Private Use of Company Cars

General

Where a company car is available for the private use of an employee the employee is chargeable to PAYE and PRSI in respect of that use.

Travel to and from work is private use.

The notional pay to which PAYE and PRSI must be applied is determined by reference to the "cash equivalent" of the private use of the company car. The cash equivalent is determined by applying a percentage based on business kilometres to the "Original Market Value" (OMV) of the vehicle supplied (whether the vehicle is owned acquired new or second-hand or leased by the employer).

The following paragraphs of this Chapter set out how the cash equivalent is determined in particular cases.

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Ready reckoners

In order to assist employers in calculating the cumulative amount of notional pay in respect of the private use of a company car to be taken into account at a relevant pay period, see Ready Reckoners for weekly/monthly calculations of the cumulative cash equivalent of the private use of the company car.

The cumulative kilometres in the ready reckoners refers separately to the cumulative business kilometres in the tax year in respect of each car provided. The ready reckoner is effective irrespective of whether the car was available on 1 January in the year or made available at a later date in the year or was given up during the course of the year. Using the ready reckoners should, in general, ensure

  • that the correct amount is taken into account for PAYE and PRSI purposes at particular pay periods, and
  • that, at the end of the tax year or, if earlier, when the car is given up, the correct amount of the taxable benefit will have been subjected to PAYE and PRSI.

Detailed instructions on how to operate the ready reckoners are also contained in Ready Reckoners. Before using the ready reckoners it is advisable to be familiar with the following paragraphs of this Chapter.

The ready reckoner is intended to be of assistance to employers, including those who may be operating a manual payroll. There is no obligation on employers to use the ready reckoner, if they are using some other method of ensuring appropriate results. In particular, the amount of the taxable benefit in respect of a car can be averaged out over pay periods so long as periodic adjustments are made to keep the aggregate PAYE and PRSI liabilities for the tax year on track by reference to the cumulative kilometres.

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Meaning of "car"

For the purposes of the PAYE and PRSI charges, 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 other persons, other than:

  1. a motor-cycle the weight of which is less than 410 kilograms
  2. a van (see definition in Private Use of Company Vans) or
  3. a vehicle not commonly used as a private vehicle and unsuitable to be so used.

This includes all cars within the ordinary meaning of the word, crewcabs and jeeps but excludes hearses and lorries.

See Free Use of Assets for the treatment in relation to motorcycles weighing less than 410 Kilograms.

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Cars in "car-pools"

There will not be a charge to tax in respect of a car which is in a "car-pool". A car can be treated as being in a car-pool if:

  • 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
  • any private use of the car by the employees is merely incidental to business use, and
  • the car is not normally kept overnight at or in the vicinity of the home of any of the employees. [but see Note below].

Note: Where:

  1. it is scheduled and verifiable that an officer of the State (including an officer of a statutory body) is obliged to be 'on call' outside of his/her normal working hours to respond to situations giving rise to possible contravention of law and, for this purpose the officer:
    1. is provided with a car during scheduled and verifiable 'on call' periods outside of his/her normal working hours; and
    2. keeps the car overnight on or in the vicinity of his or her home; and
  2. the car would, but for the obligation in (a) above, be a 'pool car', then such car may be deemed to be a car in a 'car-pool' for the purposes of the benefit in kind provisions.

Where it is proposed to treat a car as being in a car-pool but there is a doubt about that treatment, the position may be agreed in advance with local Revenue Offices.

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Chauffeur driven cars

In the case of chauffeur driven cars two separate charges arise:

  1. a benefit-in-kind charge in respect of the provision of the car and
  2. a benefit-in-kind charge in respect of the expenses incurred by the employer in the provision of a chauffeur.

Charge for the chauffeur benefit - The total expense incurred by the employer in the provision of the chauffeur (e.g. chauffeur's salary) is chargeable less any amount made good by the employee.

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Calculation of "cash equivalent"

The notional pay to which PAYE and PRSI must be applied is determined by reference to the "cash equivalent" of the private use of a company car. To arrive at the cash equivalent the employer must first apply a business kilometric related percentage to the Original Market Value (OMV) of the vehicle supplied (whether the vehicle is owned acquired new or second-hand or leased by the employer).

The cash equivalent is then reduced by any amount required to be made good, and actually made good, by the employee directly to the employer in respect of any part of the cost of providing or running the car.

Example 1

If an employee is required to pay directly to the employer €50 per month in respect of petrol, the cash equivalent for the year would be reduced by €600. If, without involving the employer, the employee pays €50 per month in purchasing petrol for the company car, the cash equivalent is not reduced.

