BIK - Overcharge Please Help

T

t-trippin

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My husband works for a small FMCG company in Ireland. He has a Ford Focus estate company car and drives aprox 40,000 business miles each year. As we also own two private cars his personal usage of this company car is minimal. Now here is the crunch - he pays €400 per month BIK. I rang revenue regarding this and they'd agreed it was way over the odds. The lovely lady from revenue calculated that he should only be paying €130 or so. When my husband queried his company he was told that they pool BIK and it is divided between everyone equally - so regardless of what you drive, how much mileage you do or whether you are a worker bee or the MD everyone pays the same.

Firstly is this legal? Secondly my husband doesn't want to rock the boat yet I don't want to be paying over the odds.

Any suggestions please?
 
t-trippin said:
he pays €400 per month BIK.
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You mean he pays €400 tax and PRSI/health contribution on the relevant gross nominal BIK amount or he is assessed for BIK on a nominal amount of €400? Anything useful here?
Benefit-in-Kind
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Benefits in kind are benefits, which are received from an employer that cannot be converted into money but which nevertheless confer a benefit on an employee. Most benefits are taxable if total remuneration (including benefits in kind) is 1,905 euro or more in any tax year.
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On his pay slip it states BIK - €400 DEDUCTED from salary.
PRSI etc is listed separately.
 
That's odd - BIK is normally a gross figure added your gross salary and then treated like normal income in terms of tax and PRSI/health contribution deductions... For example if the use of the car is deemed to be "worth" €500 p.m. then €500 is added to your gross before tax and PRSI/health contribution deductions are calculated.
 
I'll check to be 100% sure... maybe I'm reading it wrong and have wound myself up for nothing. I'll post again tomorrow to let you know!
 
t-trippin said:
he was told that they pool BIK and it is divided between everyone equally - so regardless of what you drive, how much mileage you do or whether you are a worker bee or the MD everyone pays the same.
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Unless the employer have an arrangement with the Revenue (which I doubt) this is incorrect.

Your husband should just inform the employer that this is wrong and that if they don't sort it, he'll have to adjust it himself with the Revenue, drawing attention to their error.
 
That's odd - BIK is normally a gross figure added your gross salary and then treated like normal income in terms of tax and PRSI/health contribution deductions...
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This is correct, and then the €400 has to be deducted again (because it's a notional amount) after the taxation calculation has been applied. Maybe this is what is causing the confusion.
 
I have never heard of a company pooling company cars and dividing it between workers. I don't think this could be right.

To work out your husband's BIK you need to know the list price of the actual car when it was bought. This figure is usually multiplied by 0.9 to arrive at 90% of the car's value. The revenue allow this discount as most private buyers get some money off the list price of the car when buying. If your husband is driving 40,000miles (not km) then work out 6% of that figure and that is the amount of BIK value that is added to your salary for the year. You are then taxed on that figure.

eg; Ford Focus €20,000 (wild quess) x 0.9 = €18,000
6% of €18,000 = €1080 notionally added to your salary on a yearly basis
If paid monthly €1080/12 = €90. You then pay tax on the notional €90.

The key to the low figure that you should be paying is the high mileage. If you can believe it, this government has a car BIK policy that means that the more business miles you drive the less tax you pay!
If you only did 8,000 miles a year then the notional BIK on the same value car would be €5,400 a year.
 
Yes he is being taxed on that extra €400 applied to his salary every month - as per calculations of value @ 6% of €26,000 it should only be €117. It's not as bad as I thought originally but it still money he shouldn't be paying. It's all well and good asking him to report the company but it will inevitably make his working life more difficult - Is it worth it?
 
If he is paying tax of 41% on €400 that is costing him €164 a month. He should be paying 41% on €117 which is €48 a month. So it is costing him €116 a month too much in tax. That is €1392 a year and that hasn't even taken in the fact that he may also be paying too much PRSI as well.
He is doing very high mileage in the car and obviously spends a huge amount of his working time driving. Since he is over paying it means others in the company are probably underpaying if the company is averaging out the figures. Although I don't agree with the way BIK is calculated based on mileage alone it doesn't seem right that he is overpaying.
You could ring the PAYE helpline and ask if this is a correct way of applying BIK. I suspect that they will say no. You can usually ask question like this without having to identify yourself or the company involved.
The problem then would be whether your husband is prepared to persue the matter. The difficulty is that if the system is changed there will be plenty of disgruntled employees who end up paying more. Don't think that would endear your husband to those people.
I'm surprised the company accountants are allowing this to happen. Maybe I am wrong and Revenue will say that it is ok to operate BIK like this.
Either way it's a dilemma and I don't envy your husband.
 
