Further to our previous blog relating to benefit in kind (BIK) on company vehicles (available at: https://www.cooneycarey.ie/2023/01/11/benefit-in-kind-company-vehicles/) further temporary changes have been announced to the BIK rules for company vehicles for 2023 due to the cost of living. 

-

The Original Market Value (OMV) of cars in emissions categories A to D (see table below), have been reduced by €10,000 for the purpose of calculating the benefit in kind due in 2023. The reduction in OMV does not apply to cars in emissions Category E. The upper limit in the highest business mileage band has also been reduced by to 48,001km as detailed in the business mileage table below. 

The CO2 emissions category of a car is based on the following table: 

Business mileage and CO2 emissions category:

Examples 

For example, an employee with a company car that has an original market value (OMV) of €40,000, C02 emission levels of 180g/km (Category E) and business mileage for the year of 24,000km would be charged BIK of €15,000 for the year (€40,000*37.5%). No reduction applies as the car is in emissions Category E.  Another car with an OMV of €40,000 with a CO2 emissions level of 59g/km (Category A) or less and business mileage of 24,000km would now only be liable to BIK of €6,750 per year [(OMV €40,000 – reduction €10,000) * 22.5%] based on the new temporary measures. 

Company Vans 

The temporary changes also apply to company vans, the BIK will now be based on the OMV minus the €10,000 reduction. The BIK is then calculated on 8% of the reduced OMV.     

Electric Vehicles 

Electric vehicles will also benefit from the €10,000 OMV reduction. BIK will now be chargeable on the OMV minus the tax free amount of €45,000 (increase on the previous deduction available of €35,000). BIK is chargeable on the excess amount (OMV – tax free amount) based on the C02 emissions and business mileage. If the tax free amount exceeds the OMV of the vehicle, no BIK charge will be payable. 

Payroll Submissions 

Employers should ensure that the BIK changes are backdated to 1st January 2023 and reflected in the payroll submission in which the reductions have been included. There is no requirement to amend any previous payroll submissions based on the temporary changes.  More information is available at: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01b.pdf 

-

Reach out to our team of Auditing experts for more information at info@cooneycarey.ie.