Dáil Éireann Debate, Tuesday - 23 November 2021
236. Deputy Darren O'Rourke asked the Minister for Finance the cost of the cycle to work scheme in 2019 and 2020; the number of persons who availed of it in each year; and if he will make a statement on the matter. [57029/21]
View answer237. Deputy Darren O'Rourke asked the Minister for Finance the estimated cost of increasing the cycle to work threshold for bicycles from the current €1,250 to €1,500; and if he will make a statement on the matter. [57030/21]
View answer238. Deputy Darren O'Rourke asked the Minister for Finance the estimated cost of increasing the cycle to work threshold for ebikes from the current €1,500 to €1,750 and from €1,500 to €2,000; and if he will make a statement on the matter. [57031/21]
View answer239. Deputy Darren O'Rourke asked the Minister for Finance the estimated cost of extending the cycle-to-work scheme to self-employed persons; and if he will make a statement on the matter. [57032/21]
View answerI propose to take Questions Nos. 236, 237, 238 and 239 together.
Section 118(5G) of the Taxes Consolidation Act 1997 (TCA 1997) provides for the Cycle-to-Work scheme. This scheme provides an exemption from benefit-in-kind (BIK) where an employer purchases a bicycle and associated safety equipment for an employee.
Under section 118B TCA 1997 an employer and employee may also enter into a salary sacrifice arrangement under which the employee agrees to sacrifice part of his or her salary, in exchange for a bicycle and related safety equipment.
Where a bicycle or safety equipment is purchased under the Cycle to Work scheme or through a salary sacrifice arrangement certain conditions must be met, for example:
- The exemption applies to the first €1,250 of expenditure incurred by the employer in obtaining a bicycle and related safety equipment. This exemption limit is increased to €1,500 for pedelecs or ebikes and related safety equipment. Employers may incur costs in excess of these limits, but any such excess will not qualify for the exemption and will be liable to tax. A salary sacrifice arrangement is subject to the same monetary limits.
- The bicycle and related safety equipment must be new and must be purchased by the employer.
- The bicycle and related safety equipment must be used by the employee or director mainly for the whole or part of their journey to or from work.
- An employee or director can only avail of the Cycle to Work scheme once in any 4 year period. A salary sacrifice arrangement is subject to the same time limits and any salary sacrifice arrangement entered into must be completed within a 12 month period.
The Cycle to Work scheme is only applicable where the bicycle and safety equipment is provided by an employer to either a director or someone in its employment. Thus, where an employer-employee relationship does not exist, for example, in the case of self-employed individuals, students, retired individuals, job seekers or those in unpaid work, such individuals can’t qualify for the scheme. Likewise, salary sacrifice arrangements may only be entered into between an employer and a director or employee.
As the Deputy will be aware, the cycle to work scheme operates on a self-administration basis. Relief is automatically available provided the employer is satisfied that the conditions of its particular scheme meet the requirements of the legislation. There is no notification procedure for employers involved. This approach was taken with the deliberate intention of keeping the scheme simple and reducing administration on the part of employers. Accordingly, there are no records available on the number of people availing of the scheme or the cost of the scheme.
Tax expenditure reports prepared by my Department in 2020 have previously estimated the full year's cost at €4 million covering an estimated 20,000 employees but have been clear that these figures were estimates as separate returns are not required. This gives an estimated average tax relief of €200 per employee.
In the recent Report on Tax Expenditures 2021 published as part of Budget 2022, it was estimated that there would be 25,000 beneficiaries under the scheme at a cost of €5.5 million for a full year. (This recognised the increase in the allowable expenditure from €1,000 to €1,500 in respect of e-bikes and €1,250 in respect of bicycles and allowed the purchase of a new bicycle every four years instead of five, as provided for in the Financial Provisions (Covid-19) (No. 2) Act 2020). The Report is clear that these numbers are estimates as separate returns are not required under the cycle to work scheme. Increases in the thresholds as outlined by the Deputy would be likely to increase the numbers availing of the scheme, the potential benefit to employees, as well as the overall cost but the impact cannot be readily estimated.
