Michael McGrath (Cork South Central, Fianna Fail)
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The position is that the age exemption applies for any year of assessment where an individual is aged 65 years or over and his or her total income does not exceed €18,000 per annum. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000 per annum. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.

It is important to note that marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies the individual or couple is taxed at 40 per cent on all income above the exemption limit to a ceiling of twice the exemption limit. The system of marginal relief ensures that in cases where an individual's or couple’s income rises above the exemption threshold that their net income will not decline. As the 40 per cent income tax rate only applies to the proportion of income above the threshold. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system.

It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands.

It is also important point out that the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. For example, persons aged 65 or over may also avail of the age tax credit, which currently amounts to €245 per year for single persons or €490 per year for married couples or civil partners. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are not chargeable to USC or Pay Related Social Insurance.

It should be noted that the recent Commission on Taxation and Welfare recommended that age should be removed as a factor for determining the charge to income tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, located at the following link - www.gov.ie/en/publication/7fbeb-report-of-the-commission/.

My Department is currently undertaking a review of the personal tax system, which will take account of the Commission on Taxation and Welfare recommendations and other personal tax matters.

Richard Bruton (Dublin Bay North, Fine Gael)
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199. To ask the Minister for Finance whether the Tax Strategy Group is looking at any particular issues in respect of the structure of USC and of income tax; and if he will make a statement on the matter. [33867/23]

Michael McGrath (Cork South Central, Fianna Fail)
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As the Deputy will be aware, the Tax Strategy Group (TSG) is in place since the early 1990s and is chaired by the Department of Finance with membership comprising senior officials and political advisers from a number of Civil Service Departments and Offices.

Papers on various options for tax policy changes are prepared annually by Department of Finance officials. The TSG is not a decision making body and the papers produced by the Department are simply a list of options and issues to be considered in the Budgetary process.

The TSG meeting was held last week and the papers will be published in due course, as is the normal practice.

Michael Ring (Mayo, Fine Gael)
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200. To ask the Minister for Finance to compare the tax treatment of the following persons: a car salesman who has the use of a car from their employer; a company representative who is supplied with a vehicle to do their work; an employee who receives a 'car allowance' with their salary; a 'brand ambassador' who has a new car supplied for their personal use; and if he will make a statement on the matter. [33998/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I am advised by Revenue that the tax treatment in the scenarios presented depends on a number of factors, including:

• the employment status of the individual;
• the nature of the benefit received; and
• the circumstances under which the benefit is given.

Section 121 of the Taxes Consolidation Act (TCA) 1997 provides that where a car is made available for the private use of an employee then the employee is chargeable to benefit in kind tax (BIK).

Where such a benefit is provided for an employee by his or her employer, the employer is required to include that notional payment as part of the employee’s emoluments and to deduct tax via the PAYE system accordingly.

From 1 January 2023 the amount taxable as a BIK is determined by the car’s original market value (OMV), the annual business kilometres driven and the CO₂emissions category of the car. The latter determines whether a standard, discounted, or surcharged rate applies. In addition, the Deputy should note that Finance Act 2023 introduced a temporary measure for the year of assessment 2023, which provides for a €10,000 reduction to be applied to the OMV of cars in Category A, B, C and D for 2023 (it does not apply to cars in Category E).

The cash equivalent of the use of an employer-provided car will be determined using the formula:

Original market value (OMV) x A

To calculate A:

1.Determine the applicable vehicle category from Table B based on the amount of CO₂g/km the vehicle produces.

2. Locate the vehicle category in Table A.

3. Compare the annual business mileage travelled for the year to establish the appropriate percentage to use for A.

TABLE B

Reduced BIK for Electric cars

Electric cars that fall into ‘Category A’ vehicles i.e. vehicles with CO₂emissions between 0g/km and 59g/km inclusive will benefit from a reduced BIK charge, with rates ranging from 9% to 22.5% depending on business mileage.

For an electric car made available for an employee’s private use during the years 2023 to 2025, the cash equivalent will be calculated based on the actual OMV of the car reduced by:

• €35,000 in respect of cars made available in the 2023 year of assessment;
• €20,000 in respect of cars made available in the 2024 year of assessment; and
• €10,000 in respect of cars 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 BIK at the prescribed rates.

Employees in the motor industry

Employees in the motor industry generally have the use of several different cars, both new and old, during the tax year. To deal with the frequent changes for employees within the motor industry, for BIK purposes, there is a simplification arrangement that may be availed of.

This simplification arrangement provides that the BIK in such cases may be calculated using agreed average OMV of the cars used, rather than the actual OMV. The agreed average OMV to be used when calculating the BIK on the use of the car is determined by reference to the highest value of the vehicles that the employee normally drives, and the average OMV band for the section of the motor industry within which the individual is employed. There are 8 average OMV Bands which are further divided depending on which sector of the motor industry the individual is employed in.

It should be noted that an employee may choose to have the BIK calculated on the statutory basis of the actual OMV of the car made available to him or her during the tax year.

Cars Provided by reason of employment by Third Parties

If an individual has, by reason of his or her employment, a car available for his or her private use, a taxable BIK arises even if the person providing the car is not the individual’s employer.

In such cases, it is broadly the third party who provided the benefit that is responsible for accounting for the PAYE, PRSI and USC on same, rather than the employer. However, the facts, circumstances, arrangements etc. relating to the benefit must be examined before the correct tax treatment can be determined in each case.

With regard, to the specific questions raised, I am advised by Revenue as follows:

1.A car salesman who has the use of a car from their employerWhere an employee has an employer provided car made available to them for private use, BIK is charged on the basis of the general rules, outlined above. However, as the car salesman is employed in the motor industry, the simplification arrangement for the calculation of BIK may be availed of.

2.A company representative who is supplied with a vehicle to do their workWhere a company representative, as an office holder/employee, is provided with a car that is available for their private use, the general BIK rules, outlined above, will apply.

3.An employee who receives a 'car allowance' with their salaryAny amount payable as a car allowance to an employee in lieu of the use of a car is fully taxable and is therefore subject to tax via the PAYE system by the employer.

4.A 'brand ambassador' who has a new car supplied for their personal useAs outlined above, the tax treatment regarding the provision of a car for personal use, depends on the particular facts and circumstances. If the brand ambassador is an employee of the provider of the car, the BIK rules outlined above will apply.

Where an individual is provided with the use of a car, otherwise in their capacity as an employee, and in circumstances where the individual agrees to provide a service, such as involving the promotion and marketing of the particular car brand, the individual will, depending on the particular facts and circumstances, be subject to tax under either Schedule D Case I/II or Case IV. If the service is provided in the carrying on of a trade/profession, a charge to tax under Case I/II will apply. A charge to tax under Case IV will apply in circumstances where the service is carried on otherwise than in the course of a trade. The taxable amount in each case would generally be based on a fair value of the use of the car.

I am advised by Revenue that further information on the taxation of employer-provided vehicles (including details regarding employees in the motor industry) is included in Tax and Duty Manual Part 05-01-01b, which is available at the following links:

www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01b.pdf.

www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-companycars/index.aspx.

Finally, further information on the provision of third-party benefits to employees can be found in Tax and Duty Manual Part 05-01-01m, which is available at the following link: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01m.pdf.