Upcoming Changes to Benefit-in-Kind Rules for Company Cars

On 9 March 2023, the Government of Ireland published the Finance Bill 2023. The upcoming legislative changes aim to continue the government’s assistance of businesses and families as they deal with rising energy prices, along with cost of living challenges. This blog briefly outlines the temporary changes expected to be introduced by the Bill as they affect Benefit-In-Kind (BIK) rules for company cars and how to deal with these changes on SimplePay.

The Minister for Finance announced a temporary relief of €10,000 applicable to the Original Market Value (OMV) of cars in Category A-D (excluding Category E). This means that when calculating BIK liability, employers may reduce the OMV by €10,000 to reduce the overall BIK payable. 

The same treatment is applicable to vans and electric vehicles. For electric vehicles, the OMV deduction of €10,000 will be added over and above the existing relief of €35,000 that is currently available, bringing the total relief for 2023 to €45,000. 

As part of these temporary measures, the government further reduced the upper limit in the highest mileage band from 52,001km to 48,001km. This should allow more vehicles to qualify for the lower applicable percentage for tax calculation purposes.

These temporary relief measures are being introduced in response to the new  C02 based Benefit-in-Kind system, which took effect from 1 January 2023. This new system is aimed at incentivising tax payers to use Electric Vehicles and cars that produce lower emissions. An unexpected outcome of the new system was that a significant number of employees with company vehicles had been met with large increases in their income tax liabilities, resulting in the need to provide this targeted relief.

These changes will be introduced at the committee stage of the Finance Bill 2023 and are intended to apply retrospectively from 1 January 2023 until 31 December 2023. The process of adding the Company Car benefit remains the same, by adding custom benefit and deduction (where applicable) items; the only difference being the calculated amounts. Our help page can be viewed for step-by-step instructions.

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Take care,

Team SimplePay