Company Vehicle BIK Regime

Company Vehicle BIK Regime

Changes to Company Vehicle BIK Regime from 1^st January 2023

 

The changes are largely driven by the Government’s Climate Action Plan 2021, which hope to lower CO² emissions by 2030.

 

1. Benefit in Kind: Company Cars from 1^st January 2023

 

A new method, based on both business mileage and the vehicles CO² emissions, will be used to calculate the BIK charge (the “cash equivalent”) for the use of a car. It should be noted that the new rules in 2023 will apply to all cars (including electric vehicles), whether the car is acquired in 2023 or earlier years.

 

The relevant variables are as follows:

 

1. The amount of business mileage and CO² emission category

 

Lower Limit	Upper Limit	A	B	C	D	E
Kilometres	Kilometres	%	%	%	%	%
—	26,000	22.5	26.25	30	33.75	37.5
26,001	39,000	18	21	24	27	30
39,001	52,000	13.5	15.75	18	20.25	22.5
52,001	—	9	10.5	12	13.5	15

 

1. The CO² emissions category of the car is as per the following table

 

Vehicle Category	CO2 Emissions (CO2 g/km)
A	0g/km up to & incl. 59g/km
B	More than 59g/km up to & incl. 99g/km
C	More than 99g/km up to & incl. 139g/km
D	More than 139g/km up to & incl. 179g/km
E	More than 179g/km

 

Example

 

An employee has the use of a company car in 2023. The Original Market Value (OMV) of the car is €30,000.

 

Per the manufacturer, the car produces 100g/km in CO² emissions. The actual business kilometres in the year were 45,000 kilometres. 100g/km in CO² emissions puts the car in vehicle Category C.

 

As the employee drove 45,000 kilometres in the year, the cash equivalent is equal to the OMV x 18% .

 

BIK Calculation: Cash Equivalent = 30,000 x 18% = €5,400.

As always, employers are required to maintain records of the kilometres travelled by each employee. This would be maintained on a weekly/monthly basis in order to calculate the BIK to be reported through P-Mod via the payroll returns.

 

Employers should review this regularly (at least quarterly) to ensure the BIK recorded to Revenue is as accurate as possible.

 

 

 

2. Benefit in Kind: Company Vans from 1^st January 2023

 

From 2023, the BIK “cash equivalent” for vans will increase from 5% to 8% of the OMV.

 

3. Benefit in Kind: Electric Vehicles from 1^st January 2023

 

The BIK Relief for Electric Vehicles is being phased out over the next 3 years (2023 – 2025).

 

For the years 2023 – 2025, the BIK “cash equivalent” will be calculated based on the actual OMV of the vehicle, reduced by:

 

• €35,000 in respect of vehicles made available in the 2023 year of assessment;
• €20,000 in respect of vehicles made available in the 2024 year of assessment; and
• €10,000 in respect of vehicles made available in the 2025 year of assessment.

 

Any portion of OMV remaining, after the reduction is applied, is chargeable to BIK at the usual rates.

 

Example

 

An employee has the use of an electric company car. The OMV of the car is €70,000.

 

The actual business kilometres in the year were 20,000 kilometres.

 

Electric cars will generally be ‘Category A’ vehicles i.e., vehicles with CO² emissions between 0g/km and 59g/km inclusive.

 

The BIK charges for the next 3 years are as follows:

 

Year	2023	2024	2025
Original Market Value	€70,000	€70,000	€70,000
Tax Free Threshold of OMV	€35,000	€20,000	€10,000
Taxable OMV	€35,000	€50,000	€60,000
BIK Rate to be used	22.5%	22.5%	22.5%
Cash Equivalent of use of	€7,875	€11,250	€13,500
Electric Car (= BIK charge)

 

It should be noted that no BIK arises for the provision of electric vehicle charging facilities on the employer’s business premises, once all employees and directors can avail of the facility.

 

If you have any queries in relation to these matters, please call or email your usual PSC contact.