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Queries on Benefit in kind (BIK)

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  • 16-08-2016 7:28pm
    #1
    lchang
    Registered Users Posts: 29 ✭


    Hi all,

    I looked for a similar thread and I could not find one, so apologies if there is one related.

    My employer pays 50% of my car insurance and 70% of my VHI Health Insurance.

    Every year I receive a "Compansations & Benefits" letter from my employer containing a breakdown of all the benefits I received in that year.

    The Car Insurance BIK and the VHI BIK are listed there:

    Car Insurance BIK - $xxx.xx
    VHI BIK - $xxxx.xx

    I think I did a mistake as I went to the revenue website (PAYE Anytime) and I have declare the sum of the Car Insurance BIK + VHI BIK as "other incomes".

    As a consequence of this, I received 4 P21 Statements saying that I have underpaid taxes for the last 4 years and that "All future refunds will be automatically offset against this
    underpayment until it is fully collected".

    My question to you Tax experts is:

    Do I have to declare my Car Insurance BIK and my VHI BIK as an extra income, therefore I become liable for the taxes arisen from this? Or is this already declared by my employer and therefore I indeed did a mistake?

    Thanking you in advance.
    Tagged:


Comments

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    #2
    Lockedout2
    Registered Users Posts: 402 ✭✭Lockedout2


    BIK is already on your P60 so no need to put it in again.

    Make sure you are claiming the tax credit for medical insurance.


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    #3
    lchang
    Registered Users Posts: 29 ✭lchang


    Many thanks Lockedout2 for the quick response! I did claim tax credit for my health insurance already :)


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    #4
    Marcusm
    Registered Users Posts: 10,229 ✭✭✭✭Marcusm


    Lockedout2 wrote: »
    BIK is already on your P60 so no need to put it in again.

    Make sure you are claiming the tax credit for medical insurance.

    BIK is not on a P60, it's on a P11D.


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    #5
    Lockedout2
    Registered Users Posts: 402 ✭✭Lockedout2


    Marcusm wrote: »
    BIK is not on a P60, it's on a P11D.

    Let me rephrase "the gross pay figure on the P60 includes the BIK".


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    #6
    Marcusm
    Registered Users Posts: 10,229 ✭✭✭✭Marcusm


    Lockedout2 wrote: »
    Let me rephrase "the gross pay figure on the P60 includes the BIK".

    No, it's not if your employer is operating PAYE because a BIK is not "pay" it's a separate item assessable under sch E and is included on form p11D of which you should receive an abstract. If your employer is deducting an amount of your pay and using it to discharge health insurance then it is not a BIK item.


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    #7
    exaisle
    Registered Users Posts: 2,675 ✭✭✭exaisle


    Marcusm wrote: »
    No, it's not if your employer is operating PAYE because a BIK is not "pay" it's a separate item assessable under sch E and is included on form p11D of which you should receive an abstract. If your employer is deducting an amount of your pay and using it to discharge health insurance then it is not a BIK item.

    Lockedout2 is correct.

    Employers are now only required to complete a P11D upon request by Revenue. Employees do not now receive a P11D but in cases like the OP's will receive details of the benefit in order that they can claim credits for the likes of medical insurance.

    BIK (the "taxable benefit" or "notional pay") is now subject to PAYE and is included in the Gross Pay figure on the P60.

    If the OP has declared the BIK separately as extra income, then I believe that he has made a mistake. He should contact the tax office and explain what has happened....and the nice folk there will be pleased to assist.


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    #8
    Marcusm
    Registered Users Posts: 10,229 ✭✭✭✭Marcusm


    exaisle wrote: »
    Lockedout2 is correct.

    Employers are now only required to complete a P11D upon request by Revenue. Employees do not now receive a P11D but in cases like the OP's will receive details of the benefit in order that they can claim credits for the likes of medical insurance.

    BIK (the "taxable benefit" or "notional pay") is now subject to PAYE and is included in the Gross Pay figure on the P60.

    If the OP has declared the BIK separately as extra income, then I believe that he has made a mistake. He should contact the tax office and explain what has happened....and the nice folk there will be pleased to assist.

    There are two methods by which a employer VHI scheme is operated. Under one of them the employer deducts the insurance premium net of TRS from the employee's pay - this is where the employee is discharging the cost.

    Where the employer bears the cost, it is returned on the P11D and the employee has an assessable BIK together with an additional tax credit for the insurance premium relief.

    It may not always be clear that there are two methods but there are. The method to be used is determined by the nature of the relationship between the insurer and the employee. The OP's reference to BIK is what led me to believe that it was a P11D reporting case.


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    #9
    exaisle
    Registered Users Posts: 2,675 ✭✭✭exaisle


    Marcusm wrote: »
    There are two methods by which a employer VHI scheme is operated. Under one of them the employer deducts the insurance premium net of TRS from the employee's pay - this is where the employee is discharging the cost.

    Where the employer bears the cost, it is returned on the P11D and the employee has an assessable BIK together with an additional tax credit for the insurance premium relief.

    It may not always be clear that there are two methods but there are. The method to be used is determined by the nature of the relationship between the insurer and the employee. The OP's reference to BIK is what led me to believe that it was a P11D reporting case.

    P11D is irrelevant here as there may be no obligation on the employer to return one.

    Where the employee is discharging the cost out of their net salary is irrelevant here too.

