Provision of Bicycles for Directors and Employees - Mar '09

As part of Budget 2009, and under Section 7 of the Finance Bill, 2008, there is a proposal to provide a Benefit-in-Kind Tax exemption where an employee/director is provided with a bicycle or bicycle safety equipment by an employer. The bicycle or associated safety equipment must be used by the employee/director mainly for qualifying journeys. The specific requirements and limits of the scheme are defined below.

Limits

There is a limit of €1,000 on the cost of the bicycle/safety equipment for any particular employee. Furthermore, the exemption can only be availed of once in any 5-year period by any one employee.

The exemption will only apply where the provision of bicycles/safety equipment is made available by the employer to all of its employees/directors.

An employee will be able to avail of the exemption even where the employer spends in excess of €1,000, but only the first €1,000 will be exempt from the benefit-in-kind charge to income tax.

Qualifying Journeys

The bicycle/safety equipment must be used by the employee mainly for qualifying journeys. A qualifying journey is defined as a journey in which the whole or part of the journey is between the employee's home and normal place of work (including between home and train/bus station), or between his/her normal place of work and another place of work. The employee must provide a signed statement confirming that the bicycle is for his/her own use and will be used mainly for qualifying journeys. There is no minimum threshold for the number of days the bicycle should be used, so long as the bicycle is used mainly for qualifying journeys.

Qualifying Bicycles and Safety Equipment

The exemption will cover pedal bicycles, tricycles, pedelecs (i.e. an electronically-assisted bicycle). It will not cover motorbikes, scooters or mopeds.

The following safety equipment is covered by the exemption:

Purchaser and Purchasing Arrangements

The employer must purchase the bicycle/safety equipment. The exemption will not apply where the employee purchases the bicycle/equipment and is reimbursed by the employer.

An employer may allow employees to select the bicycle/safety equipment from the retailer of their choice or the employer can limit the option to only one designated retailer.

If the employer incurs delivery charges in respect of the purchase, these will be covered provided the maximum value of the benefit does not exceed €1,000.

The employer is liable to pay VAT on any bicycle/safety equipment purchased. The employer will not be able to claim an Input Credit in respect of VAT payable, as the bicycles/safety equipment will not be used for the purposes of taxable supplies.

Salary Sacrifice Arrangements

An employer and employee may enter into a salary sacrifice arrangement whereby the employee will forgo part of his/her salary to cover the costs associated with the purchase of the bicycle/safety equipment. The employee will not be liable for tax, PRSI or levies on the salary forgone. The salary sacrifice arrangement must be completed within 12 months of the provision of the bicycle/safety equipment.

Remittance to Revenue Commissioners

An employer does not have to notify the Revenue Commissioners that it is providing bicycles/safety equipment for employees. However, the purchase of bicycles/safety equipment will be subject to the normal Revenue audit procedure, with the normal obligation on an employer to maintain records. These records include:

There is a detailed Guidance Document available on the Revenue Commissioners website www.revenue.ie.