BIK on Employer Provided Motor Vehicles and Van
(effective 1 Jan 2023)
From 2023 the basis for calculating the cash equivalent of motor vehicles or Vans provided by employers has changed.
Update - 7 March 2023
The Government announced a relief of €10,000 to be applied to the Original Market Value (OMV) of cars in Category A-D in order to reduce the amount of Benefit-in-Kind payable (this is not applicable to cars in Category E).
This means that, for the purposes of calculating BIK liability, employers may reduce the OMV by €10,000. This treatment will also apply to all vans and electric vehicles. For electric vehicles, the OMV deduction of €10,000 will be in addition to the existing relief of €35,000 that is currently available for EVs, meaning that the total relief for 2023 will be €45,000.
The upper limit in the highest mileage band is amended by way of a 4,000km reduction, so that the highest mileage band is now entered into at 48,001km.
These temporary measures will be retrospectively applied from 1 January 2023 and will remain in place until 31 December 2023
The basis for calculating the cash equivalent of motor vehicles provided to employees has changed to a system linked to the CO2 emissions of the vehicle. as well as business mileage.
For some employees they may find that their BIK (ie their tax bill) will increase as a result of these changes.
For an electric vehicle made available for an employee’s private use during 2023 , the cash equivalent will be calculated based on the actual OMV of the vehicle reduced by €35,000. This deduction reduces to €20,000 in 2024 and €10,000 in 2025.
For electric vehicles, the OMV temporary 2023 additional deduction of €10,000 will be in addition to the existing relief of €35,000 that is currently available for EVs, meaning that the total relief for 2023 will be €45,000.
The Revenue Guide has also been updated to provide the following commentary in relation to charging points for EV's and reimbursement of home electricity costs :
"An exemption from BIK also applies where an employer provides a charging point for EV’s on their business premises, on the condition that the facility is available to all employees.
This exemption does not extend to the provision or installation of an electric vehicle charge point at an employee’s private address, and in that scenario a BIK charge applies.
In principle, where an employer is providing a car to their employee and the employee is incurring home electricity costs, provided it can be shown that the employer is only reimbursing for the running costs of that employer vehicle, it would be reasonable for this reimbursement to be paid free of tax. This would be conditional on the employer retaining sufficient supporting documents to verify the amount of the reimbursed cost."
From 1 January 2023 the cash equivalent of the use of a van has increased to 8% (from 5% previously) of the OMV of the van.
Whilst every effort has been made to ensure the accuracy of matters covered by this article, no responsibility for loss or damage occasioned by any person acting, or refraining from acting, as a result of matters above. Professional advice should always be sought before acting on any interpretation of matters covered by this article.
1 January 2023