hows does BIK work on a company car (A4)

jon1981

hi,

out of curiousity how is BIK calculated on a company car? if your say earning 50k and the car is 30k do they tax you on 80k?? probably not but still curious

v10

jon1981 wrote: »

hi,

out of curiousity how is BIK calculated on a company car? if your say earning 50k and the car is 30k do they tax you on 80k?? probably not but still curious

Have a look here : http://www.revenue.ie/index.htm?/leaflets/benefit-in-kind/index.html

Oilrig

My Missus was offered an A4 a few years ago, it would have worked out at €400 odd per month in BIK AFAIKR.

jon1981

thats abit hefty if they basic isnt high... im actually enquiring for my other half...cheers

-Chris-

The Revenue use a "notional income" amount that they tax at your marginal rate of tax. They come to the notional income by multiplying the OMSP of your car (as it was when new - This also means that even if you get a 10 year old car from your workplace that's only worth €1,000, you'll still be taxed on what it cost when new - €30,000) by a percentage.
The percentage varies depending on how many business miles per annum you travel.

In your example, let's presume you do less than 15,000 miles per annum. Therefore you're in the 30% bracket.

1) Get the OMSP of your car (in this case €30,000 x 92%)
2) Multiply that OMSP by the percentage (in this case 30%, because you're doing less than 15,000 miles per year) - This is the notional income
3) Multiply this by your highest income tax rate (in this case 41%, because you're in the top tax bracket)
4) Divide that number by 12 to see your monthly tax liability

1) OMSP = €27,600
2) Notional Income = €8,280
3) Tax owed on €8,280 = €3,394.80
4) Monthly tax bill = €282.90

Read this: http://www.revenue.ie/index.htm?/leaflets/benefit-in-kind/private-use-of-company-cars.htm

Also bear in mind that it's not just costing you €282 per month, but also costing you the opportunity cost of a car allowance, which may be worth another few grand per year.



Edit (Thanks R.O.R):

Instead of OMSP in part 1, you can use the RRP of your car x 90% as a generic figure if it's a company vehicle - the Revenue will allow a generic 10% discount for cars bought fleet. If you want to apply a greater than 10% discount, you need documentary proof from the supplier that they supplied the car with greater than 10% discount.

Instead of 41% in part 3, you may be better off using a figure of 44% to get slightly more accurate - PRSI is also applied to the notional pay.

jon1981

thanks for the effort in replying, thats not actually too bad if you taken into account service, taxing, insurance, petrol etc etc for the car that your getting

-Chris-

Yeah, I've always been a big fan of company cars - whenever I've been given the option, I've always taken it.
No stress with any costs - planned or incidental (a couple of Christmasses ago someone kicked the wing mirrors off my car. No worries, I just handed the car into the local garage, got it fixed, bill went to the company - genius!!).

Another con is a lack of a no claims bonus - a lot of insurance companies won't count time served under a company car policy. You could find, when you next need private insurance, that you've got little or no NCB.

unkel

Good straight forward example there, AudiChris. And for the people that think it is expensive - driving a new or nearly new €30k car for €283 a month all inclusive with no worries / responsibilities whatsoever is a great benefit!

Indeed, one can be financially better off by driving their own (maybe old) car and getting a (untaxed) mileage rate from their employer, but the above beats that hands down any time imho

Oilrig

Audi Chris, excellent post, thank you.

unkel, its good value - like rent, a big black hole with no residual value. In our situation, I'm self employed so have an accountant on a retainer. We tossed it to him and he came back with these figures, it made far more sense for my dearest to buy her own (SH) car and charge the company mileage.

Company cars are dying out as a perk IMHO, have a mate who's a director in one of the "big five", he gave his up, sums don't stack up anymore.

The up side is that if you can claim "civil service" rates from your employer, you are definitely ahead.

unkel

It depends. I've been on mileage expenses for the last 10 years myself, some of which at the civil service rate

Personally I prefer to drive an older fancier car owned by myself for which I get a tax free subsidy, to driving a brand new middle of the road car like say a Golf

But I suspect for most people, the company car is the better option. No worries. Crash it and trash it and you'll have another one tomorrow

eamon234

AudiChris wrote: »

Another con is a lack of a no claims bonus - a lot of insurance companies won't count time served under a company car policy. You could find, when you next need private insurance, that you've got little or no NCB.

Trick there is to insure a banger on a bog standard third party policy for the year for about €150 - also a good excuse to own a classic car!

Bulmers

in similiar boat myself at moment, choice of A4 ( market value 43k, BIK approx 500/month) or car allowance of 1k/month, works out much better with the car allowance, can get A4 2/3 yrs older and more or less covered by car allowance ( i get a fuel card too ) . Speaking with some people aswell and they reckon car allowance is better option, i wont be doing any wild mileage either, more of a perk of the job than a neccesity...