BIK headache-advice needed

Clara B

Hi all
Infrequent poster. Hoping for some help regarding a BIK query.
My company leases a vehicle for me-in their name-which I fully pay for. I do and have always had a vehicle allowance as part of my salary-I have a long commute.18 months ago I was involved in an accident and my car was written off. My company leased a car for me at the time and I covered the cost of the lease.
As my car was written off I asked my boss if I could long term lease,with a view to purchase the vehicle at the end of the lease,through them. I would pay the deposit and monthly lease fees and any incidental costs. He agreed and I leased a new car-as I was told it would not be liable for bik. The lease was higher than I would have liked -but manageable and free from bik.
A couple of months into the lease I was informed by my employer that I would need to pay BIK ,as their accounting company had advised this.
So -I now pay for the lease/tax/maintenance and bik. My company does pay insurance as my car is considered part of their Fleet.
My query is-should I be paying bik as I cover the total cost? Yes-my employee pays monthly-they then invoice me and I pay them. I’m at a loss to see where the benefit arises.
Surely if personal use is a factor then the amount I contribute should be deducted from the taxable amount. My accountant has advised me that I should not be liable for bik-their accountant has advised me I am. Totally lost and confused. Can anyone shed some light on this for me please ðŸ‘ðŸ»

Shefwedfan

Clara B wrote: »

Hi all
Infrequent poster. Hoping for some help regarding a BIK query.
My company leases a vehicle for me-in their name-which I fully pay for. I do and have always had a vehicle allowance as part of my salary-I have a long commute.18 months ago I was involved in an accident and my car was written off. My company leased a car for me at the time and I covered the cost of the lease.
As my car was written off I asked my boss if I could long term lease,with a view to purchase the vehicle at the end of the lease,through them. I would pay the deposit and monthly lease fees and any incidental costs. He agreed and I leased a new car-as I was told it would not be liable for bik. The lease was higher than I would have liked -but manageable and free from bik.
A couple of months into the lease I was informed by my employer that I would need to pay BIK ,as their accounting company had advised this.
So -I now pay for the lease/tax/maintenance and bik. My company does pay insurance as my car is considered part of their Fleet.
My query is-should I be paying bik as I cover the total cost? Yes-my employee pays monthly-they then invoice me and I pay them. I’m at a loss to see where the benefit arises.
Surely if personal use is a factor then the amount I contribute should be deducted from the taxable amount. My accountant has advised me that I should not be liable for bik-their accountant has advised me I am. Totally lost and confused. Can anyone shed some light on this for me please ðŸ‘ðŸ»

Who owns the car? If the company owns the car or car is in their name then you pay BIK

thegolfer

Do pay for the full cost of the car, and I mean the full lease, full fuel insurance etc?

If so then you could argue that there is no BIK, and that the car is one the company name only for security purposes or similar.

If you only pay for part of the car then issues.

Is it a van or a passenger vehicle as there are separate treatments.

Shefwedfan

thegolfer wrote: »

Do pay for the full cost of the car, and I mean the full lease, full fuel insurance etc?

If so then you could argue that there is no BIK, and that the car is one the company name only for security purposes or similar.

If you only pay for part of the car then issues.

Is it a van or a passenger vehicle as there are separate treatments.

Company pays insurance.....from my point of view that automatically means it is BIK.....


But I am no accountant.

Shefwedfan

Shefwedfan wrote: »

Who owns the car? If the company owns the car or car is in their name then you pay BIK

What benefit is the op getting if they are paying the full cost? Benefit in kid is suppose to come into effect where there is a benefit happening.

Maybe bik on the insurance but that’s it.

Shefwedfan

Makenzie Sparse Balcony wrote: »

What benefit is the op getting if they are paying the full cost? Benefit in kid is suppose to come into effect where there is a benefit happening.

Maybe bik on the insurance but that’s it.

I asked the question who is the name owner on the car

If the company then I can only see it as a BIK, they are supplied with car to drive around in and company pays insurance

What else would you call it? Would love to know and I will chance it with mine

relax carry on

Shefwedfan wrote: »

I asked the question who is the name owner on the car

If the company then I can only see it as a BIK, they are supplied with car to drive around in and company pays insurance

What else would you call it? Would love to know and I will chance it with mine

https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-of-company-cars/how-to-calculate-the-value-of-the-benefit.aspx

If it's company car, the above is how the BIK is calculated.

