Company Vehicles Benefit-in-Kind [FAQ's]

The most common Benefit-in-Kind FAQs regarding the use of company supplied vehicles, e.g. cars, vans, motorcycles, and lorries.

Company Vehicles Issues / Questions

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What is the position if I do very little private mileage in my company car?

In the absence of evidence to the contrary, the minimum private mileage that an employer may accept for the purposes of calculating notional pay will be 5,000 miles per annum. A claim by an employee that lower private mileage occurred must be accompanied by reliable documentary evidence which must be retained by the employer.

Where the private mileage is in excess of 5,000 miles per annum, the actual figure must be taken for the purposes of calculating the notional pay.

There are new procedures relating to the taxable benefit for 'company vans'. Will these be implemented on a retrospective basis?

The Finance Act 2003 did not introduce a new tax charge for vans. Under existing legislation (which applies up to 31 Dec 2003), the private use of a company van is taxable.

The basis for calculating the benefit in kind on a company van has changed with effect from 1 Jan 2004. The new rules do not apply retrospectively.

If an employee only has restricted access to a vehicle, for example, only allowed to use the vehicle two days a week, how will the taxable benefit be calculated?

Where the vehicle is kept on the company premises for the remaining five days of the week and the employee or the employee's spouse or any member of his or her household is prohibited from using the vehicle and does not in fact use the car during those days then the taxable benefit should be computed by reference to the number of days the vehicle is available for private use.

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What kind of evidence can an employer accept in order to apply a discount to the Original Market Value of a company vehicle provided to an employee for the purposes of calculating the 'cash equivalent' of the benefit?

For a discount to apply, it must be shown that:

  1. the discount was actually received and
  2. the discount was normally obtainable in a single retail sale in the open market.

Generally, the bill of sale should indicate the actual price paid (which can easily be compared to the list price) thus indicating the amount of the discount.

Where the discount received was greater than 10%, employers are advised to obtain evidence from the vendor (the garage) i.e. written confirmation that the discount received was also obtained in single retail sales to other third parties. If this confirmation cannot be obtained the maximum discount that can be applied for the purposes of calculating the cash equivalent is 10%.

What happens if a capital sum paid by an employee towards a company car is not fully set off in the first year?

Any balance of the lump sum contribution that could not be set off in the first year may be taken into account in computing the taxable benefit (the notional pay) in the second year.

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What kind of record keeping are employers required to keep in relation to establishing the business mileage incurred by an employee?

Employers must put in place some mechanism whereby business mileage covered by employees is recorded e.g. the employee could keep a log book showing business journeys.

This is not a new requirement. Under existing arrangements, (which applied up to an including the 2003 tax year) employers are required to keep similar records for the purposes of completing forms P11D annually. Also, employees using the alternative basis for calculating benefit in kind on a company car are required to keep a log book under existing arrangements. The log book must be certified by the employer, as being to the best of his/her knowledge and belief, true and accurate.

How do you arrive at the taxable benefit for a motorcycle provided by the employer?

For motorcycles less than 410 kilograms, the annual taxable benefit is calculated at 5% of the market value of the motorcycle when it was first provided plus any other annual expenses paid in connection with same e.g. insurance, tax, petrol and repairs etc. less any amount made good by the employee to the employer.

Motorcycles over 410 kilograms are within the definition of a car for benefit in kind purposes and the taxable value must be calculated on the same basis as a car.

Where an employer provides a minibus to pick up employees / drop them home, what is the position? This would be common late at night, early in the morning where no public transport is available?

While this arrangement does constitute a benefit, PAYE/PRSI need not be applied to the benefit arising provided the following conditions are met:

  1. The bus service is provided to transport employees on journeys that are between the home and a workplace or between workplaces
  2. The bus service is available to employees generally whether or not all of the employees use the service.
  3. The main use of the service is for qualifying journeys for employees.

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Does the payment of toll charges by an employer for an employee give rise to a taxable benefit?

Whether or not a taxable benefit arises will depend on the nature of the journey undertaken by the employee. If the employee is traveling to and from work and pays toll charges which the employer reimburses, the reimbursement should be put through the payroll and PAYE/PRSI charged.

Reimbursement of toll charges incurred on business journeys may be paid free of tax.

Is the private use of lorries liable to PAYE/PRSI?

No

Where an employee who has the use of a company van goes directly to work from home in the morning and brings the van home every evening, will there be a taxable benefit?

