Significant changes to BIK on Company Vehicles from 2023
Significant changes will apply to the BIK rules for company cars and vans with effect from 1 January 2023.
- Company Cars
Finance Act 2019 provided for significant changes to BIK on cars, with effect from 2023. From 2023, the BIK % will be based on CO2 emissions and business kilometres travelled.
The cash equivalent of the use of an employer provided car can be determined using the following formula:
Original market value (OMV) x A
To Calculate A:
- Determine the applicable vehicle category from Table B below based on the amount of CO2 g/km the vehicle produces
- Locate your vehicle category in Table A
- Compare the annual business mileage travelled for the year to establish the appropriate percentage to use for A.
TABLE A
| Business mileage | Vehicle Categories | |||||
| Lower limit
(1) |
Upper limit
(2) |
A
(3) |
B
(4) |
C
(5) |
D
(6) |
E
(7) |
| Kilometres | Kilometres | Per cent | Per cent | Per cent | Per cent | Per cent |
| — | 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 |
TABLE B
| Vehicle Category
(1) |
CO₂ Emissions (CO₂ g/km)
(2) |
| A | 0g/km up to and including 59g/km |
| B | More than 59g/km up to and including 99g/km |
| C | More than 99g/km up to and including 139g/km |
| D | More than 139g/km up to and including 179g/km |
| E | More than 179g/km |
Example 1 Example 2
Original market value of car €28,000 €45,000
CO2 emissions 120g/km 190g/km
= > category C E
Business kilometres 32,000 50,000
= > BIK % 24% 22.5%
= > Annual BIK €6,720 €10,125
- Company Vans
A different calculation has always been used for company vans. From 1 January 2023, the BIK % increases to 8% (previously 5%). A van is designed as a vehicle which:
- is designed or constructed solely or mainly for the carriage of goods or other burden
- has a roofed area or areas to the rear of the driver’s seat
- has no side windows or seating fitted in that roofed area or areas, and
- has a gross vehicle weight not exceeding 3,500 kilograms.
Where a crew cab or other similar type of vehicle meets all of the above conditions it is regarded as a van rather than a car.
It is critical that the correct classification (ie, Car vs. Van) is used, as any underestimation of the BIK charge is likely to be significant.
- Electric Cars
There is a relief in calculating the BIK amount for an electric car. From 2023, the relief reduces to €35,000 (previously €50,000).
Example 2022 2023
Original market value of electric car €80,000 €80,000
Less relief (€50,000) (€35,000)
Balance €30,000 €45,000
CO2 category A A
(All electric cars fall into this category)
Business kilometres 32,000 32,000
= > BIK % 24% 18%
= > Annual BIK €7,200 €8,100
Conclusion
The effect of the above changes is that, in most cases, the BIK charge will increase in 2023 and, in many cases, will increase significantly.
For employers providing company vehicles, it is important that steps are taken now to ensure that the new rates are applied to payrolls from 1 January 2023.
Should you have any queries in relation to the above, please call your usual PSC contact.