BIK on EVs.

innrain

Revenue have updated the tax and duty manual for the BIK ref EVs. Nothing new just confirmation of what we already knew.

6.3 Extension to Tax Years 2023 to 2025

Finance Act 2021 further extended the regime for another three years, so that it also

applies to vehicles made available in the period from 1 January 2023 to 31 December

2025. The relief from the BIK charge arising during this period applies on a tapered

basis.

For an electric vehicle made available for an employee’s private use during the years

2023 – 2025, the cash equivalent will be calculated based on the actual OMV of the

vehicle reduced by:

 €35,000 in respect of vehicles made available in the 2023 year of assessment;

 €20,000 in respect of vehicles made available in the 2024 year of assessment;

and

 €10,000 in respect of vehicles made available in the 2025 year of assessment.

This reduction applies irrespective of the actual OMV of the vehicle or when the

vehicle was first provided to the employee.

If the reduction reduces the OMV to nil, a BIK charge will not arise. Any portion of

OMV remaining, after the reduction is applied, is chargeable to benefit-in-kind at the

prescribed rates.

eltoastero

So the balance of (OMV - €35k) in 2023 will be hit with BIK at 30%. That's bonkers, at least have it at a lower level than Diesel if you want to encourage EV uptake.

I'm very hopeful that they delay the implementation when the time comes (2023) as that reduced rate will change my monthly BIK charge from (OMV = €60k):

2022 (€50k limit): Monthly BIK Charge €250 (gross)

2023 (€35k limit): Monthly BIK Charge €625 (gross)

2024 (€20k limit): Monthly BIK Charge €1000 (gross)

2025 (€10k limit): Monthly BIK Charge €1250 (gross)

My reason in hoping for a delay is that there won't be many cars available in 2023 with an OMV of €35k or less (to avail of 0% BIK) and I doubt there'll be many in 2024 with an OMV €20k or less (to avail of 0% BIK).

Those who get provided with a company car and are given €35k to play with will still find better value in the non-EV world in 2023, I doubt many will opt into paying increasing amount of BIK over the term of a new PCP/HP deal.

wassie

BIK will be 22.5% for EVs.

[SOURCE: Revenue Tax and Duty Manual Part 05-01-01-b]

wassie

https://www.boards.ie/discussion/comment/118720109#Comment_118720109

My reason in hoping for a delay is that there won't be many cars available in 2023 with an OMV of €35k or less (to avail of 0% BIK) and I doubt there'll be many in 2024 with an OMV €20k or less (to avail of 0% BIK).

There are a lot of new EV models coming to market over the next 18 months. Granted many wont be at the €35K mark, but there will be some. Expect to see a couple of Chinese brands make their debut here with cheap EVs. Effectively what the Koreans did in the 2000s and the Japanese a couple of decades earlier.

I would love to see the EV BIK gravy train roll on, but the fact is our Govt has a harsh track record in their tax treatment of the Irish motorist.

eltoastero

https://www.boards.ie/discussion/comment/118721558#Comment_118721558

I'm not holding out much hope, just a tiny bit.

It's very likely I will get rid of the car instead of paying €625pm in BIK, which means I'll have gone from contributing €250 pm to the Government via BIK to €0pm. While keeping this EV was the long term plan, there's a point somewhere in years 2, 3, 4 etc where it will cost me more via BIK payments than had I just paid for it personally. We'll see, I'll do the math closer to the time.

championc

There was a real expectation / hope that EV prices would tumble, but if anything, they appear to be going the opposite way. Tech and range might be increasing, but all at a price.

eltoastero

https://www.boards.ie/discussion/comment/118721491#Comment_118721491

I've only just seen your reply with the reduction from 30% to 22.5% for EVs. That's a good move at least, takes away a bit of the sting of the changing price brackets.

