The Cycle to Work Scheme is a scheme offering a tax incentive, with the hopes to promote a healthy lifestyle and reduce commuter traffic by encouraging employees to cycle to and from work. Under the programme, employers pay for bicycles and equipment for their employees, and the employee pays back through a salary sacrifice arrangement. Employees are not liable for tax, PRSI or USC on their repayments. As an employer, you do not have to take part in the scheme. However, if you do, it must be offered to all employees.
The scheme provides for new bicycles and pedelecs, but It does not cover motorbikes, scooters or mopeds. It does cover:
- Cycle helmets which conform to European standard EN 1078
- Bells and bulb horns
- Lights, including dynamo packs
- Mirrors and mudguards to ensure that the rider’s visibility is not impaired
- Cycle clips and dress guards
- Panniers, luggage carriers and straps to allow luggage to be safely carried
- Locks and chains to ensure cycle can be safely secured
- Pumps, puncture repair kits, cycle tool kits and tyre sealant to allow for minor repairs
- Reflective clothing along with white front reflectors and spoke reflectors.
How is payment managed?
Usually, the employer pays the supplier for the bicycle and sets up a ‘salary sacrifice’ arrangement from the employee’s salary over an agreed time frame (which cannot be more than 12 months). The payment for the bicycle and equipment is taken from the employee’s gross salary, before income tax, PRSI, pension levies or USC are deducted. These deductions are made according to the salary payment arrangements of the business — i.e. weekly, fortnightly or monthly. An employer can also buy the bicycle on the behalf of their employee and not require them to pay you back.
There is a cap of €1,000 on the amount that can be spent (this includes bicycles, safety equipment and delivery charges). If more is spend than this limit, the employee is liable for a benefit-in-kind income tax charge.
How is the bike to be used?
Employees must use the bicycle and safety equipment mainly for ‘qualifying journeys.’ These are journeys that make up the whole or part of the trip an employee makes between their home and place of work. Though employers do not have to monitor this, employees will be asked to sign a statement saying that the bicycle is for their use and will be mainly used for such journeys.
Do I need to record this?
An employee can only avail of the scheme once in five years. This applies even if they do not purchase equipment up to the €1,000 threshold. The tax year in which the scheme is availed of counts as the first year. This should be recorded by employers in their HR Software where possible as all records about this scheme can be examined by Revenue as part of regular inspections. Failure to operate the scheme correctly will result in the benefits being withdrawn from both you and your employee.