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.
An exemption for vouchers of up to €500 in value given to employees: vouchers may not be exchanged for cash.
Professional subscriptions are subject to BIK. However, where the expense is incurred by the company and where the individual if they had incurred it would have been entitled to a deduction for the expense on the basis that it was incurred wholly, exclusively and necessarily incurred in the course of the
individual’s employment duties, then no BIK will arise.
The provision by an employer of monthly or annual bus, train, LUAS or ferry passes to directors and employees is exempt from IT. It is also possible to structure the reduction of an employee’s salary to cater for the provision of this benefit.
Tip: Tax savings arising from the provision of travel passes may also reduce the cost of providing car parking spaces where employees can be encouraged to use public transport. The employee tax and PRSI saving on a €700 annual pass is c.€300 and employer PRSI saving of c.€75.
The provision of a travel pass is an acceptable form of salary sacrifice.