Leprechaun77

In relation to BIK, I currently receive a 20% discount on my 30% BIK rate as I do low mileage, as per revenue rules (mileage log kept etc). This results in a BIK rate of 24% for my ICE car. I am moving to an electric vehicle which will have an effective BIK rate of 22.5% from next year based on the lowest business mileage bracket. Outside of the various tapered reliefs over the next three years on electric vehicles, does anyone know if this 20% revenue discount can be applied to the 22.5% rate?

wassie

I think generally it can when looking at Tax Manual in sections 4.1.3 & 5.1. (refer to link underneath Tables in my post above) from 2023, but you may not actually gain any benefit by doing so after the EV reductions are applied. It may also change every year from 2023 through 2025 and may also depend upon the value of the car you choose and annual km.

I could also be incorrect in my reading of this. You should get proper advice from accountant or taxation specialist to determine whether it applies to your specific circumstances before making any decision and not be relying on a forum.

digitaldr

I'm new to this bik lark and thinking of buying an ionq 5 for the business but unfortunately there's probably none to be had until 2023. I presume there's no way of paying in advance now to avail of the current 0% bik?

wassie

Unfortunately not.

The applicable BIK rate is determined by the mileage you do in the current tax year.

spakman

I bought a Kona EV in 2019 through my company, so that will be 4 years by time 2023 changes come in.

I think you're allowed calculate depreciation of 12.5% pa, so that would be a 50% reduction. Does that mean if I wanted to buy the car personally, I'd have to pay my company 50% of OMV?

digitaldr

Thanks. As it happens a dealer got back to me to say they have an ex-demo ionq 5 executive plus in white, 58kw,3200km for €43995. Unfortunately wouldn't be my first choice in colour, spec or battery. We do regular 253km trips (Dublin to Letterkenny) - in theory should be able to get there without a charging stop but reality might be different.

My preference would be a Nissan Ariya - just off the phone to Windsor, no pricing yet but sales guy was hopeful that would be at least one model under 50k based on UK pricing and should have some stock available this year.

Anyway going to have a look at the ioniq 5 later today. Wife prefers something a bit higher - current car Peugeot 3008 SUV and CRV before that.

digitaldr

Well had a quick drive of the ionq 5 and have mixed feelings. Spacious interior and good acceleration compared to my Peugeot but not gone on the interior - lots of hard plastics and really don't like the white bezels on the screen and tacky looking spray painted silver buttons. Present car has full leather and much more premium interior. Anyway the wife is going to have a look tomorrow.

Buzwaldo

https://www.boards.ie/discussion/comment/118920944#Comment_118920944

My understanding is that while depreciation is calculated as you stated, you have to pay the company a realistic valuation based on the actual second hand value that same cars are valued at the time. Or so my accountant told me, which led me to changing from a company purchase to a personal purchase just a few weeks ago. Other things that I put into that calculation were that the quote for insurance was way higher for a company car than a personal one, and also the SEAI grant of 5k was not available for company purchases ( plus the reducing BIK allowance over the next fe years ).

Of course I may have done my sums wrong, and your accountant may have a different view on things (maybe ask him/ her for an opinion).

innrain

https://www.boards.ie/discussion/comment/118924112#Comment_118924112

I've been told the same. I've been told to use the VRT calculator from Revenue to get a feel for the current Open Market Selling Price. Of course you can have reasons for your price to differ but it needs to be documented.

The tool is handy to predict the expected value in the future. By saying the year of registration is 2018, would make the value for the +1 year 23738.

The 12.5% is for calculating the tax liability. You're not going to write off a car in 8 years.

grotty

Would love to see actual costs&benefit numbers ran through.. Anyone willing to put examples in instead of the %s? It would be much appreciated and really helpful. Huge thanks.... A lot to get your head around

eltoastero

https://www.boards.ie/discussion/comment/118924112#Comment_118924112

I did all of my sums, and once the BIK limit hits €20k then i'll definitely have to sell the car (from the company) as the BIK payment per month would be in the region of €1000 (gross). Even next year when the limit reduces to €35k I'm basically doubling my BIK charge to €625 (gross), so I am weighing up the value in selling the car before 2023. But, the problem then lies in the OMSP of a car that is impossible to buy second hand and is on back order for 12months+. The accounting aspect of the Accelerated Depreciation €24k) coupled with actual depreciation of considerably less could leave me with an awkward capital gain when selling the car. I'm not looking forward to working that out.

