How to calculate the taxable benefit

Updated on March 11, 2022

Overview

You have the right to provide a personal vehicle to an employee who works for you. PAYE, PRSI, and USC must be levied for private usage regardless of whether the worker is employed or not.

Traveling to and from work is frequently regarded as personal use.

Your company’s policy is to pay this bill for any employee who receives a car from you. However, if they receive a vehicle only as a result of his work, they will be held liable (for instance, as a kind of sponsorship).

person has ties to the other participants.
A single entrepreneur, a partnership, or even a large organisation can benefit from the information here.

Note

The term “employer-provided vehicle” refers to any car provided to a worker by a company, regardless of whether the firm purchased the vehicle with their own money.

Pickup trucks with crew cabs and jeeps are both vehicles in the traditional sense of the term. The definition excludes the following:

If you’re looking for an example of an unappealing non-motorcycle vehicle, consider hearses and lorries.
Employees who lose ownership of their car upon termination are only subject to this restriction. The usual BIK limits apply if you provide the car to a worker who will use it for work. Consult the section on valuing benefits for further information.

Taxes will be levied on the wages of your employees if you allow them to acquire an automobile. This section does not address your issue.

If your employee uses the employer-provided car for private purposes, you will need to compute the ‘cash equivalent’ of such use. What you’ll be adding to your employee’s salary.

A percent of the car’s OMV is used to calculate the cash value. An employee’s tax rate is defined by the amount of miles driven for work.

If your employee helps with the car’s upkeep, you can save money on the cash equivalent.

Value at the time of purchase (OMV)

Prior to registration in Ireland, the car’s OMV includes all Irish taxes.

At the moment of first registration, this is generally the list price of the car, which includes VAT and Car Registration Tax (VRT).

Even if you bought the car used, you must still use the OMV.

Example 1: You decide to buy or lease a used car with a sticker price of €25,000. The sum of €25,000 includes both VRT and VAT as part of the total.

The €25,000 expenditure must be taken into account when calculating the taxable benefit for the year.

the average selling price of imported vehicles
Foreign taxes and tariffs should be ignored if the vehicle was imported.

Example 2: The OMV of a discount on a purchase

It is possible to lower the OMV to reflect a discount that you received when purchasing the vehicle.

Typically, the maximum discount is equal to the amount a regular client would receive at a dealership if they purchased one car there alone. This percentage is rarely higher than 10%.

It’s possible to get bigger discounts if you can show that an average retail consumer would have gotten them.

If you’re unsure, you and the Revenue Office can come to an agreement on the amount of the discount in advance.

How to compute the monetary equivalent in this example

The OMV is multiplied by a percentage to arrive at the cash equivalent.

Calculation percentages are based on annual mileage driven by your employees for business purposes. The monetary value decreases in direct proportion to the number of business miles driven. At the very least, you should check your notional pay at least periodically to confirm that the payments to Revenue are accurate.

Please refer to the chart below for the percentages that apply to your situation.

The monetary equivalent of a company’s annual business miles

Driven kilometres (percentage of OMV): 24,000 and lower.

of the total

The range between 24,001 and 32,000

Almost a quarter of the population

from 32,000-14,000

18% of the

40,000 to 48,000

An additional 12%

More than 48,001

6 out of 10

When it comes to private driving, your employee may not have any documentation to back it up. If this occurs, then you must infer that the 8,000 kilometres are the result of personal travel.

Exhibit 5: Employee cost contributions

It is possible for your employee to contribute to the car’s running costs or to pay for its use. Cash equivalent can be reduced by the amount they pay.

Only if the money is paid to you directly by your employee can you take advantage of the discount.

Employees’ contributions to the purchase of an automobile are shown in this example.
A lump sum payment may be made by your employee in order to purchase a company-provided automobile. In the first year, the amount donated reduces the cash equivalent.

Case Study 7

Employees with low business kilometres

Cash equivalent may be decreased by 20% if your employee travels less than 24,000 kilometres per year.

Your worker must also meet the following conditions:

Workers must work an average amount 20 hours per week, travel at least 8,000 commercial kilometres annually, and spend at least 70 percent of the working time away from the job.
Example
Your employee drives an OMV of €30,000 company car. They travel 9,000 kilometres a year for work. Neither the cost of the vehicle nor its operating expenditures are owed to them.

