Private use of employer-provided vehicles

Updated on March 10, 2022

Overview

Because they work for you, your employee may be given a car for personal use. Your employee must collect Pay As You Earn (PAYE), Payment Related Social Insurance (PRSI), and Social Welfare Charges (USC) for that private use if this occurs.

Traveling to and from business is often seen as personal time.

To be responsible for this charge, your employee must have obtained an automobile from you. They will, however, be responsible if they get an automobile while working for you (for instance, for sponsoring purposes) from:

A third party is a connected party.
Whether you’re a corporation, a partnership, or a lone trader, the following information applies to you.

Note

An ’employer-supplied vehicle’ refers to all cars provided to employees by their employer for the purposes of this area of the website.

Any car in the conventional sense of the word, as well as crew cabs and jeeps, can be considered a ‘car.’ It excludes the following:

vehicles not often used as a private vehicle and unsuitable for such use, such as hearses and lorries, vehicles smaller than 410kg vans (see Private Use of Company Vans) vehicles not commonly used as a private vehicle and unsuitable for such use, such as hearses and lorries
This provision only applies if the employee does not receive ownership of the vehicle. General BIK restrictions apply if you transfer the car to your employee. See Benefits Valuation for further details.

If you provide an employee a stipend to help them buy an automobile, that stipend is taxable income. This section does not apply to you.

How to calculate the taxable benefit

You will need to calculate the ‘cash equivalent’ of your employee’s private use of the employer-provided vehicle. This is the amount that you will add to your employee’s pay.

The cash equivalent is a percentage of the Original Market Value (OMV) of the car. The percentage is based on the amount of mileage for business purposes.

The cash equivalent can be reduced if your employee contributes to the running costs of the car.

Original Market Value (OMV)

The OMV is the cost of a car before it has been registered in Ireland, and it includes all applicable Irish taxes and fees.

This is the vehicle’s list price at the time of first registration, incorporating Value-Added Tax (VAT) and Vehicle License Tax (VRT).

Even if you bought a car used, you need to use the OMV.

Example 1: You decide to buy or lease a used car for €25,000. The €25,000 price includes both VRT and VAT.

The €25,000 cost should be used to determine the tax deduction for the year.

The OMV of imported autos
Any applicable international taxes and tariffs should be ignored if the car was imported.

Example 2: How a purchase discount affects OMV
If you received a discount on the vehicle when you purchased it, you can lower the OMV to reflect the discount.

When buying a car from a dealership, the maximum discount is usually the same as it would be for a regular client. In most cases, this number does not exceed 10%.

You might be able to secure a higher discount if you can prove that the savings would be offered to a regular retail consumer.

You can pre-arrange a discount level with your Revenue Office if you’re unsure.

the third illustration

How to calculate the cash equivalent

The monetary equivalent is computed by multiplying the OMV by a percentage.

The percentage we use in the calculation is determined by how many miles your employee drives for business each year. The smaller the cash equivalent, the higher the number of business kilometres. To ensure that the payments reported to Revenue are as precise as possible, you should examine notional pay on a regular basis (at least quarterly).

The applicable percentages can be seen in the table below.

Cash equivalent of annual business kilometres

24,000 kilometres driven (percentage of OMV) and below

30% of the total

between 24,001 and 32,000

a quarter

40,000 to 32,001

18% of the population

between 40,001 and 48,000

12 percentage point

48,001 and upwards

6 percentage points

Example 4: Your employee may not have proof of personal kilometres driven in a year. You must presume that 8,000 kilometres are private kilometres where this occurs.

Employee contributions to cost (Example 5)
Your employee may be required to contribute to the vehicle’s operating costs or to pay for the usage of the vehicle. The amount they pay can be deducted from the cash equivalent.

Only if your employee pays you directly can you take advantage of the discount.

Example 6: An employee’s contribution to the car’s purchase
Your employee could contribute a lump sum to the purchase of an employer-provided automobile. In the first year, the amount donated reduces the cash equivalent.

Example No. 7

Employees with low business kilometres

If your employee doesn’t really travel more than 3 million kilometres per year, the calculated cash equivalent may be reduced by 20%.

To qualify for this discount, your employee must also:

Work at least 20 hours per week on average, travel at least 8,000 business kilometres per year, and probably spend 70% of their working time away from the office. Keep a log book with data of business miles and work purposes.
Example
Your employee drives a €30,000 OMV vehicle given by his or her business. They travel 9,000 kilometres for business each year. They are not obligated to contribute to the vehicle’s purchase price or operating costs.

Your employee spends more than 70% of his or her time working outside of your office.

