Valuation of benefits
Goods and assets provided to employees
You may purchase or provide goods and assets for an employee such as:
- mobile phones
The tax treatment of these items depends on whether you:
- transfer ownership of the item to your employee
- keep ownership of the item.
Employer transfers ownership of good or asset
The value of this benefit is the higher of:
- the cost you incurred in providing the good or asset
- the market value of the good or asset (the amount your employee would get if they sold the item).
You must deduct Pay As You Earn (PAYE), Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) on this value.
If you manufacture the goods, the cost of providing the goods is normally lower than the market value. The higher of these two amounts is the value of the benefit.
You may choose to give your employee an asset which has depreciated in value. Where this occurs the value of the benefit is the market value of the asset on the date of the gift.
Employer keeps ownership of good or asset
You may keep ownership of the good or asset and provide it for private use by an employee.
The taxable benefit is 5% of the market value of the good or asset when you first provided it as a benefit. The same charge applies then each year the employee uses the good or asset. If you give the same good or asset to another employee, the taxable benefit is not recalculated.
Where your employee has free use of an asset for part of the year only, the taxable benefit should be time-apportioned.
You must operate PAYE, PRSI and USC on the taxable benefit.
Different rules apply where you let an employee use accommodation, company cars or vans owned by you. (Motorcycles weighing more than 410kg are cars for BIK purposes).
Expenses paid by the employer to maintain a good or asset are also considered a taxable benefit.
- Example 1
On 1 January, John furnishes an employee's apartment with new furniture at no cost to his employee, Tim. The furnishings, which remained Tim’s property, cost €10,000.
The annual value of the use of the furniture is
€10,000 x 5% = €500.
Notional pay of €500 (€9.61 per week / €41.66 per month) must be added to Tim’s wages for calculating PAYE, PRSI and USC.
- Example 2
On 1 August, Mary furnishes an employee’s apartment with new furniture at no cost to her employee, Catherine. The furnishings, which remained the property of Mary, cost €15,000.
The annual value is €15,000 x 5% x 5/12 = €312.50.
The employer adds notional pay of €312.50 for the full year to Catherine’s wages over the period 1 August to 31 December. (That is €14.42 for each week or €62.50 for each month during the period) for calculating PAYE, PRSI and USC.
For all future years the annual value is €750 (€15,000 x 5%). For future years, notional pay of €750 (€62.50 per month / €14.42 per week) must be added to her wages for calculating PAYE, PRSI and USC.
- Example 3
On 1 January, Marty provides his employee Tina with the free use of an asset. This asset was previously been used by another employee, Ann. At the time Ann was given the use of the asset it cost €3,000. This is the market value of the asset when first provided as a benefit.
The annual value of the asset for Tina is:
€3,000 x 5% = €150.
Notional pay of €150 per annum (€2.88 per week / €12.50 per month) must be added to Tina’s wages for calculating PAYE, PRSI and USC.
- Example 4
On 1 January, Bill provides his employee Eric with the free use of furniture which was previously used in Bill’s showrooms. The original cost of the furniture was €5,000. The furniture was professionally valued at €3,500 as at 1 January (the date the furniture was first provided as a benefit).
The annual value is €3,500 x 5% = €175.
Notional pay of €175 (€3.36 per week / €14.58 per month) must be added to the Eric’s wages for calculating PAYE, PRSI and USC.
You may offer your staff a discount on goods provided by your business. If you do, a taxable benefit may not arise if certain conditions are met. For more information on this see Staff discounts.
Goods provided for work purposes
You may provide your employees with certain office equipment for business purposes. This is not a taxable benefit where certain conditions are met. For more information on this see Internet, computers, phones and work related supplies.
Next: Specific valuation rules