What is Benefit in Kind?
A Benefit in Kind (BIK) is a benefit that an employee receives that cannot be converted into cash but has a cash value. Examples include the provision of a company car, loans given at a special rate or provision of accommodation.
Benefits (other than benefits-in-kind) would include vouchers, holidays, payment of an employee’s bills and prizes.
Is Benefit in Kind taxable?
Most benefits in kind are taxable and the employee is taxed on the cash equivalent of the value of that benefit. Where the employee is required to make a payment to the employer in return for the provision of the benefit and actually does so, the cash equivalent of the benefit is reduced by the amount `made good’ by the employee. Making good allows the employee to reduce or eliminate the tax charge.
The most common Benefit in Kind Tax is the company car. From 1 January 2020 to 31 December 2022 electric cars and vans are exempt from Benefit in Kind Tax. The open market of the car must be less than €50,000 or first used by the employee between 10th October 2017 and 9th October 2018.
There are other benefits that an employee can receive that are not subject to tax or can be received tax efficiently. These include:
- Provision of bus/train passes for one month or more
- Bicycle and safety equipment under the Cycle to Work Scheme
- Certain share and approved profit-sharing schemes
- Canteen facilities
- Reimbursement of expenses necessarily incurred in the course of employment
- Some accommodation provisions
- Lump-sum and certain redundancy payments
- Working clothes
- Non-cash personal gifts not related to employment
- Employer’s contribution to statutory or revenue approved pension schemes.
- Mobile telephones, computer equipment and home high-speed internet connections where those benefits are provided for business use. (Private use is incidental.)
- Private use of company van which is essentially for the purposes of employee’s work and where there is an employer requirement to bring the van home and where other private use is prohibited and the employee spends most of their working time away from the workplace to which they are attached.
This is not an exhaustive list and conditions and/or restrictions often apply to exemptions and should therefore be checked with the Revenue Commissioners
The rules applying to benefits-in-kind vary. Generally, the value of the benefit-in-kind is the cost to the employer of providing the benefit less any contribution by the employee. Special rules apply to the following benefits-in-kind:
- A car
- Other motor vehicles
- Provision of living accommodation
For more information on benefit in kind, contact Barry in our tax department [email protected]
If you’re looking for outsourced payroll or bookkeeper service, get in contact with Cronin & Co today.