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Benefit in Kind

All Benefits in Kind are subject to PAYE, PRSI and USC, 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:

  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 liability to income tax.
  2. 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.

Company Cars

Old cars

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:

 

Exceeding Not Exceeding %  
0 24,000 30
24,001 32,000 24
32,001 40,000 18
40001 48,000 12
48,001+   6

 

New cars

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 %
A 0G/Km-120g/Km 30%
B >120G/Km-140g/Km 30%
C >140G/Km-155g/Km 30%
D >155G/Km-170g/Km 35%
E >170G/Km-190g/Km 35%
F >190G/Km-225g/Km 40%
G >225G/Km 40%

Tapering relief is available for high levels of business travel

Lower km Upper Km A,B.C OMV% D,E OMV% F,G OMV%
0 24,000 30 35 40
24,001 32,000 24 28 32
32,001 40,000 18 21 24
40,001 48,000 12 14 16
48,001 + 6 7 8

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.

Tip: It is more beneficial to use the tapering relief outlined above when business miles exceed 32,181 km.

Tip: Structure any employee contributions to maximise a reduction in BIK

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.

Tip:Pooled 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 employees home.

 

Company Vans

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.

Electric vehicles


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.

Preferential Loans

  • The specified rate for home loans is 4%
  • The specified rate for all other loans is 13.5%

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.

Accommodation

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.

Travel Passes

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.

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 employers PRSI saving of c. €75.

The provision of a travel pass is an acceptable form of salary sacrifice.

Professional Subscriptions

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.

 

Other Exemptions

  • Where private use is incidental to business use, the following will not be subject to benefit in kind:
    1. Mobile Phones
    2. 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

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.

Unapproved salary sacrifice arrangements are subject to tax.

 

Vouchers

An exemption for vouchers of up to €500 in value given to employees: vouchers may not be exchanged for cash.

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