The table below sets out the percentages applicable:

Percentages applicable
Annual Business Kilometric Thresholds Cash Equivalent ( % of OMV )
24,135 or less 30%
24,136 to 32,180 24%
32,181 to 40,225 18%
40,226 to 48,270 12%
48,271 and over 6%

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Three steps to calculating "notional pay" for company car

The following paragraphs are a three-step guide to assist in the calculation of the amount of the taxable benefit or "notional pay" in respect of a company car.

Step One - Ascertain the Original Market Value of the car.

The Original Market Value (OMV) of a car is the price (including any duty of customs, duty of excise or value-added tax chargeable on the car) which the car might reasonably have been expected to fetch, if sold in the State singly in a retail sale in the open market, immediately before the date of its first registration in the State. Original market value includes vehicle registration tax (VRT). In the case of an imported vehicle, the OMV is the equivalent price the car would fetch in Ireland if sold in Ireland in a single retail sale immediately before it was first registered in the Foreign State.

Example 2

The original market value of a car first registered in the UK on 1 July 2004 and imported into Ireland on 1 November 2007 (and registered in Ireland in November 2007) would be the Irish open market price for a single retail sale immediately before 1 July 2004.

Generally, the original market value is taken to be the list price of the vehicle, including VAT and VRT at the time of first registration.

Example 3

An employer purchases or leases a vehicle worth €25,000 (VRT and VAT inclusive price). The taxable benefit (the notional pay) for the year must be calculated by reference to that €25,000 cost.

Where a discount was received on the acquisition of the vehicle, the list price may be reduced accordingly.

In cases where:

  • an exceptionally large discount was obtained (e.g. a quantity or fleet discount) or
  • the discount cannot be determined (e.g. a car has been traded in against a new car) or
  • the car involved was purchased second-hand,

claims in respect of discounts are limited to the discounts normally obtainable in respect of a single retail sale on the open market. Reductions for discounts do not usually exceed 10% and higher percentages will not be accepted in the absence of documentary evidence in respect of single retail sales in the open market. Where an employer receives a discount in relation to the cost of the car (or a fleet of cars), the OMV is taken to be the VAT inclusive / VRT inclusive discounted price subject to the discount being normally obtainable in respect of a single retail sale in the open market / subject to the discount complying with the paragraph above as set out above / but only in so far as the discount conforms with the paragraph above.

Example 4

An employer purchases a fleet of vehicles costing €25,000 each (VRT and VAT inclusive price) before any discount. The employer is given a 15% discount due to the size of the order.

The discount taken into account for the purposes of calculating the OMV of the cars may not exceed 10% of the list price (in the absence of documentary evidence in respect of single retail sales in the open market).

The original market value should therefore be computed as follows: €25,000 x 90% = €22,500.

In cases of doubt, the level of discount applicable may be agreed in advance with the local Revenue Office.

If no discount was received the OMV is calculated by referring to Step One of a three step guide.

Step Two - Ascertain the Business Kilometres for the year and calculate the Cash Equivalent using the appropriate percentage.

Having ascertained the OMV of the car, the cash equivalent must be calculated. This is calculated by applying the appropriate annual business kilometric related percentage in the Table in section Calculation of "cash equivalent" to the OMV.

Example 5

An employee has the use of a company car with an original market value of €30,000. Annual business travel is less than 20135 kilometres. The employee is not required to make good any amount towards the cost of the car or its running expenses. The employee is paid weekly.

Using the Table in section Calculation of "cash equivalent" the cash equivalent (notional pay) is determined as follows: €30,000 x 30% = €9,000 for the year.

As the employee is paid weekly, €173.07 notional pay should be added to the weekly money wages or salary and PAYE and PRSI should be calculated by reference to the total amount (money wages plus the notional pay).

Where an employee claims that his or her private travel is less than 8,047 kilometres in the year, the employer must calculate the taxable benefit by reference to a minimum of 8,047 private kilometres unless the employee provides evidence (which must be retained by the employer) to show that the private travel is less. Documentary evidence such as a log book of business journeys and kilometres involved would be acceptable. However where private travel is in excess of 8,047 kilometres per annum, the actual private travel figure (supported by documentary evidence) must be taken for the purposes of calculating the notional pay. The weekly and monthly equivalents of 8,047 kilometres annual private travel are 155 kilometres per week and 670 kilometres per month.

Example 6

An employee who travels a total of 38,000 kilometres annually indicates to the employer that the total includes 4,000 kilometres for private use but is unable to provide documentary evidence supporting this.

The business kilometres are calculated as follows:

	Total Annual travel         38,000
	Deduct private travel        8,047
	Business travel             29,953
	

Using the Table in section Calculation of "cash equivalent" above the applicable percentage to be applied to the OMV of the car is 24%.

Step Three - Deduct amounts made good by Employee to the Employer

Having ascertained the cash equivalent amount, deduct any amount made good by the employee directly to the employer towards the cost of providing or running the car.

