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.

For the years up to 2022, the cash equivalent was a percentage of the Open Market Value (OMV) of the car. The percentage was 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.

From 1 January 2023, a new CO2-based Benefit-in-Kind (BIK) regime for employer-provided cars applies. The amount taxable as BIK is determined by the car’s OMV, the annual business kilometres driven and the CO2 emissions-based bands. The number of mileage bands is reduced from five to four.

For 2023, a reduction of €10,000 can be applied to the OMV of cars in categories A, B, C and D. This is provided for in the Finance Bill 2023. The reduction is not applicable to cars in category E.

The reduction of €10,000 to the OMV is in addition to the existing relief of €35,000 for electric vehicles for 2023.

For 2023, the lower limit in the highest mileage band is reduced by 4,000 km to 48,001 km.

These temporary measures will be retrospectively applied from 1 January 2023 and will remain in place until 31 December 2023.

If you are able, you can apply the new method of calculation of BIK prior to enactment of the legislation. You should carry out any necessary adjustments to the BIK calculations in respect of prior periods. This should be done by way of a current period adjustment and not by amending prior period payroll submissions.

Calculating the 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 at the time of first registration including:

• Value-Added Tax (VAT)
• and
• Vehicle Registration Tax (VRT).

The OMV is to be used, even if you purchased the car second-hand.

OMV of imported cars

If you imported the car, any foreign taxes and duties applicable should be ignored.

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.

How to calculate the cash equivalent

For 2023, to calculate the cash equivalent use of an employer-provided car in categories A,B,C and D you:

• deduct €10,000 from the OMV
• and
• then multiply by the applicable vehicle category percentage.

For the years up to 2022, please refer to TDM Part 05-01-01b.

To determine the applicable percentage, you need to:

• establish your vehicle's category based on the amount of CO2 g/km the vehicle produces from Table B below
• and
• compare the annual business mileage travelled for the year to determine the applicable percentage from Table A below.

*Applies to 2023 year of assessment only.

You should review notional pay regularly (at least quarterly) to ensure the payments reported to Revenue are as accurate as possible.

The cash equivalent can be reduced if your employee contributes to the running costs of the car.

Your employee may not have documents proving business or private kilometres driven in a year. Where this happens, you may assume 8,000km are private kilometres.

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.

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.

Next: Employees with low business kilometres