Dáil Éireann Debate, Tuesday - 11 July 2023
200. Deputy Michael Ring asked the Minister for Finance to compare the tax treatment of the following persons: a car salesman who has the use of a car from their employer; a company representative who is supplied with a vehicle to do their work; an employee who receives a 'car allowance' with their salary; a 'brand ambassador' who has a new car supplied for their personal use; and if he will make a statement on the matter. [33998/23]
Amharc ar fhreagraI am advised by Revenue that the tax treatment in the scenarios presented depends on a number of factors, including:
• the employment status of the individual;
• the nature of the benefit received; and
• the circumstances under which the benefit is given.
Employer provided car
Section 121 of the Taxes Consolidation Act (TCA) 1997 provides that where a car is made available for the private use of an employee then the employee is chargeable to benefit in kind tax (BIK).
Where such a benefit is provided for an employee by his or her employer, the employer is required to include that notional payment as part of the employee’s emoluments and to deduct tax via the PAYE system accordingly.
From 1 January 2023 the amount taxable as a BIK is determined by the car’s original market value (OMV), the annual business kilometres driven and the CO2 emissions category of the car. The latter determines whether a standard, discounted, or surcharged rate applies. In addition, the Deputy should note that Finance Act 2023 introduced a temporary measure for the year of assessment 2023, which provides for a €10,000 reduction to be applied to the OMV of cars in Category A, B, C and D for 2023 (it does not apply to cars in Category E).
The cash equivalent of the use of an employer-provided car will be determined using the formula:
Original market value (OMV) x A
To calculate A:
1. Determine the applicable vehicle category from Table B based on the amount of CO2 g/km the vehicle produces.
2. Locate the vehicle category in Table A.
3. Compare the annual business mileage travelled for the year to establish the appropriate percentage to use for A.
TABLE A
|
Business mileage |
Vehicle Categories |
|||||
|
lower limit(1) |
Upper limit(2) |
A(3) |
B(4) |
C(5) |
D(6) |
E(7) |
|
kilometres |
kilometres |
Per cent |
Per cent |
Per cent |
Per cent |
Per cent |
|
-- |
26,000 |
22.5 |
26.25 |
30 |
33.75 |
37.5 |
|
26,001 |
39,000 |
18 |
21 |
24 |
27 |
30 |
|
39,001 |
52,000 |
13.5 |
15.75 |
18 |
20.25 |
22.5 |
|
*52,001 |
-- |
9 |
10.5 |
12 |
13.5 |
15 |
*For the 2023 year of assessment only, the upper limit in the highest mileage band is entered into at 48,001km.
TABLE B
|
Vehicle Category(1) |
CO2 Emissions (CO2 g/km)(2) |
|
A |
0g/km up to and including 59g/km |
|
B |
More than 59g/km up to and including 99g/km |
|
C |
More than 99g/km up to and including 139g/km |
|
D |
More than 139g/km up to and including 179g/km |
|
E |
More than 179g/km |
Reduced BIK for Electric cars
Electric cars that fall into ‘Category A’ vehicles i.e. vehicles with CO2 emissions between 0g/km and 59g/km inclusive will benefit from a reduced BIK charge, with rates ranging from 9% to 22.5% depending on business mileage.
For an electric car made available for an employee’s private use during the years 2023 to 2025, the cash equivalent will be calculated based on the actual OMV of the car reduced by:
• €35,000 in respect of cars made available in the 2023 year of assessment;
• €20,000 in respect of cars made available in the 2024 year of assessment; and
• €10,000 in respect of cars made available in the 2025 year of assessment.
Electric cars also benefit from the temporary measure for the year of assessment 2023, which provides for a further €10,000 reduction to be applied to the OMV of cars in Category A, B, C and D for 2023.
If the reduction reduces the OMV to nil, a BIK charge will not arise. Any portion of OMV remaining, after the reduction is applied, is chargeable to BIK at the prescribed rates.
Employees in the motor industry
Employees in the motor industry generally have the use of several different cars, both new and old, during the tax year. To deal with the frequent changes for employees within the motor industry, for BIK purposes, there is a simplification arrangement that may be availed of.
This simplification arrangement provides that the BIK in such cases may be calculated using agreed average OMV of the cars used, rather than the actual OMV. The agreed average OMV to be used when calculating the BIK on the use of the car is determined by reference to the highest value of the vehicles that the employee normally drives, and the average OMV band for the section of the motor industry within which the individual is employed. There are 8 average OMV Bands which are further divided depending on which sector of the motor industry the individual is employed in.
It should be noted that an employee may choose to have the BIK calculated on the statutory basis of the actual OMV of the car made available to him or her during the tax year.
Cars Provided by reason of employment by Third Parties
If an individual has, by reason of his or her employment, a car available for his or her private use, a taxable BIK arises even if the person providing the car is not the individual’s employer.
In such cases, it is broadly the third party who provided the benefit that is responsible for accounting for the PAYE, PRSI and USC on same, rather than the employer. However, the facts, circumstances, arrangements etc. relating to the benefit must be examined before the correct tax treatment can be determined in each case.
With regard, to the specific questions raised, I am advised by Revenue as follows:
1. A car salesman who has the use of a car from their employer Where an employee has an employer provided car made available to them for private use, BIK is charged on the basis of the general rules, outlined above. However, as the car salesman is employed in the motor industry, the simplification arrangement for the calculation of BIK may be availed of.
2. A company representative who is supplied with a vehicle to do their work Where a company representative, as an office holder/employee, is provided with a car that is available for their private use, the general BIK rules, outlined above, will apply.
3. An employee who receives a 'car allowance' with their salary Any amount payable as a car allowance to an employee in lieu of the use of a car is fully taxable and is therefore subject to tax via the PAYE system by the employer.
4. A 'brand ambassador' who has a new car supplied for their personal use As outlined above, the tax treatment regarding the provision of a car for personal use, depends on the particular facts and circumstances. If the brand ambassador is an employee of the provider of the car, the BIK rules outlined above will apply.
Where an individual is provided with the use of a car, otherwise in their capacity as an employee, and in circumstances where the individual agrees to provide a service, such as involving the promotion and marketing of the particular car brand, the individual will, depending on the particular facts and circumstances, be subject to tax under either Schedule D Case I/II or Case IV. If the service is provided in the carrying on of a trade/profession, a charge to tax under Case I/II will apply. A charge to tax under Case IV will apply in circumstances where the service is carried on otherwise than in the course of a trade. The taxable amount in each case would generally be based on a fair value of the use of the car.
I am advised by Revenue that further information on the taxation of employer-provided vehicles (including details regarding employees in the motor industry) is included in Tax and Duty Manual Part 05-01-01b, which is available at the following links:
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01b.pdf.
www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-companycars/index.aspx.
Finally, further information on the provision of third-party benefits to employees can be found in Tax and Duty Manual Part 05-01-01m, which is available at the following link: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01m.pdf.
