In response to the cost-of-living challenges faced by families and businesses, the Irish Government have announced a temporary change in the Benefit-in-Kind regime for company cars and vans. This follows the introduction of a new CO2 based BIK system that was rolled out at the beginning of this year where a large number of company car drivers saw their monthly BIK tax bill increase significantly.
The Minister for Finance, Michael McGrath, announced yesterday evening that a relief of €10,000 will be applied to the Original Market Value (OMV) of cars in Category A-D in order to reduce the amount of BIK payable. This relief does not apply to cars in Category E (CO2 emissions of more than 179 g/km).
In effect, this means that, for the purposes of calculating BIK liability, employers may reduce the OMV by €10,000. This treatment will also apply to all vans and electric vehicles. For electric vehicles, the OMV deduction of €10,000 will be in addition to the existing relief of €35,000 that is currently available for EVs, meaning that the total relief for 2023 will be €45,000.
In addition, The upper limit in the highest mileage band is amended by way of a 4,000km reduction, so that the highest mileage band is now entered into at 48,001km.
We have included an example calculation below of the cost implication new OMV relief for company car drivers.
|Example 1 – Company Car|
|(A)||Original Market Value (OMV) of the car||€35,000|
|(B)||New Cash Equivalent / OMV||€25,000|
|Employee Annual Kilometres Driven||30,000km|
|Car CO2 Emissions||110 g/km|
|Vehicle CO2 Emissions Category||Category C|
|(C)||Vehicle Category %||24%|
|BIK 2023 Calculation|
|€35,000 (A) x 24% (C)||€8,400|
|BIK 2023 with OMV Relief Calculation|
|€25,000 (B) x 24% (C)||€6,000|
This temporary measure will be retrospectively applied from 1 January 2023 and will remain in place until 31 December 2023.
This is welcome news from the Government particularly during these inflationary times. If you require any additional information about the temporary changes to 2023 BIK regime, please contact email@example.com.