Employees are away from the office more than 70% of the time.

Using the formula €30,000 x 24 percent, the annual cash equivalent is €7,200.

Each week, you’ll be paying your employee’s wages. They should receive an additional €138.46 (€7,200/52) in pay.

Employer-provided vehicles not available for the full year

Employees are not allowed to utilise company-owned vehicles for the full year.
Using your company automobile for the whole year may not be feasible for your employee. It’s possible that one of your employees is to blame:

I received a new car during the year, and I turned in my old one before the end of the fiscal year.
The cash value can be adjusted to reflect the amount of days the car was utilised by your employee if this is the case

Calculating the worth of a car by ‘annualizing’ business kilometres may be employed here. When you know the amount your employee would have saved if they had the car for the entire year, you’ll know how much money you saved.

Your monetary value can be reduced by the amount of time the car was out of operation.

Example
A business car was at their disposal for 153 out of the 365 days in 2017. The OMV of the car is €28,000.

The employee drove 12,000 miles for work in 2017. Car maintenance cost him €750 during that year.

There are approximately 28,627 business kilobytes of data to be accumulated over the course of a calendar year.

OMV multiplied by a factor of 24% is used to calculate cash (kilometres driven between 24,000 and 32,000).

Later, this sum is reduced to reflect the number of days in use.

Income that is subject to taxation

Theoretical Indicator
The worth of a single dollar
Twenty-four thousand euros multiplied by 24% multiplied by 153/365 €2,817
To manage a firm, how much does it cost?
€750 in tax-free earnings of €2,067
This benefit is classified as a cash equivalent for tax purposes.

Exemptions

Car-pools

PAYE, PRSI, and USC are not owed on this benefit if your employee rides in a car-pool with their coworkers in a company vehicle provided by your company.

in the following locations:

A automobile can be utilised by multiple employees at the same time.
It is imperative that no employee uses the car on a regular basis so that others can utilise it.
The employee makes minimal use of the car for his or her own purposes, and it isn’t usually parked at or near his or her home overnight.
Workers for the state may be required to use a state-owned vehicle in the course of their duties. If the following conditions are met, they may be able to keep the car overnight:

Otherwise, the car would be used as a “pool car” because they are available for emergencies outside of typical business hours.
Contact your local Revenue Office if you’re unsure whether a vehicle is part of a qualifying car pool.

Emission-free automobiles

If you provide your employees with an electric vehicle, you may be eligible for BIK exemptions and reductions.

Electric automobiles are vehicles that are powered solely by electricity. Hybrid vehicles are not electric vehicles.

Both brand-new and pre-owned vehicles are eligible for the service.

Exemption for 2018

You may have given your employee access to an electric vehicle for private usage in 2018. BIK will not be charged for any use by your employee in 2018 if this is the case.

Exemption will be extended from 2019 to 2022.
Employees may be able to utilise a company-owned electric vehicle for personal usage between January 1, 2019, and December 31, 2022. Only in rare cases can a full exemption from BIK be obtained.

BIK is not charged for:

the OMV of the car is €50,000 or less, or you first made this car available to your employee between October 10th, 2017 and October 9th, 2018, for private use throughout 2019 or 2020.
Your employee’s usage of the car for private purposes during 2021 or 2022, if the following conditions are met:
The car’s OMV is less than €50,000.
Only a partial exemption is granted if neither of the following conditions are met. This is made possible by subtracting €50,000 from the OMV when determining the car’s cash value.

Tax and Duty Manual, Section 05-01-01b, provides more information.

Other BIK issues

Chauffeur driven cars

chauffeur-driven autos may face two BIK charges. There is a fee to pay for

to pay for the car and driver’s services.
In the automotive sector, employees may use company-owned vehicles.
Special currency equivalents apply if your employee replaces their car every month. Motor sector employees are subject to these restrictions if they fall into the following categories:

short-term car rental service, motor or car leasing supplier, and franchised motor store who solely sells used cars
Special monetary equivalents really aren’t available if your worker only has one car for a month or more.

