The treatment of company cars (or vans) as benefit-in-kind could present a problem when applying the rules as to what proportion of the mileage is taxable. Any mistakes could potentially cost companies a lot of money, even if the data the company provides to Revenue does not greatly exceed, or are under, the real numbers.
Here are a few points summarizing the rules as set out by the Irish Tax and Customs for this particular area:
1 - What is considered private and what is considered business mileage?
Company cars available for private use are chargeable to PAYE (Pay As You Earn) and PRSI (Pay Related State Insurance) when used for private purposes. Travelling to and from a place of work is considered private use. A typical example, where doubt arises, is when a worker operating from home travels between customers during the day (sales reps usually have this routine). According to Revenue sources, if an employee travels from home to a place of work which is not the “normal place of work” (e.g. company premises), the business mileage has to be calculated referring to the lesser of these two parameters:
- distance between home and the temporary place of work
- distance between normal place of work and temporary place of work
2 - What is considered a company car and therefore subject to the beforementioned conditions?
According to Revenue, the definition of company car excludes motorcycles weighing less than 410 kg, vans, hearses, lorries and other vehicles unsuitable for private use, while it includes cars, crewcabs and jeeps.
3 - How should PAYE and PRSI be applied for private mileage?
Both PAYE and PRSI should be applied to the cash equivalent of the private use of the company car—the amount calculated by applying a percentage based on business kilometres to the OMV (Original Market Value) of the vehicle. Revenue provides guides and tables known as “ready reckoners” for the employers to calculate such amounts. Revenue can provide assistance or offer online guidelines and examples for different cases such as employees who are paid weekly, or who have changed their company car or do not use the company car throughout the whole year.
4 - Should I record business and private mileage?
Companies should have a system in place in order to record business and private journeys and such records have to be kept for completing the P11D form as part of their tax declaration.
