Benefit in Kind
- Company Cars
- Company Vans
- Parking Levy
- Preferential Loans
- Travel Passes
- Childcare Facilities
- Other Exemptions
- Anti Avoidance
All Benefits in Kind are subject to PAYE and PRSI (including the health contribution) and taxed as notional pay. Benefits are taxable when the benefit is provided or when the payment is made. Where the benefit provided to the employee does not exceed €250 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, these situations are as follows:
- 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 liability to income tax.
- Employers may make arrangements with the Revenue Commissioners to account directly to the Revenue Commissioners rather than through the normal PAYE system for the tax payable in respect of benefits provided to employees which 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.
The assessable annual cash benefit for the use of a company car is calculated at 30% of the original market value of the car. This percentage is reduced for high business mileage as follows:
For 2009 and subsequent periods tapering business mileage will apply to old cars as follow:
|Exceeding||Not Exceeding %|
For 2009 and subsequent periods emission allowances will be the basis for assessing benefit in kind 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 meets some of the running costs of the car, however a deduction is no longer available where an employee meets the cost of motor tax and insurance.
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’s working a minimum of 30 days abroad and the car not being available for use by family members during the period of absence.
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 Kilometres. 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.
There is an exemption from Benefit in Kind 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.
A parking levy will be charged on employees using car parking facilities provided by their employer in the following areas:
The levy applies to designated car parking facilities and to those provided on a first come first served basis. In order for the levy not to apply an employee must disclaim their entitlement to use the car parking facility, however occasional use of the car parking facility is permitted i.e. less than 10 days a year.
The levy is €200 per annum, or €100 where parking spaces are shared and the ratio of employees using the spaces to the number of spaces is 2:1 or greater. The levy is to be deducted from net salary by employers.
The levy will be reduced for job sharers, part time employees, people on maternity leave and shift workers. The levy does not apply to disabled drivers.
- The specified rate for home loans is 5%
- The specified rate for all other loans is 12.5%
Tip: Preferential Rate will still apply to Homeloans even when they no longer qualify for Mortgage Interest Relief
The preferential sum is calculated by reference to the balance of the loan as reduced by actual repayments as opposed to payments due under a loan agreement.
The benefit in kind is the amount, which could reasonably be expected to be obtained on a yearly letting. Where the living accommodation is owned by the employer, the amount referred to is as a rule of thumb calculated as 8% of the current market value of the accommodation.
The provision by an employer of monthly or annual bus, train or LUAS passes to directors and employees is exempt from income tax. It is also possible to structure the reduction of an employees salary to cater for the provision of this benefit.
This exemption also includes passes for travel on commuter ferries which operate within the State.
Effective 1 January 2011, free or subsidized childcare facilities provided for employees by their employer will be subject to income tax, the Universal Social Charge and employee’s PRSI, as well as employers PRSI. Prior to 1 January 2011 there was an exemption from BIK available where the employer provides childcare facilities. The exemption applies where:
- The premises is made available solely by the employer;or
- Are made available by the employer jointly with third parties and the employer is responsible for financing and managing the childcare service; or
- Where the service is made available by other persons and the employer is wholly or partly responsible for financing and managing the childcare service.
Where the employer is not involved in the management of the childcare service, the BIK exemption is restricted to the amount expended by the employer on capital expenditure on the construction or refurbishment of the premises.
Professional subscriptions are subject to benefit in kind. However where the expense is incurred by the Company but 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 individuals employment duties then no BIK will arise.
A tax deduction for an annual membership fee of a professional body is available where;
- There is a statutory requirement for membership of a professional body before the individual member can carry out the duties of their employment.
- The individual is registered with a professional body and has a right by virtue of that membership to be heard in a court or tribunal on their own behalf or on behalf of a client.
- There is a requirement for a current practicing cert for the individual to carry out the duties of his/her employment.
- The duties of the employee require the exercise or practice of the occupation in respect of which the annual membership fee refers
- The employee exercises or practices the occupation in respect of which the annual membership fee refers
Membership of the professional body is an indispensable condition of the tenure of the employment.
- Where private use is incidental to business use, the following will not be subject to benefit in kind:
- Mobile Phones
- Computers and related equipment including high speed internet connections
- Certain costs and expenses in respect the provision of personal security assets and services to an employee will not be subject to benefit in kind where there is a credible and serious threat to a persons physical security resulting from their employment.
- The provision of a new bicycle and/or related safety equipment up to a maximum of €1,000, where the bicycle is used to travel between home and the normal place of work. The exemption can only be claimed once in every five years. If certain conditions are met it is possible to provide the benefit by reducing salary.
Anti avoidance measures exist to restrict the exclusion of PAYE to shares given to an employee in an employers company or a company controlled by an employer only. As well as applying to existing employees the measures also apply to previous employees who retain their benefits.
Anti-avoidance measures exist to restrict the exclusion of PAYE on shares given to an employee in an employer company or a company controlled by an employer only. As well as applying to existing employees the measures also apply to previous employees who retain their benefits.
Unapproved salary sacrifice arrangements are subject to tax.