A Benefit In Kind (BIK) is a benefit provided by the employer which is in addition to an employee’s salary. All Benefits in Kind (BIK) are subject to PAYE, PRSI and USC. BIK are taxed as notional pay and are taxable when the benefit is provided or when the payment is made. Where a non-cash benefit is provided to the employee and does not exceed €250 in value, there is no BIK. This amount is not cumulative over a number of separate benefits and only one such benefit may be provided annually.
There are a number of benefits which are subject to BIK and to assist you in this regard we have outlined the Top 6 BIK which employers provide to employees.
1. COMPANY CARS
The notional pay subject to PAYE, PRSI and USC is the “cash equivalent” of the private use of the company car by the employee, less any amount paid by the employee for the private use. The “cash equivalent” is calculated as follows depending on whether the car is and “old” car or a “new” car.
These are cars first provided to employees in the tax years 2008 or earlier.
The assessable annual cash benefit for the use of an older company car is calculated by applying a business mileage related percentage to the original market value (OMV) of the car, as follows:
Emission allowances are the basis for assessing benefit in kind (BIK) on company cars provided for employees in 2009 and subsequent years, as follows:
|Vehicle Emission Category||CO2 Emissions (CO2 g/km)||OMV%|
Tapering relief is available for high levels of business travel
|Lower Km||Upper KM||A,B,C||D,E||F,G|
A reduction is available for any amount made good by the employee.
Where an employee is required to work abroad, the notional pay is reduced by reference to the number of days spent working abroad. This is conditional on the employee working a minimum of 30 days abroad and the car not being available for use by family members during the period of absence.
A additional 20% relief from BIK on cars applies to employees who work at least 20 hours per week, and whose annual business mileage is between 8,074 km pa and 24,140km pa. The employees must spend 70% or more of their time away from their place of work or business, and work a minimum of 20 hours per week on average. Revenue will require each employee to submit a logbook, which must be retained for up to six years.
Quick Tips for BIK on Company Cars
- It is more beneficial to use tapering relief where business mileage exceeds 32,001
- Structure any employee contributions to maximize a reduction in BIK.
- It will be more beneficial for employers to make a general lump sum contribution to the cost of the car, instead of meeting the cost of insurance, tax etc. as BIK is reduced € for € on any general contribution made by the employee for the use of the car.
- Pooled cars do not attract BIK provided the car is available for the use of more than one employee, any private use is incidental and the car is not kept overnight at the employees home.
2. COMPANY VANS
Generally the cash equivalent for private use of a company van is 5% of the original market value. However there is an exemption from Benefit in Kind on the provision of a company van where all of the following conditions are satisfied:
- The van is essentially used for the purposes of the employee’s work
- The employer requires the van to be brought home by the employee
- The employee spends most of his/her working time away from the office
- Private use is prohibited (apart from travel to and from work).
Where any of the above conditions are not met, a BIK charge of 5% of the original market value applies.
3. TRAVEL PASSES
The provision by an employer of monthly or annual bus, train, LUAS or ferry passes to directors and employees is exempt from income tax. It is also possible to structure the reduction of an employee’s salary to cater for the provision of this benefit.
Tip: Tax savings arising from the provision of travel passes may also reduce the cost of providing car parking spaces where employees can be encouraged to use public transport.
The provision of a travel pass is an acceptable form of salary sacrifice.
4. PREFERENTIAL LOANS
A preferential loan is a loan from an employer where either no interest or reduced interest, which is lower than the “specified rate”, is applied.
- The specified rate for a qualifying home loans is 4%
- The specified rate for all other loans is 13.5%
A qualifying home loan is a home loan which would qualify for Tax Relief at Source (TRS). The BIK applied is the difference between the interest charge which would be incurred at the specified rate less the interest charged by the employer.
For example, if an employer provided an employee with a qualifying preferential home loan of €10,000 and applied an interest charge of 2% the following BIK would apply:
Interest Charged at the Specified Rate €400 (€10,000 @ 4%)
Interest Charged at the Reduced Rate €200 (€10,000 @ 2%)
Taxable Benefit €200
The above benefit would be added to the employee’s wages or salary as “notional pay” for the year for the purpose of calculating PAYE, PRSI and USC.
If an employer provides accommodation the benefit in kind applied is the amount, which could reasonably be expected to be obtained on a yearly letting. Where the living accommodation is owned by the employer, the amount referred to is as a rule of thumb calculated as 8% of the current market value of the accommodation.
6. PROFESSIONAL SUBSCRIPTIONS
Professional subscriptions are subjected to BIK. However, where the expense is incurred by the employer and where the individual, if they had incurred it, would have been entitled to a deduction for the expense on the basis that it was incurred wholly, exclusively and necessarily incurred for the individual’s employment duties, then no BIK will arise.
There are a number of other exemptions from the BIK provisions such as mobile phones and computers where private use is incidental to business use; reasonable expenditure on staff parties and events; course and exam fees; and staff medical check-ups.
If you are an employer applying BIK or an employee subject to BIK and would like additional information please do not hesitate to contact a member of our team who can assist you with your queries.