Employer Tip May 2011 Cycle To Work Scheme: Get fit, save tax and have a greener environment

Save Tax as you Save The Environment:    Employees can save on PAYE, PRSI and USC under the cycle to work scheme.

The Cycle to work scheme introduced in January 2009, allows for employers to provide a new bicycle or pedelec (bicycle equipped with an auxiliary electric motor) and associated safety equipment to employees who agree to use the bicycles to travel to work. They will be treated as a tax-exempt benefit-in-kind.

This tax exemption may only apply once in every 5-year period in respect of any one employee/director. There will be a limit of €1,000 on the amount of expenditure an employer can incur in respect of any one employee/director.

The cost must be incurred directly by the employer. It is not permitted for the employee to purchase a bicycle and then seek reimbursement from the employer.

The scheme may also be implemented via salary sacrifice arrangements, whereby an employee agrees to forego part of his or her salary to cover the costs associated with the purchase of the bicycle and associated safety equipment. Where such salary sacrifice arrangements are implemented they must be completed over a maximum period of 12 months. In such circumstances, the employee will not be liable to tax or PRSI or levies on the salary sacrificed. The maximum amount of salary that can be sacrificed is €1,000.