Example 7

An employee has the use of a company car with an original market value of €25,000. He/she travels 19,000 business kilometres annually and contributes €1,000 per annum directly to the employer for the private use of the car. In addition, the employee pays for his/her own private fuel.

The notional pay is calculated as follows:

  25,000  x  30%                        =     €7,500
  Less amount made good to employer     -    (€1,000)
  Notional Pay                          =     €6,500
    

There is no reduction available for the private fuel as this is not an amount made good to the employer.

Where an employee makes a lump sum contribution to the employer towards the purchase price of a company car, the amount contributed is regarded as an amount made good by the employee in the first tax year that the benefit is chargeable.

Example 8

An employer is willing to provide a company car up to the value of €25,000. The employee has a particular car in mind costing €29,000. The employee agrees to pay the difference of €4,000 to the employer and is supplied with the car valued at €29,000.

The employee travels 19,000 business kilometres annually and contributes €1,000 per annum directly to the employer for the private use of the car.

Year 1
The notional pay is calculated as follows:

  €29,000  x  30%    =           €8,700
  Less
    Lump sum payment to employer €4,000
    Annual amount made good      €1,000
  Notional Pay in year 1              €3,700


Year 2 and following years
The position is:

  €29,000  x  30%   =           €8,700
  Less
    Annual amount made good     €1,000
  Notional Pay in year 2             €7,700
    

Where, exceptionally, the lump sum cannot be fully set off in computing the notional pay of the first tax year the benefit is chargeable, the balance of the lump sum may be set off in computing the notional pay in respect of the car for the subsequent tax year.

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Alternative Basis for certain employees with low business kilometres

In the case of certain employees whose annual business travel does not exceed 24,140 kilometres, the cash equivalent of 30% of OMV may be reduced by 20% giving an effective cash equivalent of 24% of OMV.

This alternative basis is available where the following conditions are complied with. The employee:

  • works an average of not less than 20 hours per week
  • travels at least 8,047 business kilometres per annum on the employer's business
  • spends at least 70% of his or her working time away from the employer's premises
  • retains a log book detailing business kilometres, business transacted, business time travelled and date of journey, and the log book is certified by the employer as being correct.

Example 9

A company car is made available to an employee on 1 Jan 2007. The original market value of the car is €18,000. The employee works full-time for the firm and travels 9,000 kilometres on company business per annum. The employee spends more than 70% of his or her working time away from the employer's premises.

The calculation of the notional pay is as follows:
€18,000 x 24% = €4,320

Notional pay of €4,320 (€83.07 per week / €360.00 per month) must be added to the money wages or salary for the purposes of calculating PAYE and PRSI.

Example 10

A company car is made available to an employee on 1 Jan 2007. The original market value of the car is €25,000. The employee works full-time for the firm and travels 9,000 kilometres on company business annually. The employee spends more than 70% of his or her working time away from the employer's premises. The employee makes good the sum of €1,000 per annum directly to the employer towards the running costs of the car.

The notional pay is calculated as follows:

  €25,000  x  24%    =            €6,000
  Less
    Amount made good to employer  €1,000
  Notional Pay                         €5,000
    

Notional pay of €5,000 (€96.15 per week / €416.66 per month) must be added to the money salary or wages for the purposes of calculating PAYE and PRSI.

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Private use of Company Cars by Employees in the Motor Industry

In the case of employees working in the motor industry an alternative arrangement has been put in place / implemented to deal with the issue of frequent changes of company cars. 'Frequent changes' means changes at periods of less than 1 month. This arrangement does not apply to employees who have exclusive use of a specific car(s) for a predictable period(s) in excess of 1 month.

This arrangement applies to the following employees:

  • Employees in the retail motor trade
  • Employees in the short-term car hire trade
  • Other employees in the motor trade

The employers within the arrangement are:

  • motor retailers who are engaged in selling use cars only
  • franchised motor retailers who are engaged in selling both new and used cars
  • short-term car hire providers
  • motor distributors and car leasing

Please see further details in Rules for Employees in the Motor Industry in relation to the calculation of PAYE/PRSI etc.

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Company Car not available for full year

Adjustments will be necessary where a car is not available for the full year, e.g. where -

  • an employee receives a car after the start of the tax year, or
  • an employee gives up a car before the end of the tax year.

