CALLING all employers – would you like to help your employees save money, get fit and help the environment – all while saving yourself money too?
Julianne Spring Heavey, Chartered Tax Advisor at CDS Law & Tax LLP, tentatively writes ‘exciting times ahead’!
The days are getting longer, and we may feel relatively safer with a renewed resolve to carpe diem. So, here’s how a tax exemption can help.
Over the past two years many of us have been thinking more about exercise, getting outdoors in our local amenities, and saving the planet. If you’re an employer who registers with the ‘bike to work scheme’, you can help your employees tick all of these boxes.
This bike initiative is a win-win as it increases job-satisfaction, while representing a cost-saving for both the employee and the employer. Employees (and directors) save on up to 52%* of the cost of the new bike and equipment, and on car parking fees. Since cycling reportedly makes us happier, this supports employee retention (a hot topic right now) as happy staff are more likely to stay. Meanwhile, employer’s PRSI is not payable on the cost of the bike or equipment.
Also, it couldn’t be a more opportune time for us Kerry folk to invest in a new bike. We have the imminent openings of the Tralee-Fenit and Listowel-Abbeyfeale Greenways to look forward to, and this week’s Supreme Court decision clears the way for the construction of the Glenbeigh-Cahersiveen South Kerry Greenway.
Relief under the bike to work scheme provides that where the new bike and safety equipment meet certain conditions, they can be provided tax-free with the employee making a saving of up to 52%*, effectively allowing them to purchase the bike from pre-tax income.
*Based on an employee paying the marginal income tax rate plus PRSI and USC. The savings individual employees would make would vary depending on their tax credits, reliefs, and exemptions.
Here’s how the scheme operates:
- The employer can register with www.biketowork.ie which is a completely free service providing all administration for the scheme, a helpline for employees, and a list of participating local bike shops (or the employer can administer the scheme themself)
- While the employer does not have to take part in the scheme, if they do, however, it must be offered to all employees
- The bike shop or supplier is paid directly by the employer (reimbursement of the employee is not permitted)
- Employees effectively get up to 52% off* a brand-new bike and safety equipment with maximum relevant spend limits of –
- €1,250 for a new, regular bike, equipment and delivery costs, or
- €1,500 for a new, electric bike, equipment and delivery costs
- Any expenditure in excess of the relevant threshold will be a taxable benefit-in-kind and so PAYE, PRSI and USC must be operated on same
- An employee can avail of both a Travel Pass and this scheme
- Employer’s PRSI is not payable on the cost of the bike or equipment (but an input credit will not be available in respect of the VAT payable as the bike/equipment will not be used for the purposes of taxable supplies)
- The bike and equipment must be mainly used for travel to and from work, or between workplaces. Home-based employees may be provided with a bike under the scheme if it is used for work-related journeys
- The cost of the bike may be deducted from the employee’s gross pay under an agreed salary sacrifice arrangement over a period of up to 12 months, depending on the options that the employer provides [OR if an employer wishes to incur the cost instead of passing it on to the employee, that is permitted under the scheme so that the employee will not be subject to tax on the benefit in kind, as long as the relevant spend limits above are observed]
- The relief can only be claimed once every 4 years so if purchasing a bike and equipment, they should be purchased in the same transaction
- For all scheme conditions and further information on its operation go to www.biketowork.ie or www.revenue.ie
This scheme provides a very simple way of benefiting employees.
If you want to get serious about rewarding, retaining and incentivising key employees there are other tax-efficient opportunities to explore. For example, offering them a stake in your business through the exercise of qualifying share options under the Key Employee Engagement Programme (KEEP). Should you wish to discuss this or any other tax optimisation/planning opportunities, then do come in and talk to our tax team in CDS Law & Tax LLP, 4 Denny St., Tralee or phone us on 066 7169033.