If the so-called 'BIK pool' averages out at €400pp, then the scheme is presumably(as in most of these things) drawn up to benefit those members of senior management who have HUGE company cars and who do very few business miles. They would be hit in an equally HUGE way with BIK if the pool didn't exist.

From experience, if the OP's husband drives the commercial version of the Focus estate (I think there is one, as opposed to the van?), then actual BIK owed is always going to be lower.
 
Sorry to drag up an old thread but i am in the same position as the op. Can't seem to get an answer online to whether this is even legal for a company to do. Anyone have an update on this practice?

I have rang the tax office and citizens advice who both said it doesn't sound right to them but couldn't say 100% that it was wrong. Company are insisting it is compliant with revenue
 
Ask for the keys to the Jag/Merc/BMW for your "pooled days" and see what they say.
 
Do your own income tax return - this will result in a refund to you, and shouldn't rock the boat with your employer. If they did get an audit - no-one will know how it arose.

Also its worth pointing out that people with company cars continue to be taxed at the original value of the car e.g. if I got a company car today in 2014, I would be taxed according to its worth in 2014. If I keep the company car until (say) 2020, I would still be taxed in 2020 on the 2014 value of the car - despite it obviously being then nowhere near its original 2014 value.
 
Still in the same position, company refusing to change the way they are calculating bik. Revenue basically washing their hands of it and saying its up to the company. Just seems to be a grey area within the tax system. I know very little about tax but it just seems wrong to me that i am subsidizing other people with my taxes. Nothing i can do about it though
 
Company cars that are "pooled" Means that no one Employee has exclusive use of a particular vehicle.My understanding is that when a return is made to Revenue by the company and it adds up to the required Tax amount,then that satisfies them,they are not interested in how it is achieved.Pooled vehicles are left at the companies premises.
My personal understanding is that an individuals' Tax affairs are between Revenue and that individual only,and not between the Managing director,or other high ranking individuals working in the company.However if there is an in house agreement in writing about the use of company vehicles,then check and find out that everyone agrees to it,and ensure it's contents are correct with regard to vehicle details.Check and see if there is such an agreement,and who signed up to it.
If there is only a dictat or verbal agreement,it may mean not every one agrees to the company's way of administering BIK.This is worth checking out.
Keep a log of all business mileage done and have your supervisor verify it.If job sheets are to be written out,then record mileage on them as well.
Commercially Taxed vehicles,i.e.Road Tax,cannot be used in a private capacity.The Vehicle insurance on all company vehicles should be checked out as well,to ensure they comply with road traffic legislation,inclusive of Social & domestic use.
 
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Hijacking this thread but somewhat related.....do the same BIK rates apply when the co. only pays for work related fuel?
Example is fully expensed car (tax, insurance, maintenance, vehicle itself) EXCEPT fuel. The business fuel is refunded by expense claim based on actual mileage.
Therefore there is no actual BIK for private fuel but using the normal BIK tax rates you are taxed as though you are receiving such a benefit.
Is there a mechanism for reduced rates?
Or could one claim deduction in a form 11 or 12 for the cost of the personal fuel on the basis you've already paid tax on it IF the standard BIK rates are applied?

Is a good system to discourage using the co car for all say weekend driving! A practical thing for the OP to have done would be park up one of the private cars to at least get some value for the cost of the BIK tax i.e. increase the personal milage.

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Trainspotter said:
Company cars that are "pooled" Means that no one Employee has exclusive use of a particular vehicle.My understanding is that when a return is made to Revenue by the company and it adds up to the required Tax amount,then that satisfies them,they are not interested in how it is achieved.Pooled vehicles are left at the companies premises.
My personal understanding is that an individuals' Tax affairs are between Revenue and that individual only,and not between the Managing director,or other high ranking individuals working in the company.However if there is an in house agreement in writing about the use of company vehicles,then check and find out that everyone agrees to it,and ensure it's contents are correct with regard to vehicle details.Check and see if there is such an agreement,and who signed up to it.
If there is only a dictat or verbal agreement,it may mean not every one agrees to the company's way of administering BIK.This is worth checking out.
Keep a log of all business mileage done and have your supervisor verify it.If job sheets are to be written out,then record mileage on them as well.
Commercially Taxed vehicles,i.e.Road Tax,cannot be used in a private capacity.The Vehicle insurance on all company vehicles should be checked out as well,to ensure they comply with road traffic legislation,inclusive of Social & domestic use.
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We have pooled mileage among the employees but don't have pooled cars. I have sole use of my car and it is insured for domestic and social as well. I was under the same impression as you that my taxes are taxes and the company are only there to administer bik for the revenuebut it seems they can dictate the rate we pay
 
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