IRELAND’S FOREMOST FLEET & CORPORATE SECTOR GUIDE
www.fleetcar.ie
Volume 20. No. 1 Spring 2023
Edited by Cathal Doyle - cathal@fleet.ie
Fears BIK changes will drive employees toward grey fleet
Concerns have been raised that changes to benefit-in-kind (BIK) tax bands that came into effect in January will have a severe impact on the leasing car market, with employees who are currently driving company cars opting instead to switch to private vehicles. The new BIK tax bands take CO2 emissions into account for the first time, with the amount taxable as BIK determined based on the car’s original market value (OMV), the annual mileage covered, and bands based on CO2 emissions. Previously BIK was calculated from the OMV and the annual mileage. The flat rate for vans has increased from 5% to 8%, while the OMV threshold for zero BIK rate applicable on electric
vehicles will be reduced from €50,000 to €35,000, with that threshold set to fall further to €20,000 in 2024 and €10,000 in 2025. As a result, BIK rates on EVs will range from 9% to 22.5% depending on mileage, while ICE powered cars can be liable for BIK rates of up to 37.5%. While the Government said the approach was to incentivise companies to provide employees with low-emission cars, the leasing industry believes that the unattractive BIK rates will result in employees giving up their company cars, choosing instead to avail of a company car allowance and buy privately. The industry fears that an increase in this so-called ‘grey fleet’ will result in an increase in older and more polluting cars being used for work purposes. Speaking to Fleet Car, Michele Hanlon, President of the Vehicle Leasing Association of Ireland (VLAI) called on the Government to rethink its approach: “We are continuing to seek a fairer way, specific to leasing, with a reduction in the BIK levies. We do
realise that there is a cost to cleaning up the environment, but increasing BIK is counter-intuitive.” (See the full interview with Michele on the following page). Opposition TDs have also criticised the new BIK levies. Sinn Féin TD for Mayo, Rose Conway-Walsh said the changes will heap more financial pressure on people in the midst of a cost-of-living crisis. “Thousands of workers with company cars will be hit with a massive tax hike in January. Many of these workers are already on very modest wages working very long hours each week. The benefit-in-kind (BIK) tax is going to soar by 40% for those who are provided with vehicles to do their job by their employer.” She added: “The government is urging companies and business owners to make an environmental change but the tool they are using to try push them towards greener options is an additional tax on workers at a time when people are suffering the highest inflation for decades.”