Written answers
Monday, 9 September 2024
Department of Finance
Tax Reliefs
Fergus O'Dowd (Louth, Fine Gael)
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322.To ask the Minister for Finance to review the concerns raised in correspondence (details supplied) relating to depreciation as a factor in BIK calculations; and if he will make a statement on the matter.[34206/24]
Jack Chambers (Dublin West, Fianna Fail)
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As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions. However some general background information is provided below.
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 to 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.
At present, the amount taxable as a BIK is determined with reference to the cars original market value (“OMV”), the annual business kilometres driven, and the CO2 emissions of the vehicle in question.
Electric cars that fall into ‘Category A’ vehicles, i.e., vehicles with CO2 emissions between 0g/km and 59g/km inclusive, benefit from a preferential rate of BIK, ranging from 9% – 22.5% depending on business mileage.
In addition electric cars, are further incentivised under section 121(4A)(aa) TCA 1997. This provides that the cash equivalent of an electric vehicle made available for an employee’s private use during the years 2024 to 2027, is calculated based on the OMV of the vehicle reduced by:
- €35,000 in respect of vehicles made available in the 2024 and 2025 years of assessment,
- €20,000 in respect of vehicles made available in the 2026 year of assessment, and
- €10,000 in respect of vehicles made available in the 2027 year of assessment.
The reductions above apply irrespective of the actual OMV of the vehicle or when the vehicle was first provided to the employee. 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.
Further information in regard to the tax treatment applicable where an employer makes a vehicle available to an employee for his or her private use can be found at the links below:
- Revenue website: www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-company-cars/index.aspx
- Tax and Duty Manual Part 05-01-01b: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01b.pdf
Ruairí Ó Murchú (Louth, Sinn Fein)
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323.To ask the Minister for Finance if he intends to make any changes to the current benefit-in-kind taxation situation for company cars; and if he will make a statement on the matter.[34257/24]
Jack Chambers (Dublin West, Fianna Fail)
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From 1 January 2023, new rates of benefit-in-kind (BIK) were applied to the provision of an employer provided car, which take into account the CO2 emissions of the car. The amount taxable as a BIK remains determined by the car's original market value (OMV) and the annual business kilometres driven, with new CO2 emissions bands used to determine whether a standard, discounted, or surcharged rate applies.
This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars. Electric cars that fall into ‘Category A’ vehicles, i.e., vehicles with CO2 emissions between 0g/km and 59g/km inclusive benefit from a preferential rate of BIK, ranging from 9% - 22.5% depending on business mileage.
Due to the impact the new emissions based BIK system has on certain petrol and diesel cars, Finance Act 2023 provided as a temporary measure a €10,000 reduction to be applied to the OMV of cars in Category A, B, C and D for 2023 in order to reduce the amount of BIK payable. This was not applicable to cars in Category E - the highest emission category. This treatment also applied to vans and electric vehicles (EVs). This meant that for the purposes of calculating the BIK liability on an employer-provided car, employers could reduce the OMV by €10,000. Additionally, the lower limit in the highest mileage band was amended by way of a 4,000km reduction, so that the highest mileage band was entered into at 48,001km. Finance (No.2) Act 2023 extended these measures to 31 December 2024.
For EVs, the OMV deduction of €10,000 is in addition to the existing relief of €35,000 that is currently available for such vehicles, meaning that the total relief for EVs in 2024 is €45,000. Finance (No.2) Act 2023 also extended the existing BIK tapering regime that is available for EVs to 2027.
In relation to whether any changes to the current BIK taxation situation for company cars will be considered, the Deputy will be aware that it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.
Gerald Nash (Louth, Labour)
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324.To ask the Minister for Finance his plans, if any, to maintain the current relief of €10,000 on the original market value of eligible cars for the purposes of calculating benefit-in-kind liability in Budget 2025; and if he will make a statement on the matter.[34262/24]
Jack Chambers (Dublin West, Fianna Fail)
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As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.
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