Employers often have questions about the tax implications of giving non-cash benefits to their employees. In this short article, Nikki Johns answers some frequently asked questions about Benefit-in-Kind.
What is Benefit-in-Kind?
A benefit-in-kind (BIK) is a non-cash benefit provided by an employer to an employee. Although these benefits are not cash, employees must pay PAYE, PRSI, and USC on the equivalent cash value and employers must include the value of the benefit in their payroll submissions to Revenue. Usually, payroll software will facilitate this.
Are any benefits exempt from Benefit-in-Kind?
Certain benefits are exempt from BIK. Examples include situations where an employer pays qualifying course fees or professional subscriptions for an employee or provides certain types of office equipment for employees working from home.
In addition, small benefits of up to €500 in value are exempt from BIK however the benefit must not be cash.
Many businesses use the small benefits exemption to provide tax-free vouchers or gifts for their employees at Christmas. Usually, if more than one small benefit is given in a year, only the first one qualifies for tax-free status, however at the time of writing, due to the Covid-19 pandemic, the requirement that only one benefit may be given each year may be waived for key staff who continued to work during the restricted period.
Any unused ‘allowance’ from the €500 cannot be carried over.
For more information about the small benefits exemption, see the Revenue website.
How do I calculate Benefit-in-Kind?
Generally, BIK value is calculated as the higher of:
- The cost to the employer of providing the benefit; or
- The market value of the benefit (if converted into money).
Note that special rules apply to certain benefits (see below).
What happens if my employee repays part of the cost of the benefit?
If your employee repays part of the cost of the benefit, the BIK value is reduced by the amount of the repayment.
Which benefits-in-kind have special rules?
Examples of benefits where special rules apply include situations where an employer
- pays medical insurance premiums for an employee,
- provides an employee with free or subsidised accommodation,
- provides an employee with a company car.
Does the Covid-19 pandemic affect Benefit-in-Kind?
Yes. Revenue have introduced several alterations to the application of BIK in response to the Covid-19 pandemic. You can read more about this in our blog on Benefits-in-Kind and Covid-19: What You Need to Know .
Need help with Benefit-in-Kind calculations or payroll?
As payroll specialists, GroForth knows only too well that keeping up to date with changing payroll rules and regulations can be time consuming and stressful. If you need help calculating Benefit-in-Kind and/or operating your payroll, we can assist you. Check out our payroll services page or contact our CEO Sarah Daly to discuss your specific requirements.