Revenue climbs down on plans to reinstate tax on company cars despite lockdown rules

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Revenue has relaxed rules that were set to cost people with company cars thousands extra in tax during the lockdown.

his is because the tax authority had told those who use a car provided to them for work that they are to be charged benefit-in-kind (BIK) tax for use of their cars as normal from this month.

This is despite the fact that the lockdown means they cannot use the company cars for work.

This was set to cost people with company cars up to €1,500 more in tax a month.

Thousands of sales reps have been forced to work from home but they had been told by Revenue in December that they would liable for BIK as normal this year based on business mileage under pandemic conditions.

It comes after tax authorities relaxed the rules from the first lockdown last March for all of last year in relation to BIK.

BIK is calculated based on original value of the car provided to the staff. People pay PAYE on a cash equivalent calculated using the car’s value and the mileage driven for business.

A percentage amount is then applied to the original market value of the company car, based on mileage.

Low mileage generates the higher percentage tax rate at 30pc, with other bands down to 6pc for those driving more than 48,000km a year.

The more mileage you put on your car, the less tax you pay.

But it also means the less mileage you do then the higher the rate of the tax.

As company cars are not being used for work at the moment, sales reps are being taxed at a rate of 30pc of the value of the cars.

One sales rep for a pharmaceutical firm, speaking before the Revenue climb-down, said: “I stand to be charged around €1,500 per month from my salary as a result of this action.”

Last year Revenue allowed the amount of business mileage travelled in January 2020 to be used as a base month for the purposes of calculating the amount of BIK due for all of last year.

Sinn Féin’s Pearse Doherty and Labour’s Ged Nash had contacted Revenue asking it to show the same flexibility this year.
Contacted yesterday. Revenue conceded that a new lockdown was now in place. This was not the case in early December when it lifted its “concessionary measure related to employer-provided vehicles”.

The Revenue Commissioners said “having regard to the current public health restrictions, the short-term concessionary measures announced back in March will remain in place”.

This means that if the employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period.

Where an employee retains possession of a vehicle, but the employer prohibits the use of it, no BIK will apply if it is not used for private use.

If the worker holds on to the company car and there is limited business use and some personal use, then the the amount of business mileage travelled in January 2020 may be used as a base month for calculating the amount of BIK due.

Revenue said: “Due to the nature of the Covid-19 pandemic it is not known how long any Covid-19 restrictions will ultimately remain in place.

“Revenue will, however, continue to regularly review all Covid-19 related matters (including the provisions relating to BIK on employer-provided vehicles) and if any further measures are considered necessary in the future, updated guidance will be made available by Revenue.”

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Source: Irish News