The Government has today announced temporary changes to how Benefit-in-Kind (BIK) is charged on company cars and vans.
It comes after complaints that reforms introduced on 1st January were leading to increases in tax bills for those driving them – in some cases by hundreds of euro.
The Government said that in the Finance Bill 2023, it will temporarily introduce a relief on €10,000 on the Original Market Value (OMV) of some vehicles, upon which the tax is calculated.
The relief will apply to the OMV of cars in the categories of A-D, but it won’t apply to the E category of most polluting vehicles.
“In effect, this means that, for the purposes of calculating BIK liability, employers may reduce the OMV by €10,000,” the Department of Finance said in a statement.
“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.”
The upper limit in the highest mileage band, which is also used as part of the calculation of tax due, is also to be temporarily reduced by 4,000km to 48,001km.
The changes are to be applied retrospectively from 1st January, when the reforms were first introduced and will remain in place until 31st December 2023.
Minister for Finance, Michael McGrath today said: “The Government remains committed to the environmental rationale behind the current emissions-based vehicle Benefit-in-Kind regime which has been in operation since 1 January 2023.
“In the current inflationary context, however, we recognise the difficulty experienced by some people facing BIK increases under the new regime.
“To that end, I am announcing that the Government is providing temporary changes to BIK for the current year which will help to mitigate some of the increases associated with the new emissions-based calculation.”
The measures are set to be introduced at the committee stage of the Finance Bill 2023.