The operation of Benefit-in-Kind (‘BIK’) in respect of company cars

In the current workplace environment, retention of talent is key and it is often the case that Employers consider additional incentive packages for their staff. One such common benefit is the provision of a company car where the deemed private use is subject to PAYE/PRSI as notional pay. The basis for such notional benefit is between 6% and 30% of the Original Market Value of the car, depending on the level of business mileage with a reduction from 30% only applying where the employee has travelled 24,000 or more business kilometres in a tax year. Where a reduced rate is to be applied, it is imperative that the employer retain a detailed record to support the level of business kilometres travelled, which is typically by way of a log book of travel which is maintained by the employee and verified by the employer. 

In a move towards lower emissions and greener vehicles, the most recent Budget brought about the introduction of a 0% BIK regime for electric vehicles. It should be noted that this special rate only applies to vehicles powered solely by electric power, and will also extend to any facilities for charging provided by the employer. The impact of this new regime on the uptake in electric vehicles has yet to be quantified, and much commentary expects same to be limited by reason that the 0% rate has been introduced initially for one year only from 1st January to 31st December 2018. That being said, it is widely anticipated that the regime will be extended for a further period by the Minister in the next Budget. This may render the rate as a more attractive option for employers/employees in terms of their choice regarding company vehicles, if the benefit of the 0% rate is to be guaranteed for a longer period of up to 3 or 5 years.

Return to: Tax Issue - Summer 2018

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Mairead O'Grady

Taxation Partner

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