Menu

12/10/2022

12/10/2022

Cars & Vans

Employment Benefits

In theme with our last two blogs where we began digging into the world of Employee Benefits, this week we’ll take a look specifically at Cars and Vans. There are certain rules that apply to certain benefits/benefits-in-kind that may reduce the tax liability. Some benefits that an employee can receive that are not subject to tax or can be received tax efficiently are Cars & Vans. We walk through the details of both below:  

Benefit – Car

An employer may provide an employee with a car, the private use of the car is a taxable benefit-in-kind.  It is important to note that; 
  • Travel to and from work is generally considered private use
  • Usually, the employee receives the car from the employer, but they may also receive it because of their employment e.g., sponsorship purposes from a connected party or a third party
  • Ownership of the vehicle does not transfer to the employee; general BIK rules apply if ownership is transferred
  • A car can also be crew cabs and jeeps but does not include
    • Motor-classes less than 410kg
    • Vans (separate BIK treatment)
    • Vehicles not commonly used as a private vehicle and unsuitable for such use such as hearses and lorries
  • No taxable benefit-in-kind applies if the car is in a carpool. A car-pool exists where: 
  • A car is available and used by more than one employee
    • The car must not be regularly used by one employee who prevents others from using it
    • Private use of the car by the employee is minimal
    • The car is not regularly kept overnight at or near the employee’s home 
  • There is a 0% benefit-in-kind rate for electric vehicles including cars with an OMV of less than €50,000, this has been extended to December 2022. For 2023 there is a €35,000 relief, 2024 €20,000 relief and 2025 €10,000 relief
How to calculate the taxable benefit 
  • The cash equivalent of the employee’s private use of the vehicle must be calculated
  • Cash equivalent is a % of the Original Market Value (OMV) of the car
  • The % is based on the amount of mileage for business purposes
Kilometres driven 24,000 and below  30% of OMV Kilometres driven 24,001 to 32,000  24% of OMV Kilometres driven 32,001 to 40,000  18% of OMV Kilometres driven 40,001 to 48,000  12% of OMV Kilometres driven 48,000 and over   6% of OMV  
  • Cash equivalent is reduced if the employee contributes to running costs
  • OMV is the list price of the car including VAT and VRT at the time of first registration
  • OMV is used even when the car is purchased second hand 
  • If imported any foreign taxes and duties should be ignored 
  • If a discount was received when purchasing the car this can be used to reduce the OMV (usually the max is 10%) 
  • An employee with less than 24,000 annual business kilometres can reduce the cash equivalent by a further 20% if; 
    • They work an average of a least 20hrs per week 
    • Travel at least 8,000 annual business kilometres
    • Spend at least 70% of working time away from the workplace
    • Retain a logbook of details of business kilometres and work purposes 
  • If the car is not available for the full year, the cash equivalent can be reduced to reflect the amount of days the car was available for
There are separate OMV figures used for employers in the car and motor industry N.B. From the 1st of January 2023 Car BIK valuations will take into account CO2 emissions

Benefit – Van

An employer may provide an employee with a van, the private use of the van is a taxable benefit-in-kind.  It is important to note that; 
  • Ownership of the van does not transfer to the employee; general BIK rules apply if ownership is transferred
  • If the employer pays an allowance or gives money to an employee to purchase a van, this amount is taxable salary 
  • A van is a vehicle which;
    • Is made solely or mainly for the transport of goods
    • Has a roofed area behind the driver’s seat
    • Has no side windows or seating fitted in the roofed area
    • If the vehicle does not meet all the above criteria, it may be a car for tax purposes
  • No taxable benefit-in-kind applies if the van is in a van pool. A vanpool exists where: 
  • A van is available and used by more than one employee
    • The van must not be regularly used by one employee who prevents others from using it
    • Private use of the van by the employee is minimal
    • The van is not regularly kept overnight at or near the employee’s home 
  • No taxable benefit-in-kind applies if the gross van weight (gross laden weight) is more than 3,500kg
  • These is a 0% benefit-in-kind rate for electric vehicles including vans with an OMV of less than €50,000, this has been extended to December 2022. For 2023 there is a €35,000 relief, 2024 €20,000 relief and 2025 €10,000 relief. 
How to calculate the taxable benefit 
  • The cash equivalent of the employee’s private use of the vehicle must be calculated
  • Cash equivalent is 5% of the Original Market Value (OMV) of the van
  • If the van has been modified this should be excluded from the OMV e.g., refrigeration unit
  • Cash equivalent is reduced if the employee contributes to running costs
  • If the van is not available for the full year, the cash equivalent can be reduced to reflect the amount of days the van was available for
BACK TO NEWS