Benefit in Kind Company Car

curiousJudg

Just wondering guys if anyone can advise. So I'm getting a company car and obviously paying BIK on that. Now, I'll be paying for the Insurance and petrol myself - does this payment that I make for insurance/runnings costs of the vehicle count towards reducing the BIK?

If the answer is yes to the above, do I [1] Pay the insurance out of my own bank account and provide receipt to company or am I better to [2] get company to pay the insurance and then I pay the company

Lenar3556

To answer your question, any amounts you make good to your employer (I am guessing your own company) can be deducted against the notional pay for BIK purposes.

The company should insure the car. And should buy all of the petrol. Any amount you make good to the company can then be offset as above.

Unlikely to be very tax efficient however. Indeed even a company car in the first instance is often not a great idea. You would often be better off buying privately. A commercial would a different story.

SureYWouldntYa

It will not reduce the BIK. The BIK is calculated on the OMV, Original Market Value, inclusive of all taxes even VAT where the company may be able to recover it. For BIK purposes the OMV includes all taxes as its meant to replicate the value as if a private person purchased the vehicle for their own private use.

I'd question why the place would be getting you to pay the insurance, they absolutely should be reimbursing you for it in full if not paying for it in the first place and same for the petrol.

ELM327

The tax is on the asset acquisition, and not the running costs. Therefore the BIK is due in full even if you had to pay for tax, insurance, fuel, NCT, repairs, etc

curiousJudg

From revenue website - Employee contributions towards cost

Your employee may pay towards the running costs, or for the use, of the car. You can deduct the amount they pay from the cash equivalent. The reduction can only be applied if your employee pays the amount directly to you.

So this is where I got the 'runnings costs' from… and why I'm wondering if Insurance is a 'running cost'. Small business where I am director so I am getting the car through the company but as it is mainly private use I'll be contributing privately to the costs

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

SureYWouldntYa

You'd be paying for the insurance using private funds that have likely already been taxed through the PAYE system as opposed to paying with the funds that are within the company. It makes no sense to pay the insurance privately even if its main use is private, which raises the questions of why did you buy it through the company?

curiousJudg

I bought through the company as I needed a car and am currently in the process of moving home i.e a re-mortgage so I did not want a €40K loan for a car on my personal account. So only question I have now is Insurance considered a running cost as one of the runnings costs mentioned on revenue website.

SureYWouldntYa

It could be considered a running cost but it would still make no sense to pay it privately

E.g. Your BIK annual charge is €5,000, taxed at 52% is a cost of €2,600 to you taken through payroll. The insurance of €1,000 paid privately comes off the annual BIK charge, so the new charge is €4,000 at 52% is tax of €2,080 plus €1,000 in insurance means a total cost of €3,080