BIK on Commercial Vehicles – What You Need to Know
For business owners and employees using company vehicles, understanding the rules around Benefit-in-Kind (BIK) on commercial vehicles is essential. With changes in tax regulations and increased Revenue scrutiny, it’s crucial to ensure compliance while managing costs effectively.
What is Benefit-in-Kind (BIK)?
BIK is a tax charge that applies when an employer provides an employee with a benefit, such as a company car, which is used for personal purposes. The value of this benefit is subject to PAYE, PRSI, and USC.
BIK on Commercial Vehicles – What You Need to Know
BIK treatment differs for commercial vehicles compared to passenger cars. A commercial vehicle is generally defined as:
A van (designed primarily for carrying goods, not passengers)
A pickup truck (with a gross vehicle weight exceeding 3,500kg)
Other vehicles that meet Revenue’s classification as commercial for tax purposes
How BIK on Commercial Vehicles is Calculated
For commercial vehicles, the standard BIK rate is 8% of the Original Market Value (OMV) of the vehicle, compared to rates of up to 37.50% for passenger vehicles.
To qualify for the 8% rate, the vehicle must be:
- A commercial vehicle used primarily for work purposes.
- Necessary for the employee’s role (e.g., for deliveries, construction, or servicing work).
- Not used extensively for personal travel beyond incidental use.
For 2023, 2024 and 2025, a reduction of €10,000 can be applied to the OMV of vans for the purpose of calculating the cash equivalent.
Exemptions from Benefit in Kind (BIK)
General Exemption -> Your employee will not pay tax on the benefit of an employer provided van where:
you provide your employee with the van for work purposes and they have to bring it home afterwards and
your employee is not allowed to use the van for private travel apart from travelling to and from work
and your employee spends at least 80% of their working day away from your work premises.
If your employee uses an employer provided van in a van pool, they do not have to pay any tax on that benefit.
Certain BIK exemptions and discounts are available where the van made available to your employee is an electric van.
Common Misconceptions About BIK on Commercial Vehicles
? -> “If it’s a van, there’s no BIK.” – False. If a van is used for personal trips, even occasionally, it could be subject to BIK.
? -> “I own the company, so I can avoid BIK.” – False. Directors and employees alike must follow Revenue rules.
? -> “BIK doesn’t apply if the vehicle is parked at the workplace overnight.” – False. Personal use outside of work, even if minimal, can trigger BIK liability.
How to Minimise BIK Exposure
✅ Limit personal use: Ensure commercial vehicles are used strictly for business needs.
✅ Keep mileage records: Maintain logs to demonstrate that the vehicle is not used personally.
✅ Ensure proper classification: Verify with Revenue that the vehicle qualifies as commercial.
✅ Explore alternatives: Consider mileage reimbursement instead of providing a vehicle.
Conclusion
BIK on commercial vehicles is an area of tax that businesses must manage carefully. If your company provides vehicles to employees, ensuring compliance with Revenue guidelines can prevent unexpected tax liabilities. Seeking professional advice can help structure your vehicle policies efficiently while keeping costs under control.
If you need assistance with BIK calculations or tax-efficient vehicle policies, Solve Outsource is here to help
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