Equally an adjustment will be required where a car is for some other reason not available for private use for part of the tax year, for example, where an employee is working abroad for an extended period. In this case, a car provided to an employee will not be regarded as available for private use for that part of the year in which the employee is outside the State for the purpose of performing the duties of the office or employment, provided the following conditions are met:

  • The employee travels abroad without the car
  • The car is not available for use by the employee's family or household during the employee's period of absence outside the State

Where a car is not available for part of a year, the business kilometric thresholds and the percentage cash equivalents used should be calculated by reference to the following fraction of the normal thresholds and percentages (as listed in the Table in section Calculation of "cash equivalent"). The fraction is
(number of days in the tax year car is available for private use) / 365

This fraction may also be expressed as a percentage as follows:
(number of days in the tax year car is available for private use) x 100) / 365

Example 11

An employee has the use of a company car for 220 days of the tax year. The original market value of the car is €28,000. The employee travels 25,950 business kilometres during this period.

In this instance, the Table in section Calculation of "cash equivalent" is revised by applying the following percentage to each of the annual business kilometric thresholds and the cash equivalent percentages.

(220 days x 100) / 365 days = 60.27%

The adjusted table for this employee would therefore be:

Annual Business Kilometric Thresholds Cash Equivalent ( % of OMV )
14,546 or less 18.08%
14,547 to 19,394 14.46%
19,395 to 24,243 10.84%
24,244 to 29,092 7.23%
29,093 and over 3.61%

The notional pay is calculated as follows -
€28,000 x 7.23% (percentage for 25,950 business kilometres) = €2,024 for the year.

Change of Car during the tax year

Where there is a change of company car during the year, the annual business kilometric thresholds and the cash equivalent percentages must be calculated in accordance with the section titled, Company Car not available for full year.

Example 12

An employee has the use of a company car with an original market value €23,000 for the first 186 days of the tax year and a car valued at €25,000 for the balance of the year. The employee, who travels 13,850 business kilometres in the first car and 19,650 business kilometres in the second car, directly reimburses the employer a total of €1,000 for the private use of the two cars.

The Table in section Calculation of "cash equivalent" must, in respect of each car, be adjusted as follows for the purposes of calculating the chargeable benefit (notional pay) by applying the following percentages to each of the annual business kilometric thresholds and the cash equivalent as follows:

First Car
(186 days) / 365 days = 50.96% for the first car

Second Car 
(179 days) / 365 days = 49.04% for the second car

Therefore, the revised tables are as follows:
First Car:

Annual Business Kilometric Thresholds Cash Equivalent ( % of OMV )
12,299 or less 15.28%
12,300 to 16,398 12.23%
16,399 to 20,498 9.17%
20,499 to 24,598 6.11%
24,599 and over 3.05%

Second Car:

Annual Business Kilometric Thresholds Cash Equivalent ( % of OMV )
11,835 or less 14.71%
11,836 to 15,781 11.76%
15,782 to 19,726 8.82%
19,727 to 23,671 5.88%
23,672 and over 2.94%

The notional pay is calculated as follows:

First Car - €23,000 x 12.23% 
(percentage for 13850 business kilometres)  =    €2,812
Second Car - €25,000 x 8.82% 
(percentage for 19650 business kilometres)  =    €2,205
Total                                            €5,017
Less amount made good directly to the employer  (€1,000)
Notional pay for the year                        €4,017
    

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Lump Sum Contributions by Employees

Please refer to Example 8 above.

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End of Year Adjustment

As the exact business kilometres for an employee may not be known until the end of the tax year, employers should, during the course of the year, make a best estimate of the business kilometres for the year, based on available information and records. The resultant estimated notional pay based on the estimated business kilometres should be added to the employee's money wages or salary and PAYE and PRSI calculated on the aggregate amount.

However, prior to the end of the tax year, having regard to the known business kilometres covered in the tax year up to that date, the best estimate should be reviewed to determine its accuracy. Any adjustments necessary to the cumulative notional pay charged to date should be incorporated in the remaining pay periods for the year having gone back to the pay period in question and recalculated the PAYE/PRSI. Where the adjustment only affect's the employee's PAYE liability, this can be rectified in the current pay period without revisiting the earlier pay period. i.e. where employee has reached the pay ceiling for PRSI purposes.

Periodic references to the Ready Reckoners, or equivalent checks using a computerised system, taking account of updated business kilometre figures should ensure that the cumulative notional pay taxed during the tax year stays on track in relation to the notional pay for the year as computed at the end of the year.

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Car Allowances

Where an employee surrenders the use of a company car and the employer gives the employee a round sum car allowance instead, such allowance is liable to PAYE and PRSI as an emolument of the employee.

Where an employer reimburses an employee in respect of the expense of business kilometres driven by the employee in the employee's own car and that reimbursement is in line with the conditions set out in the Revenue Information Leaflet IT51 - Employees Motoring/Bicycle Expenses, a PAYE or PRSI liability does not arise on the amounts reimbursed.

Where an employer gives an employee money to purchase a car, the amount paid to the employee is liable to PAYE and PRSI as an emolument of the employee, whether or not the car is used by the employee for business purposes.

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