BIK changes, effective from January 2023, affect businesses whose directors and/or employees have private use of company cars or vans.
Benefit-in-Kind (BIK) is payable where a company car or van is available to a business’s directors or employees for their private use. From January 2023, there are a number of changes to be aware of. These include changes to how the cash equivalent value of company cars is calculated, an increase in BIK on company vans and changes to the BIK relief on electric vehicles. Set out below is some brief information explaining the changes. Full details are available on the Revenue website.
Changes to how the BIK cash equivalent value of company cars is calculated
Effective from January 2023, the cash equivalent when calculating BIK on company cars takes CO2 emissions into account. There are five emissions categories:
As well as working out which emissions category the vehicle is in, you also need to know the original market value (OMV) and business mileage. Business mileage and emissions determine the percentage used to calculate the vehicle’s cash equivalent for BIK purposes.
BIK on Company Vans
From 1 January 2023, the flat rate percentage used in the calculation of the cash equivalent of the use of a van has increased from 5% to 8%. If you’re not sure whether a vehicle qualifies as a ‘van’ for BIK purposes, the relevant criteria are listed on the Revenue website.
There are also changes to the tax relief on employer-provided electric vehicles. This relief is being phased out, reducing on a tapering basis. The cash equivalent for electric vehicles is calculated based on the vehicle’s original market value reduced as follows:
- €35,000 in respect of vehicles made available in the 2023 year of assessment;
- €20,000 in respect of vehicles made available in the 2024 year of assessment;
- €10,000 in respect of vehicles made available in the 2025 year of assessment.
Revenue states that this reduction applies irrespective of the actual OMV of the vehicle or when the vehicle was first provided to the employee.
It is important to familiarise yourself with the changes and apply the correct BIK rates. If you require assistance, please let us know.