Important changes announced to BIK for company vehicles

As you are aware, there were significant changes made in 2023 to the calculation of BIK for company vehicles with the introduction of a new CO2 based calculation for Diesel and Petrol cars, a reduction in the allowance for Electric Vehicles and an increase to the rate of BIK for company vans. These changes will have resulted in many employees being charged a higher amount of BIK in 2023.

The Minister has today announced that the following temporary changes are being made for 2023;

1) A relief of €10,000 to be applied to the Original Market Value (OMV) of cars in the C02 Categories A-D. 

2) The €10,000 relief will also apply to vans and Electric Vehicles. For EV's this means the total relief allowed is now €45,000

3) Vehicles which fall into CO2 category E will not get any relief.

4) The threshold for highest mileage band is being reduced by 4,000km from 52,001Km to 48,001km. This means that employees who travel high amounts of mileage will enter the lowest rate of BIK earlier.

The full announcement can be viewed on the Department Of Finance website at 

or on the RTE website at https://www.rte.ie/news/business/2023/0307/1360853-temporary-changes-to-how-bik-is-charged-on-company-cars/

What we have shared above is based on a "Press Release" and a "News Report" - we know what the Governments intention is, but we have not spoken with Revenue about the nitty gritty details of these changes and how they should be implemented.

We would urge all employers to hold off from making any changes to their Payroll until we have had time to tease out all of the details with Revenue.

The problems that need to be figured out include the following;

1) The amount of BIK itself is not necessarily a cumulative calculation - we need to determine how we calculate the total adjustment is calculated.

2) Any backdated reduction of BIK will result in a reduction in the amounts of PAYE, USC and PRSI due. PRSI is not calculated on a cumulative basis therefore correcting the amounts of Employee and Employer PRSI cannot be simply calculated by a cumulative adjustment in the next pay period.

3) BIK is reported to Revenue in two ways - as an amount of BIK and as part of Gross Pay - both of these figures need to be adjusted on Revenue, and we need to ensure that the change is reported correctly.

We will be engaging with Revenue in the coming days to tease out these issues and we will release a software update once the details have been settled.

We would urge all employers not to try and make any changes or adjustments to their payroll in advance of our solution being released - the issues around these changes are not trivial, and we all need to take time to consider all the implications.