"The cash equivalent is a percentage of the Original Market Value (OMV) of the car. The percentage is based on the amount of mileage for business purposes.

The cash equivalent can be reduced if your employee contributes to the running costs of the car."

Marcusm

Clara B wrote: »

Hi all
Infrequent poster. Hoping for some help regarding a BIK query.
My company leases a vehicle for me-in their name-which I fully pay for. I do and have always had a vehicle allowance as part of my salary-I have a long commute.18 months ago I was involved in an accident and my car was written off. My company leased a car for me at the time and I covered the cost of the lease.
As my car was written off I asked my boss if I could long term lease,with a view to purchase the vehicle at the end of the lease,through them. I would pay the deposit and monthly lease fees and any incidental costs. He agreed and I leased a new car-as I was told it would not be liable for bik. The lease was higher than I would have liked -but manageable and free from bik.
A couple of months into the lease I was informed by my employer that I would need to pay BIK ,as their accounting company had advised this.
So -I now pay for the lease/tax/maintenance and bik. My company does pay insurance as my car is considered part of their Fleet.
My query is-should I be paying bik as I cover the total cost? Yes-my employee pays monthly-they then invoice me and I pay them. I’m at a loss to see where the benefit arises.
Surely if personal use is a factor then the amount I contribute should be deducted from the taxable amount. My accountant has advised me that I should not be liable for bik-their accountant has advised me I am. Totally lost and confused. Can anyone shed some light on this for me please ðŸ‘ðŸ»

The lease is in their name and they provide you with the car therefore you are within the scope of BIK. Any amount which you pay to the company out of your after tax income reduces the amount of the taxable benefit (note, not the tax) € for €.

Depending on the rate of BIK applicable and your income tax rate, this may be a very inefficient means of obtaining use of the car.

Do you know the OMV? The BIK rate, your personal tax rate and any reduction for business miles. If you put these up, it might be possible to see if you have screwed yourself.

Shefwedfan

relax carry on wrote: »

https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-of-company-cars/how-to-calculate-the-value-of-the-benefit.aspx

If it's company car, the above is how the BIK is calculated.

"The cash equivalent is a percentage of the Original Market Value (OMV) of the car. The percentage is based on the amount of mileage for business purposes.

The cash equivalent can be reduced if your employee contributes to the running costs of the car."

Yes I’m aware and I pay a “personal
Use charge”

But the poster doesn’t want to pay any BIK

Shefwedfan

By the looks of it the OP originally had a pool car which was probably bought for someone else in company and left

Company never set it up right that she was using, once that was written off they had to replace the car

The tax man would be asking who it is for so they put the OP against it and that’s why now she is paying BIK.....she was lucky she hasn’t been paying BIK since day 1, that would be my understanding

The problem now is car is bought and OMV etc comes into pay which OP wasn’t aware of
So could have got an expensive car which she can’t pay for.....

sundodger5

But any cost the OP pays back directly to the company towards running/cost of car offsets the BIK.
I suppose it depends if the OP pays for the car directly, or reimburses the Company directly. i.e as a salary deduction.

Marcusm

Shefwedfan wrote: »

By the looks of it the OP originally had a pool car which was probably bought for someone else in company and left

Company never set it up right that she was using, once that was written off they had to replace the car

The tax man would be asking who it is for so they put the OP against it and that’s why now she is paying BIK.....she was lucky she hasn’t been paying BIK since day 1, that would be my understanding

The problem now is car is bought and OMV etc comes into pay which OP wasn’t aware of
So could have got an expensive car which she can’t pay for.....

sundodger5 wrote: »

But any cost the OP pays back directly to the company towards running/cost of car offsets the BIK.
I suppose it depends if the OP pays for the car directly, or reimburses the Company directly. i.e as a salary deduction.

The OP said it was a new car which was leased following the write off of what, I assume, was a personal car.

The issue is that BIK on a car is, unusually, not based on the actual cost to the employer of providing the vehicle but on the statutory scale charge based on a %age of the OMV, which may bear little relation to the lease cost which the OP has reimbursed.

