Buying out company car

ReddererMist

hi, employer is phasing out company cars and I might have the option of buying it out at a significantly reduced cost but I am beyond confused as to how BIK would be calculated. OMV IS €55k

Any ideas? Thanks

Allinall

If OMV is €55k and you buy it from the company for €35k, then you will tax at your marginal rate, plus PRSI and USC on €20k.

ThreeGreens

Above comment is totally off the mark. Ignore it.

OMV is a concept used to calculate BIK. If you are buying the car off the company, then you will not have any BIK from the date that you own it.

You will presumably be buying it from the company at market value. If so, then there is no BIK, gift or any other tax to be worried about.

You will owe BIK up to the date of sale (as you do now) you won't owe any more BIK from that date on.

The act of purchasing the car (at market value) does not give rise to any taxes (BIK or otherwise).

You should then be able to charge the company for mileage for any business use of the car (at no more than civil service rates).

If you are purchasing the car at an undervalue (very unlikely) then you may owe tax on the difference between the current market value and the price that you are paying, but the OMV doesn't come into that.

Allinall

https://www.boards.ie/discussion/comment/120575221#Comment_120575221

Which part of my post is "totally off the mark"?

You have made the same point yourself. If they buy the car at a discount from OMV, then they will have to pay tax, PRSI and USC on that discount.

You have said as much yourself.

I never mentioned BIK.

ThreeGreens

The OMV is completely irrelevant to the buy out. That part is totally off the mark.

Only the current market value is relevant to that which is likely to be significantly different.

Lenar3556

‘OMV’ could refer to ‘Open Market Value’ or ‘Original Market Value’ depending on the context and hence the confusion here.

The OP inferred that they would be buying the car below market value, and in that regard there may be a taxable benefit - the difference between the open market value of the car and the discounted price offered by the employer.

mickdw

Generally companies seek trade value for cars in this scenario. While there will be a saving over retail price, I wouldn't be paying tax on that difference as you are buying it without the benefits of a retail sale such as warranty etc and as such are paying its true value so no gift involved.

ReddererMist

Thank you