Seán Sherlock
Ceist:404. Deputy Sean Sherlock asked the Minister for Finance if he will examine a matter for a person (details supplied) regarding benefit-in-kind. [43744/22]
Amharc ar fhreagraThursday, 8 September 2022
Ceisteanna (404)
Freagraí scríofa
I am advised by Revenue that the matter referred to relates to the application of the Benefit-In-Kind (BIK) concessionary arrangements in respect of employer-provided vehicles during the period of restrictions due to the Covid-19 pandemic.
Calculation of the BIK charge on the provision of a car to an employee
Section 121 of the Taxes Consolidation Act 1997, provides that an employee is chargeable to tax on the benefit arising where, by reason of his or her employment, a car is made available (without a transfer of ownership) to him or her and the car is, in the tax year, available either for that individual’s private use or to his or her family or household.
The taxable benefit is calculated based on the cash equivalent of the use of the car. This cash equivalent is calculated as a percentage of the original market value of the car. The percentage applied varies according to the distance over which the car is used for business purposes.
BIK is applied to 30% of the original market value of a car. However, this 30% may be reduced (to 24%, 18%, 12% or 6%) depending on the annual business kilometres travelled. The following table shows the applicable rates.
|
Business Kilometres - Lower Limit |
Business Kilometres - Upper Limit |
Percentage of Original Market Value (per cent) |
|
Nil |
24,000 |
30 |
|
24,001 |
32,000 |
24 |
|
32,001 |
40,000 |
18 |
|
40,001 |
48,000 |
12 |
|
48,001 |
-- |
6 |
If the car provided is an electric vehicle, there may be a full exemption or partial relief from BIK available.
Absence from work
As the annual business mileage is a key factor in determining the rate used in calculating the BIK charge (i.e. using 30%, 24%, 18%,12%, 6%), where an employee is not working, for example, due to maternity leave, this may have a bearing on the BIK charge due.
Concessionary treatment COVID-19 circumstances
Due to the unprecedented circumstances of the COVID-19 pandemic, certain concessional treatment was permitted by Revenue in relation to the operation of BIK on employer-provided vehicles.
This concession was published on Revenue’s website in March 2020. Thus, for the years of assessment 2020 and 2021, where an employee was in receipt of a vehicle (car or van) provided by his or her employer, the following may apply:
(a) Employer Takes Back Possession of the Vehicle
Where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period.
(b) Employer Prohibits Use
Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use.
(c) Employer Allows Private Use
Where an employee is not prohibited from using a vehicle, but limited or reduced business mileage (if any) is undertaken during the period of the COVID-19 crisis, the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due. Personal use of the vehicle must be limited in this scenario and appropriate records should be kept, e.g. business mileage travelled in January 2020, amount of private use, photographic evidence of odometer, etc.
Where an employee continues to undertake business travel as usual in an employer-provided vehicle, the usual BIK rules will apply.
For 2022, the measure was only applicable for the period during which public health guidance required employees to work from home, therefore the concession ceased to apply from 1 June 2022.
It is understood from the information provided to Revenue, that the person concerned had the use of the employer provided car during the period for which the she was absent from work in 2020, due to maternity leave. In these circumstances the situations outlined in (a) and (b) above do not apply. However, the concessional treatment outlined in (c) may apply for the relevant period in 2020 up to when she commenced her maternity leave.
Therefore, the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of business mileage for the period in 2020 in respect of which the employee was working but had movements restricted due to COVID-19. As stated above, it is not possible to deem business mileage for months an employee is on leave. Thus, in respect of this employee, if the total amount of business mileage for 2020 was less than 24,001 kms, the standard 30% rate will apply to the calculation of BIK.
Revenue can be contacted via the National Helpline (01 738 3636) or online via MyEnquiries should further clarification be required.
Further information on the taxation of employer-provided vehicles, is included in Tax and Duty Manual Part 05- 01-01b, which is available on the Revenue website.