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.