General
The tax due on benefits in kind are taken at source by your employer and are also taken into account for PRSI and USC Levy purposes by treating the benefit in kind as part of your salary payment.
The most common Benefit in Kind Tax is the company car. All employees who are provided with a company car should check to ensure that their employer is correctly calculating the Benefit in Kind Tax due on the company car. The tax experts at FastTax.ie can assist you with this.
Company Cars
The first step is to calculate the value of the car when new. This is referred to as the original market value (OMV) and is used even where a second hand car is provided. In addition the OMV figure does not go down as the car decreases in value. The original brand new value is always used to calculate the taxable benefit.
The Original Market Value (OMV) of a car is the price (including any duty of customs, duty of excise or valueadded tax chargeable on the car) which the car might reasonably have been expected to fetch, if sold in the State singly in a retail sale in the open market, immediately before the date of its first registration in the State or elsewhere. Original market value includes vehicle registration tax (VRT).
For 2023, 2024 and 2025, a reduction of €10,000 can be applied to the OMV of cars in categories A, B, C and D. The reduction is not applicable to cars in category E.
The reduction of €10,000 to the OMV is in addition to the relief of €35,000 for electric vehicles for 2023, 2024 and 2025.
Annual Business Mileage
For the purpose of determining the correct business mileage, the total mileage for the year should be reduced by a minimum of 5,000 private miles. If private mileage is in fact higher then you must deduct the higher figure. The employer may accept lower levels of private mileage but only where documentary evidence can be provided in this regard by the employee to the employer. The weekly and monthly equivalents of 5,000 miles annual private mileage are 96 miles per week and 416 miles per month. It is also important to note that employees must keep detailed records of their business mileage which must be available for inspection by the Revenue.
70% Out of Office Rule
In the case of certain employees whose annual business mileage does not exceed 15,000 miles, the cash equivalent of 30% of OMV may be reduced by 20% giving an effective cash equivalent of 24% of OMV. This alternative basis is available where the following conditions are complied with.
The employee
- works an average of not less than 20 hours per week.
- travels at least 5,000 business miles per annum on the employer’s business.
- spends at least 70% of his or her working time away from the employer’s premises retains a log book detailing business mileage, business transacted, business time travelled and date of journey, and the log book is certified by the employer as being correct.
Company Car not available for Full Year
Adjustments will be necessary where a car is not available for the full year, e.g. where
- an employee receives a car after the start of the tax year, or
- an employee gives up a car before the end of the tax year.
Equally an adjustment will be required where a car is for some other reason not available for private use for part of the tax year, for example, where an employee is working abroad for an extended period. In this case, a car provided to an employee will not be regarded as available for private use for that part of the year in which the employee is outside the State for the purpose of performing the duties of the office or employment, provided the following conditions are met:
- The employee travels abroad without the car.
- The car is not available for use by the employee’s family or household during the employee’s period of absence outside the State.
Vans
This applies to two seater jeeps, possibly cab crews and normal vans which we will now collectively refer to as vans. The rules regarding the Original Market Value (OMV) as explained above apply. However the multiplier used to calculate the taxable benefit is a flat 5% rate per year. There will not be any benefit in kind if the van is necessary for the performance of the job, private use of the van is prohibited and the employee is required to keep the van at their residence and finally the employee must spend at least 80% of their time away from the work premises. The extent of business mileage is not relevant to the calculation and is ignored.
Pooled Cars & Vans
Many employees claim exemption from a benefit-in-kind on the basis that they are driving a pooled car/ van. To qualify for this exemption the pooled car/van must be available to more than one employee and not generally used by only one employee. In addition any private use must be incidental to the business use and it must not normally be kept overnight at the home of any of the employees.
Accommodation
Where living accommodation e.g. house or an apartment is provided for an employee the taxable benefit in kind is either the rent paid by the employer for the accommodation or if the property is owned by the employer, the equivalent rate if rented on open market. An exemption is available for employees who are required to live on a company premises as part of the job subject to various rules and conditions. This exemption is not available for company directors.
Furniture
Where an employer provides house furniture for an employee the taxable benefit in kind is at a rate of 5% of the cost to the employer of the furniture.
Preferential Loans
These are most common in the financial services industry and may be provided by financial institutions as part of an overall financial package for their employees.
There are two different types of loans attracting different rates of taxable benefit. The first is a loan for the purchase of your principal private residence referred to as qualifying loans and covers all loans re the purchase, improvement or repair of your private residence. All other loans are taxable at a higher rate of tax. The benefit in kind on either type of loan is calculated as a percentage of the average loan balance throughout the tax year. The percentage multiplier is set out just below.
| For Home Loans | 4% | |||
| All Other Loans | 13.5% |
Professional Subscriptions
The Revenue have now clarified the position regarding the taxing of Professional Subscriptions when paid for by an employer. Annual membership fees of professional bodies will be taxable as normal income where the employer pays the subscription unless membership of the professional body is required for the job of the employee.
This means PAYE, PRSI and USC will be charged on professional subscriptions paid to professional bodies not required for the job. For example accountants or solicitors working in marketing and their employer pays their annual sub to the relevant professional body. In this case the sub paid is fully taxable as the professional subs are not relevant to their role in marketing.
On the other hand an accountant employed by a firm of accountants or a solicitor employed by a firm of solicitors is not taxable if their employer pays their sub to the relevant professional body.
Tax Free Benefits
These are a very rare thing but arise in different situations. There are two types of small benefits which can be given to employees free of PAYE/PRSI. The first is a long service award provided it is not paid in cash or vouchers. The value of the benefit must not exceed €50 for each year of service and can only be awarded tax free if the employee has at least 20 years service.
The second is commonly referred to as the Christmas Bonus. Following changes in Revenue practice employers may give a voucher to the value of no more than €1,000 to an employee free of PAYE/PRSI. The €1,000 limit is applied on a yearly basis per employee. If the €1,000 value is exceed in any year then the total benefit is liable for tax. There is no exemption for the first €1,000.
No benefits arise for staff canteens in respect of meals provided free of charge or at a subsidised rate provided the canteen is available to all staff.
A very topical subject these days is the provision of Crèche/ Childcare facilities. There is no exemption from BIK for the provision of these services to employees. These services will now be subject to income tax, universal service charge and employee’s PRSI, as well as employers’ PRSI.
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