Private use of employer-provided vehicles
How to calculate the taxable benefit
You will need to calculate the ‘cash equivalent’ of your employee’s private use of the employer-provided vehicle. This is the amount that you will add to your employee's pay.
The cash equivalent is a percentage of the Original Market Value (OMV) of the car. The percentage is based on the amount of mileage for business purposes.
The cash equivalent can be reduced if your employee contributes to the running costs of the car.
Original Market Value (OMV)
The OMV is the cost of the car, in Ireland, prior to its first registration, including all Irish taxes and duties.
Generally, this is the list price of the vehicle, including Value-Added Tax (VAT) and Vehicle Registration Tax (VRT) at the time of first registration.
The OMV is to be used, even if you purchased the car second hand.
- Example 1
You purchase or lease a second hand car originally worth €25,000. VRT and VAT are included in the €25,000 value.
The taxable benefit for the year must be calculated on the €25,000 cost.
OMV of imported cars
If you imported the car any foreign taxes and duties applicable should be ignored.
- Example 2
You import a car from abroad on 1 November that was first registered in the foreign country on 1 July. The car was worth €27,000 in the foreign country on 1 July (inclusive of all foreign taxes and duties).
In Ireland on 1 July the car was worth €25,000 (inclusive of all Irish taxes and duties). It was worth €20,000 in Ireland on 1 November (inclusive of all Irish taxes and duties).
The OMV is €25,000.
Effect of a purchase discount on OMV
If you received a discount when you purchased the vehicle, you may reduce the OMV to reflect the discount received.
The maximum discount is usually the amount an ordinary customer would receive when buying one car in a dealership. This amount typically does not exceed 10%.
Higher discounts may be available where you can prove they would have been available to an ordinary retail customer.
In cases of doubt, you can agree in advance the level of discount with your Revenue Office.
- Example 3
You purchase a fleet of vehicles costing €25,000 each (VRT and VAT included). You are given a 15% discount.
Discounts on single retail sales of these vehicles generally do not exceed 10%.
The OMV is calculated as €25,000 x 90% = €22,500.
How to calculate the cash equivalent
The cash equivalent is calculated by applying a percentage to the OMV.
The percentage you use in the calculation depends on how many kilometres your employee drives in a year for business. The greater the level of business kilometres, the lower the cash equivalent will be. You should review notional pay regularly (at least quarterly) to ensure the payments reported to Revenue are as accurate as possible.
Please see the table below for the applicable percentages.
Annual business kilometres - Cash equivalent
| Kilometres Driven | (% of OMV) |
|---|
|
24,000 and below
|
30%
|
|
24,001 to 32,000
|
24%
|
|
32,001 to 40,000
|
18%
|
|
40,001 to 48,000
|
12%
|
|
48,001 and over
|
6%
|
- Example 4
Your employee has the use of an employer-provided vehicle with an OMV of €30,000. The employee is not required to pay towards the cost of the car or its running expenses. Annual business travel is less than 20,135 kilometres.
From reading the table, we see the applicable percentage is 30%.
The cash equivalent (notional pay) for the year is determined as €30,000 x 30% = €9,000.
Notional pay of €9,000 (€173.07 per week or €750 per month) should be added to their wages or salary.
PAYE, PRSI and USC should be calculated on the total amount.
Your employee may not have documents proving private kilometres driven in a year. Where this happens, you must assume 8,000km are private kilometres.
- Example 5
Your employee travels a total of 38,000 kilometres in 2017. They are unable to provide documentary evidence of how many kilometres they have driven in their private travel. They told you that they have driven 4,000 kilometres.
Because there is no logbook you use 8,000 kilometres to calculate the business kilometres:
Total annual travel 38,000
Deduct private travel (8,000)
Business travel 30,000
From reading the table, we see the applicable percentage is 24%.
Employee contributions towards cost
Your employee may pay towards the running costs or for the use of the car. You can deduct the amount they pay from the cash equivalent.
The reduction can only be applied if your employee pays the amount directly to you.
- Example 6
Your employee has the use of an employer-provided vehicle with an OMV of €25,000.
They travel 19,000 business kilometres annually. The applicable percentage is 30%.
Your employee is required to pay, directly to you, €50 per month for petrol for the car provided to them. The cash equivalent for the year would be reduced by €600 (€50 x 12).
Calculation of notional pay
| | Calculation | Value |
|---|
| OMV and applicable percentage |
€25,000 x 30%
|
€7,500
|
|---|
| Annual contribution is deducted |
|
€600
|
|---|
| Notional Pay |
|
€6,900
|
|---|
Employee contribution to the purchase of the car
Your employee might make a lump sum contribution towards the purchase of an employer-provided vehicle. The amount contributed reduces the cash equivalent in the first year.
- Example 7
You are willing to provide an employer-provided vehicle up to the value of €25,000 for your employee. They have a particular car in mind costing €29,000. They agree to pay the difference of €4,000 to you.
Your employee travels 19,000 business kilometres annually. They also pay €1,000 each year directly to you for the private use of the car.
Calculation of notional pay - Year 1
| | Calculation | Value |
|---|
| OMV and applicable percentage |
€29,000 x 30%
|
€8,700
|
|---|
| Lump sum payment is deducted |
|
€4,000
|
|---|
| Annual contribution is deducted |
|
€1,000
|
|---|
| Notional Pay |
|
€3,700
|
|---|
Calculation of notional pay - Year 2 and following years
| | Calculation | Value |
|---|
| OMV and applicable percentage |
€29,000 x 30%
|
€8,700
|
|---|
| Annual contribution is deducted |
|
€1,000
|
|---|
| Notional Pay |
|
€7,700
|
|---|
Next: Employees with low business kilometres