Shefwedfan

Ok the original post is confusing

So reading it again. This is based on my experience so could’ve wrong

The original car which is crashed is irrelevant at this stage

The OP might have option for car allowances or company car. So let’s say500 per month into wages or 500 per month against a car. They would need to confirm of course

it’s just sounds like above, in this case the company leases the car and puts it under the company insurance. Instead of additional money per week the OP now has a car.....
This is BIK.....now as I said i might be wrong but sounds like that

AndrewJRenko

Shefwedfan wrote: »

Ok the original post is confusing

So reading it again. This is based on my experience so could’ve wrong

The original car which is crashed is irrelevant at this stage

The OP might have option for car allowances or company car. So let’s say500 per month into wages or 500 per month against a car. They would need to confirm of course

it’s just sounds like above, in this case the company leases the car and puts it under the company insurance. Instead of additional money per week the OP now has a car.....
This is BIK.....now as I said i might be wrong but sounds like that

Why didn't the OP pay the lease from the start?

barneystinson

AndrewJRenko wrote: »

Why didn't the OP pay the lease from the start?

It’s not their lease, it’s the employer’s, so that’s a moot point. The employer’s accountants are clear on that fact, as it’s what gives rise to the BIK charge. The making good to the employer of the lease charge is a secondary issue that results in a deduction from the “cash equivalent” as calculated under BIK rules.

It’s clear though, that if they still have a car allowance as part of their taxed pay, and are stuck with a substantial BIK tax liability, this is a very expensive way to have access to a car.

sundodger5

I may be missing something but if the op is covering the entire cost of the lease then no benefit is given.
Lets be fair BIK is a tax brought in because you had the benefit of a free car.
This is not a free car if being paid in full by the op.

barneystinson

sundodger5 wrote: »

I may be missing something but if the op is covering the entire cost of the lease then no benefit is given.
Lets be fair BIK is a tax brought in because you had the benefit of a free car.
This is not a free car if being paid in full by the op.

I understand that it seems like that, from a cash flows point of view, however BIK has to be operated in accordance with the relevant tax legislation. In the case of a car, that’s section 121 TCA 1997.

It prescribes that the “cash equivalent” (which is the value of the use of a car), is 30% of the OMV of the car. So BIK is calculated by reference to that figure.

This figure may be reduced, depending on how many business kilometres the employee puts up on the car, and it is also reduced by any amount contributed by the employee towards the cost of the vehicle or its running. That is where the reimbursement of the lease rentals comes in.

So if you take a car with an OMV of €35k, the cash equivalent of this would be €10.5k, and if the lease payments are €5k, this still leaves you with a €5.5k taxable benefit, or €55 a week in extra tax deducted in the case of an employee who’s in the higher tax bracket.

sundodger5

That is kinda my point. If the op is paying 55 euro a week using your example paid directly to the employer the liability is then zero?

nompere

sundodger5 wrote: »

That is kinda my point. If the op is paying 55 euro a week using your example paid directly to the employer the liability is then zero?

No - the €55 pw comes off the €5,500, leaving €2,640 still chargeable to tax.

Shefwedfan

sundodger5 wrote: »

That is kinda my point. If the op is paying 55 euro a week using your example paid directly to the employer the liability is then zero?

Lots of questions and no real answers from the OP.....


I dont think anyone can give advice without some more information.

barneystinson

sundodger5 wrote: »

That is kinda my point. If the op is paying 55 euro a week using your example paid directly to the employer the liability is then zero?

No. Jesus wept...

I’ve explained how the calculation works. The €55 is a rough estimate of the additional TAX that the employee pays, for the BENEFIT of the car provided to them by their employer, IN ADDITION TO having already reimbursed the employer in full for the lease payments (out of their after-tax pay). (The figures are my own for illustrative purposes, not the OP’s.)

Point being, the OP could just lease the car directly themselves and not incur an extra few grand in tax annually.

sundodger5

i was trying to equate it to my BIK and costs made good directly to my employer for running the car.
e.g i pay for personal mileage at 9c per kilometer.
So lets say my notional pay for BIK purposes is 150 euro, but i reimburse my employer 30 euro for personal mileage, my notional pay drops by the 30 euro to 120 euro.
This must not be a comparable situation to the OP and i think we need to wait and see if the OP clarifies with actual figures.