    No need to over-complicate matters.

    The OP's mention of a Compensation and Benefits letter from their employer, quoting Car Insurance BIK and VHI BIK makes it clear that this is a case which concerns BIK.

    The OP's question was whether they should declare the Car Insurance and VHI BIK as extra income. The answer is NO, because PAYE has already been operated on it and it is included in the Gross Pay figure on his P60.

    If the OP has included the BIK as extra income on the PAYE Anytime site, he should contact his local tax office and explain that an error has occured and they will rectify matters.


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    #10
    Marcusm
    Registered Users Posts: 10,229 ✭✭✭✭Marcusm


    Of course, of course, facts are irrelevant.


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    #11
    exaisle
    Registered Users Posts: 2,675 ✭✭✭exaisle


    Marcusm wrote: »
    Of course, of course, facts are irrelevant.

    Stop digging.


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    #12
    Marcusm
    Registered Users Posts: 10,229 ✭✭✭✭Marcusm


    exaisle wrote: »
    Stop digging.

    I'm not digging; the facts determine the treatment. Some employers gross it up and put it through payroll. Some do not. There are insufficient details here to discern which treatment the employer has adopted.

    If you don't believe me, read it from Revenue's mouth!

    http://www.revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-18.pdf

    Gross up treatment should be applied where the employer discharges the employee's liability as opposed to providing him with a prepaid policy although this is not stated clearly enough in the manual abstract.


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    #13
    exaisle
    Registered Users Posts: 2,675 ✭✭✭exaisle


    You are digging. You've mentioned a P11D several times and that has no relevance whatsoever. To cover that slip you've started on about employers paying VHI out of net salary, which isn't relevant here either.

    If no BIK arose there would be no thread on this issue. The title gives a really strong hint. Read it. Then read the original post. Nothing in it suggested that the employer was paying Car Insurance and VHI out of net salary. It should be patently clear to anybody reading the original post that this is a case where BIK arises.

    Why else would the employer mention BIK (twice) in the Compensations and Benefits letter which they gave the OP???

    The OP's question has been answered. He should contact the tax office to resolve the issue. Please don't start straying off topic to cover errors in your earlier posts.

    Please put the spade away and let's all be friends...

    Mods- now might be a good time to close this thread...


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    #14
    Marcusm
    Registered Users Posts: 10,229 ✭✭✭✭Marcusm


    Oh for god's sake, you don't get the point. If the employer has put it through payroll then it is not a BIK item by definition.


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    #15
    landmarkjohn
    Registered Users Posts: 699 ✭✭✭landmarkjohn


    I've gotta say I queried BIK on VHI with our company a whilst ago and the reply that came back in a couple of paragraphs completely baffled me. Something about the TRS figure gets added to the amount paid to VHI and then you pay BIK on the total and then you can claim relief.....

    After a whilst we got some notification that the calculation on of BIK on VHI was wrong and we were getting a refund. It doesn't seem straightforward. There's got to be a better way...


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    #16
    Synode
    Closed Accounts Posts: 7,967 ✭✭✭Synode


    Marcusm wrote: »
    Oh for god's sake, you don't get the point. If the employer has put it through payroll then it is not a BIK item by definition.

    What? If it goes through payroll as notional pay then why wouldn't it be BIK?


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    #17
    exaisle
    Registered Users Posts: 2,675 ✭✭✭exaisle


    Synode wrote: »
    What? If it goes through payroll as notional pay then why wouldn't it be BIK?

    You put that far more politely than I would have managed....luckily I was on hols and didn't notice the reply until now.... :-)


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    #18
    Synode
    Closed Accounts Posts: 7,967 ✭✭✭Synode


    landmarkjohn wrote: »
    I've gotta say I queried BIK on VHI with our company a whilst ago and the reply that came back in a couple of paragraphs completely baffled me. Something about the TRS figure gets added to the amount paid to VHI and then you pay BIK on the total and then you can claim relief.....

    After a whilst we got some notification that the calculation on of BIK on VHI was wrong and we were getting a refund. It doesn't seem straightforward. There's got to be a better way...

    They were exactly right. Employees get taxed on the Grossed up amount paid by a company to the health insurance provider i.e. the amount paid plus the tax relief at source that originally reduced the premium.

    It's then up to the employee to inform Revenue that they are due a tax credit for their health insurance premium. I'd say the amount of employees that actually do this is very low.


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    #19
    landmarkjohn
    Registered Users Posts: 699 ✭✭✭landmarkjohn


    Synode wrote: »
    They were exactly right. Employees get taxed on the Grossed up amount paid by a company to the health insurance provider i.e. the amount paid plus the tax relief at source that originally reduced the premium.

    It's then up to the employee to inform Revenue that they are due a tax credit for their health insurance premium. I'd say the amount of employees that actually do this is very low.

    Thanks for confirming that in a simple way..... and I would say a lot of people don't realise this because you hear TRS mentioned and then think well that's it, nothing more to be claimed. I've probably left 20 years worth behind me!


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    #20
    Synode
    Closed Accounts Posts: 7,967 ✭✭✭Synode


    TRS is a recent enough construct so you won't have overpaid for quite that long. You can go back 4 years though, so make sure to inform Revenue if you haven't claimed it all.

    The Government must clean up between that and under claimed tax relief on medical expenses. Though they do try to inform people from time to time


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