Information relating to the principles of Benefit in Kind can be found in the Introduction to Benefit in Kind article.
WHAT IS A COMPANY VAN
As defined by Revenue, a van means a mechanically propelled vehicle which:
- is designed or constructed solely or mainly for the carriage of goods or other burdens, and
- has a roofed area or areas to the rear of the driver's seat, and
- has no side windows or seating fitted in that roofed area or areas.
Where a crew cab or other similar type of vehicle meets all of these criteria it would be regarded as a van rather than a car.
PRIVATE USE OF A COMPANY VAN
Where a company van is available for the private use of an employee, the employee is chargeable to PAYE/PRSI and USC in respect of that private use ONLY. Travel to and from work in the van is private use.
CALCULATING THE VALUE OF THE BENEFIT IN KIND (NOTIONAL PAY)
In order to tax the employee on the PRIVATE USE of a company van a cash equivalent value must be ascertained. This cash equivalent value becomes the "notional pay" item on the payroll for that employee, i.e. a value on which tax is be deducted but the benefit of which has already been received in the form of the private use of the company van.
Unlike company car's the level of kilometres travelled by the employee in the van, either business related or private, is irrelevant. Therefore there is not a kilometric table applicable to company vans. In place of the kilometric table a flat 5% is applied to the Opening Market Value (OMV) of the van.
The results arise as a notional value (cash equivalent) on which the employee will be taxed.
1. Ascertain the Opening Market Value
For the purposes of Benefit in Kind, the Opening Market Value (OMV) of a van is the original value the van would have been sold for pre-registration in the state. The OMV is the list price of the van, INCLUDING custom duty, VAT and VRT, which is the price it would have been reasonable for it to be sold for PRE_REGISTRATION, i.e. new.
The only adjustment that can be made to reduce the OMV of a van is when the employer receives a discount, then the list price may be adjusted.
Any discount received is restricted to a maximum of 10% reduction to the OMV as it is a reasonable discount that a purchaser may receive for a single purchase on the open market. However, to apply a discount you must:
- have documentary evidence of discounts received
- if the discount exceeded 10% you not apply this, you must restrict the OMV adjustment to 10%
- discount is applied to the VAT and VRT inclusive price
- the discount would be achievable in a single purchase transaction
2. Calculate the Cash Equivalent
Apply 5% to the OMV (as calculated in Step 1 above). The result of this is the cash equivalent of the benefit derived from having the private use of a company van.
Company Van: Notional Pay (Cash Equivalent) calculation for private use
If a van is part of a 'van-pool' there will not be a charge to PAYE, USC or PRSI if it fulfills the following criteria:
- the van is made available to AND IS ACTUALLY USED by MORE THAN ONE employee and is not used by one employee with the exclusion of others
- private use of the van is merely incidental to business use
- the van is not normally kept overnight at the home of any of the employees
EXEMPTION FROM BIK
A taxable benefit will not arise in respect of the private use of a company van where all of the following conditions are met:
- the van is supplied by the employer to the employee for the purposes of the employee's work
- the employee is required by the employer to bring the van home after work
- apart from travelling from work to home and back to work, other private use of the van by the employee is forbidden by the employer, and there is in fact, no other private use
- in the course of their work, the employee spends at least 80% of their time away from the premises of the employer to which they are attached.
This exemption ONLY APPLIES TO COMPANY VANS. Additionally, no taxable benefit will arise in respect of the private use of a commercial vehicle with a gross weight (i.e. laden weight) in excess of 3,500kg.
SETTING UP A COMPANY VAN IN COLLSOFT PAYROLL (which has private travel subject to PAYE, USC & PRSI)
Where the private use of a van gives rise to a taxable benefit in line with Revenue guidelines then the van must be set up like all other benefits within the payroll. The specific detail relevant to each employee's individual employment is entered against the employee record so that the "notional pay" will flow through to the payroll for tax purposes. This will be itemised on the employee payslip as well.
Accessing the BIK function at employee level
- Choose Employee from the toolbar.
- Select the Employee to whom the company car has been provided.
- Select the BIK tab.
- The first benefit defaults to Vehicle by default. Next to this, you will see Vehicle Details. Choose Vehicle Details, an input screen will display to allow you to enter all the relevant vehicle details from which the notional pay will be calculated, as explained above.
Company Van: Setting up the van on the employee record
It is important the Vehicle details entered are correct. BIK operates on a cumulative basis, therefore, errors can be corrected in a subsequent payroll period within the tax year. However, this may result in an excessive tax bill for the employee in one particular payroll period.
Set-up the van details
- Choose the type of vehicle: Van
- Enter a description that will identify the particular vehicle in use at the moment.
- Enter the vehicle registration.
- Enter the Opening Market Value (OMV)
Company Van: Setting up the Van details on the employee record
As the vehicle is a van, you do not enter any travel detail (i.e. kilometres). As explained above a kilometric table is not applicable in the case of company vans. A flat 5% is the applicable rate against the OMV.
Date range of use
Enter the date range for which the employee has use of the van for the current tax year.
If the employee has a change of role, for which they will no longer have the private use of a company van, it is very important to enter the end date as the last day they had private use of the van.
Where an employee only has the private use of a van for part of the tax year, it is important to set up the van as a benefit in kind and use the dates to indicate the length of private use. Remember once an employee no longer has the private use of the van (or changes to a new van) DO NOT DELETE the van detail simply enter the end date for use of the van.
Where a new van is given to the employee, for which the employee will continue to have private use, the original van will have a mid-year end date and the new van will be set up with a mid-year start date.
Benefit in Kind is operated on a cumulative basis, therefore any changes made to a benefit creates an adjustment in the subsequent pay period to take account of the previous notional pay accounted for in the payroll.
Company Van: Setting up the date range for the private use of the Van
Select 'Save' to attach the record to the employee file.
NOTIONAL PAY IN THE WAGES
Now that the company van details are set up against the employee record the notional pay (cash equivalent) will flow through to the employee's payroll.
- Choose Wages from the toolbar.
- Start the next payroll period or choose the current period, whichever is appropriate.
- Choose the Employee.
- Choose BIK tab.
The first default benefit of Vehicle will display the current period notional pay (cash equivalent) as calculated by CollSoft payroll based on the van details entered on the employee record (as explained above).
Company Van: Notional Pay (Cash Equivalent) of private van use in the payroll
As explained earlier the notional pay is the cash equivalent value of the private use of the company van for the payroll period in question. Based on the date range entered when setting up the company van, each pay period, within that date range, will reflect a pro-rata element appropriate to the length of the pay period.
The notional pay will be added to the payroll for the period in order to calculate the PAYE, USC and PRSI attributable to this payment in kind in addition to the wages/salary. The notional pay is merely added in order to make the correct deductions based on total pay, it is then deducted so that the net effect does not have a pay element within the net payment figure as the employee has already received it (i.e. in kind) in the form of the private use of the company van.
Company Van: Notional Pay on the payslip