Company Vehicles: New Benefit in Kind (BIK) rules from 1 January 2023
Background: Employer-Provided Vehicles
An employer provided vehicle encompasses all cars or vans made available to an employee. An employee may be chargeable to tax on the benefit in kind (BIK) arising where, by reason of his or her employment, a vehicle is made available (without a transfer of ownership) to him or her and the vehicle is, in the tax year, available either for that individual’s private use or to his or her family or household.
Benefit-in-kind: Effect on Company Cars from 1 January 2023
Section 6 of Finance Act 2019 introduced a new method to calculate the cash equivalent of the use of a car. These changes will take effect for 2023 and subsequent years.
The new rules in 2023 will apply to all cars (including electric vehicles, see further detail below), whether the car is acquired in 2023 or was made available to employees in earlier years of assessment.
From 2023 onwards, the BIK cash equivalent on the use of an employer provider car will be determined based on both the business mileage undertaken and the vehicle’s CO2 emissions. Please find details below:
- The amount of business mileage and CO2 emission category
|Lower Limit||Upper Limit||A||B||C||D||E|
- The CO2 emissions category of the car is as per the following table
|Vehicle Category||CO2 Emissions (CO2 g/km)|
|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|
Benefit-in-kind: Effect on Company Vans from 1 January 2023
For the year of assessment 2023 and onwards the cash equivalent for vans will increase from 5% to 8% of the Original Market Value (OMV).
Benefit-in-kind: Effect on Electric Vehicles from 1 January 2023
The Department of Finance announced in Budget 2022 the phasing out of the 0% BIK on Electric Vehicles over the next 4 years. Finance Act 2021 extended the favourable BIK regime for certain electric vehicles made available to employee’s in the period from 1 January 2023 to 31 December 2025. The relief from the BIK charge arising during this period applies on a tapered basis.
For an electric vehicle made available for an employee’s private use during the years 2023 – 2025, the cash equivalent will be calculated based on the actual original market value (OMV) of the vehicle reduced by:
- €35,000 in respect of vehicles made available in the 2023 year of assessment;
- €20,000 in respect of vehicles made available in the 2024 year of assessment; and
- €10,000 in respect of vehicles made available in the 2025 year of assessment.
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 benefit-in-kind at the prescribed rates.
Section 118 (5H) TCA 1997 provides that from 1 January 2018 any expense incurred by an employer in the provision of electric vehicle charging facilities for employees and directors on the employer’s business premises, once all employees and directors can avail of the facility are exempt from the charge to BIK.