Ready reckoners

How much money you’ll get from a business car each pay month can easily be calculated using a ready canonist calculator. If you prefer to calculate this amount in a different manner, there is no need to use the Ready Reckoner.

Over the course of a year, the Ready Reckoner should account for PAYE, PRSI, and USC. You can use the Ready Reckoner if you have any of the following:

In what period of time will you be able to drive the vehicle?
Each of the following situations can benefit from using Quick Reckoners to their fullest extent:

These employees are compensated on a monthly basis.
Employees are paid on a weekly basis.
Headings for those who are already calculating
Over a certain period of time, the total number of business miles driven in a vehicle.

For instance, how many miles have you travelled this year?

The cash equivalent of a pay period can be calculated by multiplying the overall OMV by the corresponding Car’s OMV percent.

As a result, for weekly-paid employees, the first pay period in which the car was used is Week 1.

The month in which your employee bought the car is referred to as “Month 1” on the calendar when discussing a monthly salary.

Assuming you pay on a weekly basis, the first pay period that your employee will receive in their new vehicle is Week 2. You’ll get rewarded for the third time in a row after you reach Week 4.

An employee’s first week or month of ownership of a new car will be included in the employee’s pay. Car purchases during pay periods may entail a cash equivalent adjustment

For a year, you don’t pay your employee because they couldn’t utilise the car. A vehicle’s value may need to be reassessed depending on how long ago it was returned to the dealership.

While on work trips outside of the country, your employee isn’t eligible for BIK. However much time youngsters spend away from home, it makes no difference to their development. As an illustration, if they’re on vacation in July, that month shouldn’t be included when calculating the year’s tally. That was a long month of July.

It is appropriate to deduct compensation for employees who pay for their employees to use their own cars for work purposes.

This year’s car has undergone a significant makeover.

For the first pay period in their new vehicle, those who swap cars within a year of each other are subject to these rules. If they buy a new car in the middle of a pay period, they may have to modify the monetary equivalent.

Think of the following as an example:

Maria makes €500 a week, or €1,000 a month. In 2018, her company will pay her an OMV of €20,000, which she will receive in 2018. She contributes €20 a week to keep the car running.

Using the Weekly Ready Reckoner, she can easily figure out how much money she’ll take home.

First-week compensation:

Maria travels 800 kilometres in the first week of January.

The overall number of business kilometres for Pay Week 1 is in Band 4 according to the counter. For context, that works out to be roughly 0.23 percent.

The first week of school was devoted to calculating.

Indicator of Potential

€46.50 was the entire monetary equivalent of €20,000 in the first week.
Deduct €20 BIK from the total cost of €26 for a week’s operational charges.
Salary for the first week: €500 plus €26, or a total of €526.
Weekly Payments:

Maria drives an additional 160 miles for work in Week 2. She has travelled 960 kilometres (800+160) in the last two weeks.

Using the Ready Reckoner, you’ll find that the overall kilometre count is in Band 2 for Pay Week 2. As a result, the relevant proportion is 0.92 percent.

Taking a look at the figures for the previous two weeks will allow you to make any necessary modifications to Maria’s salary during this time.

During a two-week period, €20,000 x 0.92 percent = €20,000 in cash.

€184

Subtract €20 x 2 from the total cost of running.

€40

BIK was €144 for a two-week period.

A total of €144 less €26 is the increased gross pay for Week 2.

€118

The overall gross pay for Week 2 is as follows: More than €500 and $118.

€618

The third week’s pay is as follows:

During the third week of her job, Maria will travel an additional 800 miles. Her total mileage has increased by 1,760 kilometres (800 + 160 + 800).

According to the reckoner, the accumulated kilometres in Pay Week 3 are in Band 2. The relevant proportion in this case is 1.38 percent.

The three-week pay period totals can be used to adjust Maria’s salary.

For a period of three weeks

Indicator of Potential
€20,00 x 1.38 percent = three weeks’ worth of spending money.

€276

In order to reduce the overall operating expenses by €20 x 3, multiply €20 by 3.

€60

This BIK will last for three weeks.

€216

Week 3’s increased gross pay was €216 – €26 – €114.

€72

Week 3’s gross pay is calculated as €500 plus €72.

€572

Exhibit 2 and Exhibit 3