Where a van is available for private use, a taxable benefit arises. However, such private use will not be taxable where the following conditions are met:

  1. the van is supplied by the employer to the employee for the purposes of the employee's work,
  2. the employee is required by the employer to bring the van home after work,
  3. apart from travelling from work to home and back to work, other private use of the van by the employee is forbidden by the employer, and there is in fact no other private use,
  4. in the course of his or her work, the employee spends at least 80% of his or her time away from the premises of the employer to which he or she is attached.

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Are all vans exempt from the benefit in kind charge following the Ministers recent announcement?

No. Where all of the conditions outlined in the Minister for Finance's statement (as set out in the answer to the previous question) are not satisfied, the taxable benefit is 5% of the original market value (VAT / VRT inclusive) of the van less any amount made good by the employee directly to the employer.

Are cars exempt from the benefit in kind charge where all the conditions set out in the Minister 's announcement are satisfied?

No. The exemption from the benefit in kind charge is confined to vans only.

Is a crew cab a van or a car? Is a Jeep a van or a car?

How the vehicle is treated depends on whether it falls within the definition of a 'car' or the definition of a 'van'.

Essentially, a 'car' means; any mechanically propelled road vehicle designed, constructed or adapted for the carriage of the driver or the driver and one or more persons other than (a) a motorcycle, (b) a van or (c) a vehicle not commonly used as a private vehicle and unsuitable to be so used. The definition of a car includes motorcycles over 410kgs.

A van means a vehicle which was designed or constructed solely or mainly for the carriage of goods or other burden, and which has a roofed area or areas to the rear of the driver's seat and no seats or side windows in that area.

Adapting say a four - seater crew cab (e.g. taking out the back seats) would not change the vehicle from being a car to a van, as subsequent adaptation cannot alter the original purpose of design or construction. Even with the back seats removed, the vehicle would still be classed as a car for benefit in kind purposes having regard to the original construction. If the vehicle does fall into the definition of a van, the vehicle is not automatically excluded from the benefit in kind charge. There will be no charge to tax, where all of the following conditions are satisfied:

  1. the van is supplied by the employer to the employee for the purposes of the employee's work,
  2. the employee is required by the employer to bring the van home after work,
  3. apart from travelling from work to home and back to work, other private use of the van by the employee is forbidden by the employer, and there is in fact no other private use,
  4. in the course of his or her work, the employee spends at least 80% of his or her time away from the premises of the employer to which he or she is attached.

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What is the position if the vehicle is adapted? If I have a car and I take out the backs seats and black out the rear side windows, is the vehicle now a van?

No. A car is defined as any mechanically propelled road vehicle designed, constructed or adapted for the carriage of the driver or the driver and one or more persons other than (a) a motorcycle, (b) a van or (c) a vehicle not commonly used as a private vehicle and unsuitable to be so used. Subsequent adaptation of the vehicle does not alter the fact that the vehicle was designed, constructed for the carriage of one or more persons.

What is the position if I put in back seats and fit rear windows in a van?

Once there are rear seats fitted etc, the vehicle no longer satisfies the criteria to be regarded as a van for benefit in kind purposes. Therefore, the vehicle should be treated as a car and the taxable benefit calculated accordingly. For the purposes of calculating the taxable benefit, the employer should consult the relevant regional office for a ruling on the Original Market Value that should be used.

A company has several sites located all over the country. It is impractical to bring back the van to a central location (the employers premises) every night. If the van is brought home by an employee, does a taxable benefit arise?

Where a van is available for private use, a taxable benefit arises. However, such private use will not be taxable where the following conditions are met:

  1. the van is supplied by the employer to the employee for the purposes of the employee's work,
  2. the employee is required by the employer to bring the van home after work,
  3. apart from travelling from work to home and back to work, other private use of the van by the employee is forbidden by the employer, and there is in fact no other private use,
  4. in the course of his or her work, the employee spends at least 80% of his or her time away from the premises of the employer to which he or she is attached.

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In the case of Van which forms part of a Van Pool, will Revenue accept a Tachometer/Tripmeter reading taken each Friday evening and again on Monday morning to show that no private mileage was done over the weekend?

Yes this is acceptable.

Company A is a UK registered company who provides staff to Company B (a Dublin based company) in return for a management fee (which includes the cost of the employee's salary). Company B provides a company car to the employee who carries out his duties in Dublin. What is the position in relation to the benefit-in-kind arising from the availability of the company car for the private use of the employee?

The facts of each case would have to be ascertained

  • copies of the contract of employment and terms and conditions of employment
  • relationship, if any, between the two companies
  • copy of contract between the Irish and UK company

would have to be submitted to the relevant regional tax office for a ruling.

