In this current time of unease amidst the Cost-of-Living crisis as well as the Energy crisis, any news that results in an easing of financial burdens is welcome for all business owners and employees alike.
It was announced this week that the Government had made an unusual and temporary U-Turn to controversial tax changes which were introduced earlier this year. These changes were intended to encourage the use of Electric Vehicles (EVs), but received massive backlash from the approx. 150,000 motorists utilising company cars in Ireland. These changes saw the Benefit-In-Kind system become more CO2 based in order to facilitate the move towards lower emissions in Ireland. Unfortunately this meant that motorists whose vehicles were within the standard emission brackets were seeing a drastic increase in their income tax liabilities with their benefit-in-kind almost doubling in some cases. This, combined with the exponential price increases across the board were unsustainable for many employees.
Minister for Finance Michael McGrath has stated that the U-Turn on this will be temporary, as the move towards EVs is still very much a push that the government intend to make. The changes will only be applicable until December 31st, 2023. This change is set to be published in the coming days as part of the Finance Bill 2023 which is designed to assist businesses, employees and families alike in managing amidst the current rising energy prices and the cost of living crisis.
This change will involve a temporary relief of €10,000 to be applied to the Original Market Value (OMV) of cars within the A-D Categories to reduce the amount of BIK payable. In order to further facilitate the push towards Renewable Energy sources, this will also apply to EVs. In the case of EVs the reduction will be in addition to the existing €35,000 relief. It is important to note that vehicles in the E category will not be included here as these are vehicles with the highest emissions.
Of the changes, the Department of Finance has said; “In effect, this means that, for the purposes of calculating BIK liability, employers may reduce the OMV by €10,000 […] This treatment will also apply to all vans and electric vehicles. For electric vehicles, the OMV deduction of €10,000 will be in addition to the existing relief of €35,000 that is currently available for EVs, meaning that the total relief for 2023 will be €45,000.”
This U-Turn will be a welcome one as it was reported that some employees had either bought their company car for use as a private vehicle or handed the car back to avoid these increasing costs. The changes will be applied retrospectively to January 1st, 2023. It is not currently known if any measures will be in place in future years to safeguard company car drivers.
Updated BIK Mileage Bands for Cars:
|Lower limit (1)
|Upper limit (2)