All Benefits in Kind (“BIK”) are subject to PAYE, PRSI and USC, and taxed as notional pay. They are taxable when the benefit is provided or when the payment is made. Where the benefit provided to the employee does not exceed €500 in value, there is no BIK, the amount is not cumulative over a number of benefits and only one such benefit may be provided annually.
Consequently, there is an obligation to report and pay any tax due from the employee.
In certain exceptional circumstances the employer may pay the tax on behalf of the employee, as follows:
1) Where the employee has insufficient income; in such cases the payment on behalf of the employee will be treated as a simultaneous deduction from the employee’s IT liability.
2) Employers may make arrangements with Revenue to account directly to Revenue rather than through the normal PAYE system for the tax payable in respect of benefits provided to employees who are minor and irregular. Where the employer so accounts for the tax, the benefits will not form part of the total income of the employees and they will not be entitled to credit for or repayment of the tax accounted for.
Old cars: The assessable annual cash benefit for the use of a company car is calculated at 30% of the original market value (“OMV”) of the car. This percentage is reduced for high business mileage as follows:
|Business Mileage Exceeding||Not Exceeding||%|
New Cars: For 2009 and subsequent periods, emission allowances will be the basis for assessing BIK on company cars.
|Vehicle Emission Category||CO2 Emissions (CO2 g/km)||OMV %|
Tapering relief is available for high levels of business travel.
|Lower km||Upper km||A,B,C OMV %||D,E OMV %||F,G OMV %|
Employee contributions: A reduction is available where an employee makes a general contribution to the running costs of the car; however, a deduction is no longer available where an employee meets the specific cost of motor tax, insurance and running costs.
Foreign Travel: Where an employee is required to work abroad, the notional pay is reduced by reference to the number of days spent working abroad. This is conditional on the employee working a minimum of 30 days abroad and the car not being available for use by family members during the period of
Further reduction: A 20% relief from BIK on cars applies to employees who work at least 20 hours per week, and whose annual business mileage exceeds 8,000 km. The employees must spend 70% or more of their time away from their place of work or business, and work a minimum of 20 hours per week on average. Revenue will require each employee to submit a logbook, which must be retained for up to six years.
Tip: It is more beneficial to use tapering relief where business mileage exceeds 32,181 km.
Tip: It will be more beneficial for employees to make a general lump sum contribution to the cost of the car, instead of say meeting the cost of insurance, tax etc. as BIK is reduced € for € on any general contribution made by the employee for the use of the car.
Pool cars do not attract BIK provided the car is available for the use of more than one employee and provided the car is not kept overnight at the employee’s home.
Electric cars are worth considering with a lower BIK rate.
There is an exemption from BIK on the provision of a company van where all of the following conditions are satisfied:
• The van is essentially used for the purposes of the employee’s work
• The employer requires the van to be brought home
• The employee spends most of his/her working time away from the office
Where any of the above conditions are not met, a BIK charge of 5% of the original market value applies.
Finance Act 2017 introduces a zero percent BIK rate for electric vehicles in 2018 which applies equally to company cars and company vans. Finance Act 2018 imposes a limit of €50,000 on the original market value of the vehicle where made available in the three-year period to 31 December 2021.