam

Paddigol wrote: »

Thanks for the replies.

I can't find anything on the Revenue/ citizens information web sites that say you are prohibited from simply giving your employer a cheque for €1,000 in return for their cheque to the bike company - is that permitted?

I only ask because my employer is willing to participate but, as cash flow is very tight, only on the basis that I refund them in full up front.

How will that affect my income tax/ pay?

How are you gonna make the saving if you give em 1,000 quid?

Paddigol

Raam wrote: »

How are you gonna make the saving if you give em 1,000 quid?

By paying approximately €270 less in tax. But I wonder would this be a book keeper's nightmare (the paying in full up front part).

And on that point, everywhere seems to refer to 30% tax free. But when I use the on-line calculators I seem to only save €270, not €300.

Is there an official website anywhere? The exact details seems very sketchy, even though some of you appear to have figured it out. Where are the rules governing the scheme. 2009 Finance Act? This year's Finance Act even?? I've looked at the information on the revenue's site, but it seems quite vague on the finer points.

Again, sorry for (most likely) repeating questions previously raised. I just keep tripping myself up when I go back through all the posts.

Whatever_fools

You will still save the same even if they take it back in one pay cheque.

@ Raam As per my post above - the repayments are taken from gross salary, this is where the savings are made.

Whatever_fools

@Paddigol - Try this http://www.procurement.ie/sites/default/files/Revenue%20Guidance%20Document_0.pdf

Beasty

First the employer pays for €1,000 for the bike

The employee pays for this through a "salary sacrifice" - without that the scheme does not work. At the end of the month they reduce the gross salary by €1,000 (and net by €700)

If in the meantime the employee wishes to loan the employer €1,000 then that's fine (but completely independent of the scehme). If money is tight though and the employer goes bust before they repay the loan you will fall in line with all other creditors for repayment

Fuzzy_Dunlop

Paddigol wrote: »

Thanks for the replies.

I can't find anything on the Revenue/ citizens information web sites that say you are prohibited from simply giving your employer a cheque for €1,000 in return for their cheque to the bike company - is that permitted?

I only ask because my employer is willing to participate but, as cash flow is very tight, only on the basis that I refund them in full up front.

How will that affect my income tax/ pay?

Just get them to take the full whack out of your next pay check straight away. If they're really stuck for cash flow, wait until the week you're due to get paid to do this so it would go: Money out (for bike), take said money from gross pay => net payment of zero (and they save on employers PRSI I believe)

Beasty

Whatever_fools wrote: »

@ Raam As per my post above - the repayments are taken from gross salary, this is where the savings are made.

Raam knows how the scheme works;)

His point was different - if you pay €1,000 to the employer you have saved nothing - as I've just indicated this must be done through payroll

Raam

Whatever_fools wrote: »

You will still save the same even if they take it back in one pay cheque.

@ Raam As per my post above - the repayments are taken from gross salary, this is where the savings are made.

If Paddigol pays the 1,000 quid to the company, how does he get to claim the tax back? I know how the scheme works, just dunno how Paddigol can make his saving if he hasn't paid for it out of gross.