Brian Leddin (Limerick City, Green Party)
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53. To ask the Minister for Finance if he will address the anomaly in which an e-bike qualifies under the cycle to work scheme but an e-bike kit does not; and if he will make a statement on the matter. [36743/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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It is understood that the Deputy is referring to an e-bike conversion kit, which enables a push bike to be converted into an e-bike.

I am advised by Revenue that section 118 of the Taxes Consolidation Act 1997 provides that a charge to tax will generally arise where an employer provides a benefit to a director or employee.

The Cycle to Work scheme provides for an exemption from this charge to tax and allows an employer to purchase a bicycle and safety equipment for a director or employee without a taxable benefit-in-kind (BIK) arising. An employer may also enter a salary sacrifice arrangement under which an employee foregoes an agreed amount of their gross salary in exchange for a bicycle and related safety equipment.

Where a bicycle or safety equipment is being purchased under the Cycle to Work scheme or through a salary sacrifice arrangement, certain conditions must be met.

Among these conditions is the requirement that the bicycle must meet the definition of a ‘pedal cycle’. A ‘pedal cycle’ means:

- A bicycle or tricycle which is intended or adapted for propulsion solely by the physical exertions of a person or persons seated thereon, or

- A pedelec, being a bicycle or tricycle which is equipped with an auxiliary electric motor having a maximum continuous rated power of 0.25 kilo-watts, of which output is progressively reduced and finally cut off as the bicycle reaches a speed of 25 kilometres per hour, or sooner if the cyclist stops pedalling.

A ‘pedal cycle’ does not include a moped or a scooter.

In addition, only the following safety equipment is covered by the Cycle to Work scheme or salary sacrifice arrangements:

- Cycle helmets which conform to European standard EN 1078;

- Bells and bulb horns;

- Lights, including dynamo packs;

- Mirrors and mudguards to ensure riders 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 bikes can be safely secured;

- Pumps, puncture repair kits, cycle tool kits and tyre sealant to allow for minor repairs; and

- Reflective clothing along with white front reflectors and spoke reflectors.

A number of additional conditions apply to both the Cycle to Work scheme and salary sacrifice arrangements, for example:

- Exemption Limits - as of 1 August 2020, the exemption provided under the Cycle to Work scheme applies to the first €1,250 expenditure incurred. A higher exemption limit of €1,500 applies in the case of the provision of an electric bike. Prior to August 2020, a single limit of €1,000 applied to all bicycle types. An employer may incur expenditure in excess of the above limits, and this does not preclude the employee or director from availing of the exemption, however any amount in excess of the relevant limits will be liable to tax. A salary sacrifice arrangement is subject to the same monetary limits.

- Time Limit -an employee or director can only avail of the Cycle to Work scheme once in any 4-year period, commencing with the date the employee is first provided with a bicycle or bicycle safety equipment. Prior to 1 August 2020 an employee or director could only avail of the Cycle to Work scheme once in any 5-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.

An e-bike conversion kit of the type referred to by the Deputy would not be covered by the Cycle to Work scheme or salary sacrifice arrangement as it does not meet the definition of a ‘pedal cycle’ and would not come within the other allowable expenditure category of ‘bicycle safety equipment’, as set out in the legislation.

The inclusion of such kits in the scheme would create an additional cost and that cost must be recovered elsewhere. For that reason, while the scheme is kept under review by officials, I have no plans at present to make such a change.

Further guidance regarding the Cycle to Work scheme and salary sacrifice arrangements can be found on Revenue’s website.