Dáil Éireann debate -
Thursday, 5 Nov 1992

Vol. 424 No. 10

Ceisteanna — Questions. Written Answers. - Benefit-in-kind Tax Liability.

Bernard J. Durkan

Question:

61 Mr. Durkan asked the Minister for Finance the extent, if any, to which he will extend regulations in the Financial Services Sector with particular reference to investment intermediaries; and if will make a statement on the matter.

Minister for Finance (Mr. B. Ahern)

I have received a number of representations about the changes in the Finance Act, 1992, in relation to the taxation of the benefit from the availability for private use of company cars.

The Deputy will appreciate that this aspect of income tax cannot be seen in isolation from the totality of the measures taken in the income tax area in the Act — both their underlying rationale, and the fact that the Act effected substantial mainstream income tax reliefs.

The previous rates of taxable benefit (i.e. 20 per cent of original market value where all the costs are met by the employer, falling to 12½ per cent where the car only is provided) were very lenient when compared with the costs of private ownership. When the sliding scale was originally introduced in 1982, it was intended that these rates would double to 40 per cent and 25 per cent for 1983-84 and subsequent years but this change never took place. There is no doubt that the annual cost to an individual of providing and running a new car is over 40 per cent of the purchase price. This being the case the increase in the BIK rate to 30 per cent, announced in the Budget, is seen as being fair. Equally the Government consider that the changes in tapering relief in the Act were not unreasonable. I have no plans to alter these arrangements in the 1993 Finance Bill.

It should be noted that the benefit-in-kind charge does not apply where an employee arranges with his employer that he will not have the use of the car other than for business purposes; therefore, the provision of cars exclusively for business purposes is not being taxed. Alternatively, no charge will arise where an employee uses his own car for work and, subject to Revenue approval, is recouped the cost involved by his employer.