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

tamaskan

CramCycle wrote: »

Nope, its a deduction from your gross salary and it should be marked on your wage slip but the tax office do not have to be notified as far as I am aware unless specifically asked.

Thanks CramCycle. So my employer just divides the €450 or whatever x12 and deducts that each month from my wages. How does revenue know the deduction is for the BTW scheme?

Beasty

tamaskan wrote: »

How does revenue know the deduction is for the BTW scheme?

No, and they don't care. It does not have to be done as any "deductions" - your employer could simply give you a bike with a value of up to €1,000. Of course the vast majority go through the salary sacrifice process, but that does not need reporting to the Revenue (nor indeed is there any formal process to do so)

ruskin

I have a question about the bike to work scheme. I work in a job full-time (where I am taxed in the lower bracket). I also work for myself on evenings doing graphic design work. The work I do here has to be taxed at the higher (40%) range. If I apply for the bike to work thing, does the tax exemption fall into the higher or lower group?

Beasty

ruskin wrote: »

I have a question about the bike to work scheme. I work in a job full-time (where I am taxed in the lower bracket). I also work for myself on evenings doing graphic design work. The work I do here has to be taxed at the higher (40%) range. If I apply for the bike to work thing, does the tax exemption fall into the higher or lower group?

It works through the PAYE system so initially you get the lower relief. However it reduces your overall gross taxable pay and presuming you file a tax return and you are actually subject to higher rate tax you will in effect get the full higher rate relief (evantually)

dceire

I'm looking to buy a bike direct from Canyon through the bike to work scheme. I work for a company with charity status and we do not have an Irish VAT number. From what I understand, from below, this means that we just pay the VAT applied by the online seller wherever they may be in the EU (Canyon = Germany?) and are not liable for any further VAT in Ireland. Is this correct?

I pray that it is because it would make things a lot simpler.

Beasty wrote: »

Assuming the employer is registered for VAT in Ireland, and the bike is bought from an Irish retailer, the position is straightforward. The retailer charges 23% VAT, and the employer cannot claim it back. The same situation arises where the UK retailer is registered for Irish VAT (eg Wiggle)

If the employer is registered for VAT in Ireland and the bike is bought from a UK (or other non-Irish) retailer that is not registered for VAT in Ireland (which is often the case, the main exceptions being Wiggle and ChainReactionCycles), the employer should provide the retailer with its Irish VAT number. The retailer should then not charge any VAT. However the employer should then self-account for Irish VAT at 23%, and is unable to recover it. If the employer does not provide it's Irish VAT number, you end up paying both UK VAT (on the initial purchase) and Irish VAT (under the self-accounting system) - there is a procedure to recover the UK VAT paid but it is very messy and time-consuming, so it's better not to go there!

In all the above examples, the net position is that irrecoverable Irish VAT at 21% is suffered. It is perhaps important to note that if you are looking at prices with 20% UK VAT that come to just under €1,000, the extra 1% may bring you above the €1,000 threshhold. In this case, only the excess is a taxable benefit in kind.

The one situation where Irish VAT is not paid is where the employer is not registered for Irish VAT (not normally the case, but possible, particularly for low turnover or financial service companies). In this case the retailer charges UK VAT at 20%, but there is no mechanism for the employer to charge itself Irish VAT. Hence the VAT cost is 20% in this case.

dceire

Does anyone know for definite the situation when buying online from abroad? I called revenue today and they didn't even seem to know. The best answer they could provide is, once the invoice is in euros there's no problem

That sort of flies in the face of what I've been reading.

CramCycle

dceire wrote: »

Does anyone know for definite the situation when buying online from abroad? I called revenue today and they didn't even seem to know. The best answer they could provide is, once the invoice is in euros there's no problem

That sort of flies in the face of what I've been reading.

Thats what happened to me, I bought mine from Evans after my LBS ran out of stock (but were very helpful in locating other stores in Dublin who might of had it). I done it over the phone with Evans as the company credit card got flagged when I went to buy a bike. I have seen alot of posts on getting Irish VAT applied but no one in work or revenue seemed to care. Just that there was an invoice for the correct amount. Not sure what the technicalities are though.

Beasty

dceire wrote: »

I'm looking to buy a bike direct from Canyon through the bike to work scheme. I work for a company with charity status and we do not have an Irish VAT number. From what I understand, from below, this means that we just pay the VAT applied by the online seller wherever they may be in the EU (Canyon = Germany?) and are not liable for any further VAT in Ireland. Is this correct?

I pray that it is because it would make things a lot simpler.

Clearly I'm going to say yes, that is correct, as I made the original post, but yes that is correct ....

Beasty

Just to add the currency your employer uses does not matter - they need to convert the purchase price into euros though to calculate any deductions from salary (assuming you are paid in euros) and confirm the price paid (whether it was above €1,000 for example). They should convert it at the current exchange rate - what exactly this means is largely down to how they do foreign currency transactions in their accounts

godtabh

Beasty wrote: »

No, and they don't care. It does not have to be done as any "deductions" - your employer could simply give you a bike with a value of up to €1,000. Of course the vast majority go through the salary sacrifice process, but that does not need reporting to the Revenue (nor indeed is there any formal process to do so)

Just on that point are you saying an employer can give a bike free to an employee up to a value of €1000 without any tax implications?

The reason why I ask is that I have made enquires about getting the BTW here.

This is the response I got

The schemes that we have run so far have all resulted in the employee buying their bike from the business at the end of the hire purchase period – at a charge of 15% of net cost.

I've asked for confirmation of what this means but form your post it would appear that it can be implemented in various ways. I just assumed standard salary deductions to pay it off

CramCycle

godtabh wrote: »

Just on that point are you saying an employer can give a bike free to an employee up to a value of €1000 without any tax implications?

I always wondered would this be seen as BIK rather than the BTW but that would be at the companies discretion. They may have awarded you a bonus of 1000euro that paid for the bike.

godtabh

CramCycle wrote: »

I always wondered would this be seen as BIK rather than the BTW but that would be at the companies discretion. They may have awarded you a bonus of 1000euro that paid for the bike.

If i get a bike through work I will have to pay but their suggestion of buying the bike for 15% of the net value through me. I wasnt sure if they were mixing up how it is done in the uk as opposed to here

Beasty

If it's under the BTW scheme (which must be generally open to all employees), the employer can certainly give the bike to the employee. That's the starting point of the scheme, with the exemption from the BIK charge. They then add on the salary sacrifice arrangements which allow the employer to recover the cost from the employee without penalty to them or the employee

Beasty

Just on the point of buying a bike at the end of a hire period for 15% - this is nothing to do with the Irish BTW scheme. The employee is supposed to buy the bike up-front (as new). The UK scheme works in this sort of way though with the employer letting the employee use the bike during a "hire period" without charge, and the employee buying it for its second hand value at the end of the hire period.

godtabh

Beasty wrote: »

Just on the point of buying a bike at the end of a hire period for 15% - this is nothing to do with the Irish BTW scheme. The employee is supposed to buy the bike up-front (as new). The UK scheme works in this sort of way though with the employer letting the employee use the bike during a "hire period" without charge, and the employee buying it for its second hand value at the end of the hire period.

I knew they got the two of them confused. I was trying to explain to HR that Dublin is in a different country with a different BTW scheme. You should see the hassle I have to go through while claiming expenses!

bp_me

dceire wrote: »

Does anyone know for definite the situation when buying online from abroad? I called revenue today and they didn't even seem to know. The best answer they could provide is, once the invoice is in euros there's no problem

That sort of flies in the face of what I've been reading.

There is a list of companies somewhere. Abroad is no issue as CRC are on the list for the example.

Beasty

bp_me wrote: »

There is a list of companies somewhere. Abroad is no issue as CRC are on the list for the example.