innrain

https://www.boards.ie/discussion/comment/118924552#Comment_118924552

I played with the numbers at some point into an Excel sheet. Unfortunately I have only the screen grabs

Here it is for a Kona

and here is for something selling at 55k mark (EV6 for example)

I labeled OMV but that is actually OMV - reduction as described in the tax manual and BIK rate is 22.5%

I may be wrong cause I was just playing so please verify.

eltoastero

https://www.boards.ie/discussion/comment/118925242#Comment_118925242

I fully agree with your figures for 2023/2024/2025 in your EV6 example (there will be a BIK payment in 2022 too, it's €5k over the 2022 Threshold).

This approach really blunts the appeal of an giving you the private use of a company purchased EV, especially as a lot of PCP/HP deals will last 3 years. Lowering the BIK rate from 22.5% would reduce the impact in a huge way.

championc

Budget day 2022 will be interesting. With prices somewhat rising rather than falling, and with the shortage of EV in supply, the sales levels are definitely behind expected levels and therefore, you'd think there must be a real chance of pushing out the timelines by another 12 months

splashthecash

https://www.boards.ie/discussion/comment/118927649#Comment_118927649

Even if this happens, is that not kicking the can down the road in terms of ending up having to pay this BIK in 2 years time rather than next year?

I'm really new to all this tax\BIK stuff but from what I'm reading above, it seems like the benefits that I thought were there to purchase an EV through my own LTD company will be lost to this BIK payment in the long run? Or maybe I'm missing something obvious.

Apart from expensing fueld, insurance, tax, servicing - are there any other benefits to purchasing an EV through a LTD that makes it cheaper in the long run?

Apologies...noob question I know

wassie

https://www.boards.ie/discussion/comment/118927649#Comment_118927649

I think the chances are next to none. BIK exemptions were alway stimultory measures for early adopters to generate demand.

Prices are rising, but the rapid inflation in fuel prices will only accelerate peoples decisions to change over to full EVs regardless of govt incentives. For the first quarter just gone 6,244 new EVs were registered compared to 2,816 on the same period 2021 so the demand is only going in one direction.

I would agree with you that price is the biggest inihibtor to take up, but this should change especially when we see some of the chinese manufacturers such as BYD & NIO start selling in Europe.

Of course the biggest factor why cars are expensive here is thanks to VRT and that is not changing any time soon.

championc

Anything announced ?

spakman

Didn't hear anything yet!

championc

In many cases, the devil is in the detail - as to what is actually written in the Finance Bill itself

boccy23

Checking the budget calculators, they are calculating in BIK for 2023 anyway. So the phasing in of BIK seems to be still on the cards.

fafy

Theres reliable info here, it starts January 1st 2023, commencing with the BIK value, in excess of €35 k. Unless, of course, this gets changed, in the Finance bill

https://www.grantthornton.ie/insights/factsheets/change-to-company-vehicle-bik-rules-from-1-january-2023/

There is still a big difference between driving a company EV (category A)versus an ICE(category B to E), up to 15% less BIK on the value, albeit, a chunk of this, is eaten up for the higher pricing of EV’s:

wassie

A lot of ICE drivers in for BIK pain according to an article in the indo. Glad I have an EV.

https://www.independent.ie/business/personal-finance/tax/anger-as-people-with-company-cars-hit-with-huge-benefit-in-kind-tax-increase-42041103.html

championc

From that article

"The Bik regime is also changing for electric vehicles (EV). Under the current rules, if the electric vehicle open market value (OMV) exceeds €50,000, then the OMV is reduced by €50,000, effectively to zero.

Over €50,000 in value, the existing rates are used based on the business mileage – from 6pc to 30pc.

The new regime provides for a reduction of €35,000 in 2023, €20,000 in 2024 and €10,000 in 2025. The threshold will gradually reduce to zero by 2026, with a new BIK rate of up to 22.5pc being applied.

This is lower than the top 30pc Bik rate for internal combustion engine vehicles."