The cash equivalent for the year is €7,200 (€30,000 multiplied by 24%).

Your employee is compensated on a weekly basis. Their pay should be increased by €138.46 (€7,200/52) in cash.

Employer-provided vehicles not available for the full year

It’s likely that your employee will not be able to use the vehicle throughout the year. This could be as a result of your employee:

You bought a car throughout the year, sold it before the end of the tax year, and travelled abroad for work without it.
If this occurs, you can alter the monetary equivalent to match the number of days your specific employee had the car.

When this happens, you can calculate the car’s cash value by ‘annualizing’ the business kilometres. This helps you to figure out how much money your employee would have received if they had kept the car for the entire year.

The cash equivalent can then be subtracted from the number of days the car was not in use during the year.

Example
In 2017, your employee drove an employer-provided vehicle for 153 days. The automobile is worth €28,000 on the open market.

The employee drove 12,000 kilometres for work in 2017. That year, he contributed €750 to the car’s operational costs.

12,000 km x 365/153 = 28,627 km are the annualised business kilometres for the year.

The OMV multiplied by 24 percent equals the cash equivalent (kilometres driven between 24,000 and 32,000).

This is then adjusted to reflect how many days the car was really used.

The following is how the taxable benefit is calculated.

Calculation monetary equivalent of value
€28,000 153 / 365 = €28,000 x 24 percent = €28,000 x 24 percent = €28,000 x 24 percent = €28,000 x 24 percent = €28,000 x 24 percent = €2,817
Amount spent on operating costs
€750 in taxable benefits €2,067 in non-taxable benefits
This benefit is calculated as the cash equivalent for the year.

Exemptions

Car-pools

Your employee does not have to pay Pay As Your Earn (PAYE), Pay Linked Social Insurance (PRSI), or Social Welfare Charge (USC) on this benefit if they use an employer-provided vehicle in a carpool.

There is a carpool where:

A automobile is available and is being used by multiple employees.
The car cannot be utilised on a regular basis by a single employee who inhibits others from doing so.
The employee’s private use of the car is modest, and the car is not parked overnight at or near the employee’s house on a regular basis.
As part of their job, state employees may be required to drive a state-owned vehicle. They may keep that car overnight at or near their home if they meet the following criteria:

They are on call outside of their regular working hours; otherwise, the car would be a ‘pool car.’
Please contact your local Revenue Office if you are unsure if an automobile is part of a qualified car pool.

Electric vehicles

If the car provided to your employee is an electric car, several BIK exemptions and discounts are available.

Electric cars are those that rely solely on electricity for propulsion. Hybrid vehicles are not considered electric vehicles.

Both new and secondhand autos are subject to the procedure.

Exemption for 2018
During 2018, you may have made an electric automobile available to your employee for personal usage. In the event that this occurs, there will be no fee to BIK for any use by your employee in 2018.

Exemption will be extended from 2019 to 2022.
You may have decided to provide an electric car to your employee for personal usage between January 1, 2019 and December 31, 2022. A full exemption from BIK is only attainable in particular conditions when this happens.

There is no payment to BIK as a result of:

any private use of the vehicle by your employee in 2019 or 2020 where one of the following conditions applies: the car’s OMV is €50,000 or less, or you first made the vehicle available to your employee between October 10, 2017 and October 9, 2018.
any personal use of the vehicle by your employee in 2021 or 2022 if the following conditions are met:
The car’s OMV is €50,000 or less.
Only a partial exemption is granted if neither of the aforementioned apply. This is accomplished by lowering the OMV by €50,000 when calculating the car’s cash worth.

Please check Part 05-01-01b of the Tax and Duty Manual for more details.

Other BIK issues

Chauffeur driven cars

There may be two BIK costs for chauffeur-driven cars. There is a charge for each of the following:

Expenses for employing a driver for the vehicle.

Use of employer-provided vehicles in the motor industry

If your employee switches cars on a monthly basis, there are specific cash equivalents. If you work in the automotive business, these rules apply to you if you are:

Motor retailer that only sells used vehicles franchised motor retailer that sells both new and then used cars short-term car rental company motor and automobile leasing service
These special liquid funds are not accessible if your worker just uses single car for a month or longer.

Ready reckoners

A Ready Reckoner is a calculator that can help you figure out how much money an employer-provided vehicle is worth each pay period. If you are calculating this amount using another method, you are not required using the Ready Reckoner.

Using the Quick Reckoner should ensure the correct amount of PAYE, PRSI, and USC is computed each year. The Ready Canonist can assist you regardless of the following:

when is the automobile available throughout the year
how long this car will be available
How to Make the Most of Ready Reckoners
Separate reckoners existed for: