Cathal Crowe (Clare, Fianna Fail)
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237. To ask the Minister for Finance the options available to a person (details supplied) facing a large benefit-in-kind bill due to Covid-19; and if he will make a statement on the matter. [40325/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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This matter concerns a benefit-in-kind (BIK) charge arising to an employee in respect of an employer provided car. In this case the employee incurred reduced business mileage during 2020 due to the impact of COVID-19 and may therefore have a higher tax liability than anticipated as a result of reduced business travel.

The options available to such a taxpayer together with the applicable tax treatment are set out below.

Calculation of the BIK charge on the provision of a car to an employee

I am informed by Revenue that section 121 of the Taxes Consolidation Act 1997 provides for the taxation of cars provided by an employer to an employee. This benefit is taxed through the payroll by the employer.

BIK is applied to 30% of the original market value of a car. The original market value of a car is the price which it might reasonably have been expected to fetch if sold in the State singly in a retail sale in the open market, immediately before the date of its first registration (in the State or elsewhere). In short, the original market value is the Irish open market price for a single retail sale immediately before the date on which the car was first registered. For a second-hand car, the original market value is the price of the car when purchased new for the first time.

This 30% may be reduced (to 24%, 18%, 12% or 6%) depending on the annual business kilometres travelled. The following table shows the applicable rates:

If the car provided is an electric vehicle, there may be a full exemption or partial relief from benefit-in-kind available.

Concessions permitted by Revenue

Due to the unprecedented circumstances of the COVID-19 pandemic, certain concessional treatment is permitted by Revenue in relation to the operation of BIK on employer-provided vehicles for the tax year 2020, which is outlined below. This concession together with other COVID-19 related concessions can be found on Revenue’s website - available here.

Where an employee is in receipt of a vehicle (car or van) provided by his or her employer, the following may apply:

(a) Employer Takes Back Possession of the Vehicle

Where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period.

(b) Employer Prohibits Use

Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use. Records should be maintained to show that the employer has prohibited the vehicle’s use and that no such use has occurred, e.g. communication from employer, photographic evidence of odometer, etc.

(c) Employer Allows Private Use

Where an employee is not prohibited from using a vehicle, but limited or reduced business mileage (if any) is undertaken during the period of the COVID-19 crisis, the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due. Personal use of the vehicle must be limited in this scenario and appropriate records should be kept, e.g. business mileage travelled in January 2020, amount of private use, photographic evidence of odometer, etc.

Where an employee continues to undertake business travel as usual in an employer-provided vehicle, the usual BIK rules will apply.

In addition to the above, as a further measure to support taxpayers, Revenue also allowed employers to temporarily suspend the operation of BIK in respect of employees in receipt of the Temporary Wage Subsidy Scheme (TWSS), for the period the TWSS applied.

Payment options

Generally, where an underpayment of tax arises there are a range of options available to settle this liability with Revenue, to include a Phased Payment Arrangement or a reduction to tax credits etc.

Given the unique circumstances of COVID-19, Revenue further expanded the range of options available to taxpayers. For example, where an employee was in receipt of the TWSS, to minimise any hardship, the employee may opt for Revenue to collect the 2020 liability (arising on the TWSS and any deferred BIK) interest free, by reducing the individual’s tax credits over four years, with the reduction of tax credits not commencing until January 2022. In addition, Revenue will also facilitate employers who wish to pay an employee’s liability for 2020, arising on the TWSS and any deferred BIK, without giving rise to an additional benefit.

In relation to this particular case, the individual can engage directly with Revenue in relation to the liability and the specific options available to them with regard to discharging same, based on their individual circumstances. Contact details for Revenue can be found here.