Written answers

Tuesday, 27 September 2022

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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122. To ask the Minister for Finance his views on matters raised in correspondence (details supplied) in relation to benefit-in-kind on company cars; and if he will make a statement on the matter. [46781/22]

Photo of Niall CollinsNiall Collins (Limerick County, Fianna Fail)
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126. To ask the Minister for Finance if the benefit-in-kind charge in relation to a person (details supplied) is correct; and if he will make a statement on the matter. [46840/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 122 and 126 together.

The query is referring to the implementation of the new rules applying to the calculation of benefit-in-kind in respect of employer provided vehicles to employees, for the tax year 2023 and subsequent years.

Broadly, new rates of benefit-in-kind will apply to the provision of a company car, from 1 January 2023, which among existing factors will now take into account the CO2 emissions of the car. As a consequence, lower rates of tax will generally apply to cars that are more environmentally friendly.

From 1 January 2023 the amount taxable as a benefit-in-kind remains determined by the car’s original market value (OMV) and the annual business kilometres driven, but new CO2 emissions bands will be used to determine whether a standard, discounted, or surcharged rate applies. Thus, under the new charging regime, the carbon footprint and fuel emissions of the car play a key role in determining the benefit-in-kind charge.

Regarding the specific circumstances of the person referred to in the details supplied, a 6% BIK rate under the current rules would suggest that the person concerned does mileage in excess of 48,000 per annum. The person also indicates that under the new rules, for the 2023 tax year and subsequent years, they will be liable to BIK at a rate of 18%. This suggests they are driving a non-electric car in category C (i.e. CO2 Emissions more than 99g/km up to and including 139g/km) with business mileage of between 39,001 to 52,000.

The precise arrangements surrounding what types of vehicles are provided by employers for those employees that are ‘on the road’ in the performance of their duties is a matter between the employee and their employer. Given the new taxation rules that will apply for company cars from 1 January next, it may provide an opportunity for the person concerned to discuss the matter with their employer.

I am aware there have been arguments surrounding the mileage bands in the new BIK structure as they can be perceived as incentivising higher mileage to avail of lower rates, leading to higher levels of emissions. The rationale behind the mileage bands is that the greater the business mileage, the more the car is a benefit to the company rather than its employee (on average); and the more the car depreciates in value, the less of a benefit it is to the employee (in years 2 and 3) as the asset from which the benefit is derived is depreciating faster. Mileage bands also ensure that cars more integral to the conduct of business receive preferential tax treatment.

I believe that better value for money for the taxpayer is achieved by curtailing the amount of subsidies available and building an environmental rationale directly into the BIK regime. It was determined in this context that reforming the BIK system to include emissions bands provides for a more sustainable environmental rationale than the continuation of the current system with exemptions for electric vehicles (EVs). This will bring the taxation system around company cars into step with other CO2-based motor taxes as well as the long-established CO2-based vehicle BIK regimes in other member states.

In addition to the above and in light of government commitments on climate change, Budget 2022 extended the preferential BIK treatment for EVs to end 2025 with a tapering mechanism on the vehicle value threshold. This BIK exemption forms part of a broader series of very generous measures to support the uptake of EVs, including a reduced rate of 7% VRT, a VRT relief of up to €5,000, low motor tax of €120 per annum, SEAI grants, discounted tolls fees, and 0% BIK on electric charging.

Finally, it should be noted that this new BIK charging mechanism was legislated for in 2019 and was announced as part of Budget 2020. I am satisfied that this has provided a sufficient lead in time to adapt to this new system before its implementation in 2023. Therefore there are no plans to postpone its introduction.


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