What is the position where for example a car distributor gives an award to the sales person of the year (the sales person could be from one of a number of garages i.e. an employee of the garage not the car distributor)?

Where arrangements are in place whereby the award is routed through the particular garage, the amount of the award (if cash) or the taxable value of the award should be put through the normal payroll and PAYE/PRSI applied. Where no such arrangements are in place, the car distributor is responsible for remitting the tax and PRSI due on the award.

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Can an employer use their own system for calculating the taxable benefit arising from the use of a company car or must they use the ready reckoner provided in the Employer's Guide to operating PAYE and PRSI on certain benefits?

There is no onus on the employer to use the ready reckoner. Whatever method is used, the employer must ensure that the correct PAYE/PRSI is deducted.

Where an employees annual business mileage is known in advance (or the employer estimates what it is likely to be) the total benefit in kind charge can be estimated at the beginning of the year and the resultant notional pay may be averaged out over the relevant pay periods

e.g. Original Market Value €20,000. Estimate Business Mileage 18,000.

Notional pay is €20,000 x 24% = €4,800 per annum or €92.30 notional pay per week.

However, the employer should make periodic checks of the cumulative business mileage during the year to ensure that the aggregate PAYE and PRSI liabilities for the year are on track having regard to the originally estimated business mileage. (See Private Use of Company Vans of the Employer's Guide to operating PAYE and PRSI on certain benefits)

Give an example how the ready reckoner works where the employee is on holiday and the business mileage stays the same.

Example

Payroll week 47 (business miles to date 14,500) - Use Pay week 47 Band 2 (13559 to 18077)

Payroll week 48 (business miles still 14,500 - say employee on holiday) - Use Pay week 48 Band 2 (13847 to 18462)

Payroll week 49 (business miles still 14,500 - say employee on holiday) - Use Pay week 49 Band 2 (14136 to 18846)

Payroll week 50 (business miles now 15,000) - Use Pay week 50 Band 2 (14424 to 19231)

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I am a travelling sales representative. Generally, I operate from home and I travel between customers during the day. What do I record as business mileage?

Where an employee proceeds on a business journey directly from home to a temporary place of work (rather than commencing that business journey from his or her normal place of work) or returns home directly, the business mileage should be calculated by reference to the lesser of:

  1. The distance between home and the temporary place of work or
  2. The distance between the normal place of work and the temporary place of work

What evidence will Revenue accept where the private mileage for a company car is less than 5,000 miles?

Where an employee claims that his or her private mileage is less than 5,000 miles in the year, the employer must calculate the taxable benefit by reference to a minimum of 5000 private mileage unless the employee provides evidence (which must be retained by the employer) to show that the private mileage is less.

Acceptable evidence would be a log book of business journeys and mileage involved or some other form of account of the business miles done. The private mileage can be calculated by deducting the recorded business mileage from the total mileage according to the milometer reading.

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What is the situation where the employee pays for private fuel while using a company car for work purposes?

Where an employee pays for his own private fuel which does not involve a direct contribution to the employer, the amount expended by the employee is ignored for the purposes of calculating the taxable benefit.

Is there any taxable benefit where a company van is kept at the employers' premises?

Where the van is part of a van pool, there will be no taxable benefit. A van can be treated as being in a van pool if -

  1. the van is made available to, and is actually used by, more than one employee and is not ordinarily used by one employee to the exclusion of the others, and
  2. any private use of the van by the employees is merely incidental to business use, and
  3. it is not normally kept overnight at the home of any of the employees.

Where a van is not part of a van pool but kept at the employers premises on days off and at weekends, picked up from there each working day to be used for business purposes throughout the day and dropped back there every evening and any private use during the day is merely incidental, no taxable benefit arises.

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In the case of second hand cars can an employer use the cost rather than the original market value for the purposes of calculating the taxable benefit?

No. The taxable benefit must be computed by reference to the original market value of the car.

Where the employer pays car tax and insurance for an employee's private car, is that a benefit?

Yes the amount paid by the employer is a taxable benefit.

What is the position if most (but not all) of the car pool criteria are satisfied?

Once all the criteria -

  1. the car is made available to, and is actually used by, more than one employee and is not ordinarily used by one employee to the exclusion of the others, and
  2. any private use of the car by the employees is merely incidental to business use, and
  3. it is not normally kept overnight at the home of any of the employees

are satisfied, no taxable benefit arises.

If any of the criteria are not satisfied, a taxable benefit arises.

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Revenue Commissioners
March 2004

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