There is no "official" list - you can buy from any overseas retailer, but it does get a bit more complicated once you get outside the EU

Beasty

godtabh wrote: »

I knew they got the two of them confused. I was trying to explain to HR that Dublin is in a different country with a different BTW scheme. You should see the hassle I have to go through while claiming expenses!

I'm pretty much responsible for our set-up over here, and am particularly aware of tax issues so my employer does not have any "confusion" (or if there is I basically put HR right!)

bp_me

Beasty wrote: »

There is no "official" list - you can buy from any overseas retailer, but it does get a bit more complicated once you get outside the EU

You are right of course. I was thinking of the nice long list on procurement.ie ( http://www.procurement.ie/sites/default/files/bicycle_suppliers_-_14.05.14.pdf )

ruskin

I am considering availing of a bike and equipment through the bike to work scheme. I work 9-5.30 and am on a wage that would technically put me into the lower tax bracket. However, I also work for myself and am registered for tax, and on this additional work, I am taxed at the higher tax rate. Can I avail of the higher relief through the bike to work scheme, since ultimately I pay tax at the top rate? If so, does anyone know how this is done?

Skrynesaver

Do you own a company that pays you a wage or are you self-employed in your second role?

ruskin

self employed

Oryx

Moving this to cycling forum. Maybe taxation is better but see how you get on.

EDIT: Moved to megathread

Beasty

ruskin wrote: »

self employed

If you are self-employed you do not qualify for the scheme. It's available to employees taxed under PAYE only

Idleater

Beasty wrote: »

If you are self-employed you do not qualify for the scheme. It's available to employees taxed under PAYE only

But if (s)he is a paye employee for the other job, the scheme can be done under that at the "lower" bracket but by end of year the total earned from the second employment would effectively give relief at the higher rate?

Beasty

Idleater wrote: »

But if (s)he is a paye employee for the other job, the scheme can be done under that at the "lower" bracket but by end of year the total earned from the second employment would effectively give relief at the higher rate?

Sorry but missed that point - yes the effect will be at the marginal tax rate. Essentially the tax return will aggregate income from the two sources. The income subject to PAYE will have been reduced by the BTW payments, and the effect is to reduce the total income declared on the tax return. The basic rate bracket remains the same, so indirectly the employee does get relief at the higher rate - the basic rate via PAYE and the balance via the submission of the tax return

ruskin

Beasty wrote: »

Sorry but missed that point - yes the effect will be at the marginal tax rate. Essentially the tax return will aggregate income from the two sources. The income subject to PAYE will have been reduced by the BTW payments, and the effect is to reduce the total income declared on the tax return. The basic rate bracket remains the same, so indirectly the employee does get relief at the higher rate - the basic rate via PAYE and the balance via the submission of the tax return

Thanks for that, but could you explain it a little simpler? Excuse me, but I've no idea about this!

Idleater

ruskin wrote: »

Thanks for that, but could you explain it a little simpler? Excuse me, but I've no idea about this!

Btw scheme is paye only. But if you have a second income, your annual tax is based on the total.
You can avail of the BTW scheme in your paye job and "only" save 21%, but your end of year accounts will reflect a 50% Btw saving assuming other deductions.
I recommend talking to your accountant or tax advisor.

hesker

I see on the Revenue website purchase of second-hand bikes under bike to work seems to be excluded

http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/faqs/cycle-work.html#cycle25

Does the scheme apply to second-hand bicycles and/or safety equipment?

No. The scheme applies only to new bicycles and cycle safety equipment purchased from approved providers.

When did this come into effect? I don't recall seeing this restriction when the scheme was set up. I still have the guidance document from 2008 that does not mention this requirement. I also retained the relevant section from Section 118(5G) TCA 1997, last updated Jan 2009. No mention of new bikes here either.
Was there an update to the legislation that introduced this restriction?

Idleater

hesker wrote: »

...last updated Jan 2009. No mention of new bikes here either.
Was there an update to the legislation that introduced this restriction?

The qualifying journeys clauses also seem to have been "tightened" up removing the "intention" element. Can you check if the wording around those sections has been updated too?