BIK Information
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The current BIK system uses the OMV (Original Market Value ) of the vehicle as a base and after calculating 30% of that figure it then discounts that BIK figure using five kilometres usage bands for calculating discount. It does not interfere with your tax-free allowance as in the pre-2004 method and instead the B.I.K. is now deemed to be a form of earnings (Notional Earnings) and it is added to your salary either weekly or monthly for the purposes of calculating PAYE and PRSI liability on that “Notional Earnings”. That added Notional Earnings pay is then removed as soon as your PAYE and PRSI liability is calculated. The net effect is that you now pay tax on that Notional Earnings at a rate dictated by your income and you also pay 8% (PRSI & Health Levy ) on the same Notional Earnings. Your company also pays 10.75% Employer PRSI on that Notional Earnings.
The System is as follows: (All the figures below have the 2010 PRSI level but excludes the 2010 Income levy)
1. The first figure that you need is the OMV (Original Market Value) of the car. If your company is unsure how much the vehicle cost them when they sourced it originally you can usually calculate it by taking the SIMI (Society of the Irish Motor Industry) retail price for your car in the year it was leased or purchased and applying a trade discount of 10%.
2. From that OMV figure you are now in a position to calculate the BIK liability which is calculated at 30% of that OMV of the car:
Car is valued: = €25000 (OMV value)
BIK Liability = OMV X 30% = €7500
A. Next you need to calculate your business kilometres for the year so that you can discount the B.I.K. liability of €7500 by various percentages depending on kilometres travelled. There are five kilometre usage discount bands (as outlined below) to get the final B.I.K. liability or what is now being referred to as your Notional Earnings.
B. By knowing your business kilometre usage per week and multiplying that figure by 48 Weeks (assuming 4 weeks holidays) or by 52 weeks (if your car is used by the company when you are on holidays). Because most people do not use the car during holidays it is now to your advantage to allow somebody else use your car while on holidays so as to keep the usage up to the max discount levels.
3. Depending on the business usage in kilometres it now uses the discount chart below to calculate the B.I.K. liability (otherwise known as the Notional Earnings) figure. The chart works on the principal that the higher the business usage the lower the liability.
| Annual Business Kilometres | Discount on Liability | Liability Notional Earnings € |
| Below 21140 | no Discount | 7500 |
| 21140 to 32187 | *20% | 7500 less 1500 (20% of 7500) = €6000 |
| 32188 to 40234 | 40% | 7500 less 3000 (40% of 7500) = €4500 |
| 40235 to 48281 | 60% | 7500 less 4500 (60% of 7500) =€3000 |
| Above 48282 | 80% | 7500 less 6000 (80% of 7500) = €1500 |
* There is one alternative basis for employees with company cars and low kilometres usage. It applies to users travelling under the 21140 but over 8047 Business Kilometres and provided you work a minimum 20 hours per week. If you spend more than 70% of your time away from your employers premises and keep very good records of all business travel and verified by your employer then you are entitled to the 20% discount on the OMV. In other words the revenue commissioners will allow you in to the first discount bracket i.e. 20% discount (marked with the asterisk.)
4. The annual liability or Notional Earnings as calculated above is then divided by 52 or 12 (weekly or monthly) and then fed in to your pay calculations on a weekly or monthly basis (as if you had actually earned it) where you pay PAYE plus PRSI at your current level. This additional notional earnings that was added to your salary before PAYE & PRSI calculation is then deducted so that you do not get the earnings but you do pay PAYE and PRSI.
Weekly Calculations Chart (Based on PAYE level of 20% excludes income levy)
| Yearly National Earning Liability | Calculated Weekly Notional Earning Liability (Yearly divided by 52) | Weekly PAYE at 20% | Weekly PRSI at 8% ( Includes Health Levy ) |
Total Weekly PAYE & PRSI Deduction (or what the car costs you each week) |
| 7500 | 144.23 | 28.84 | 11.53 | 40.37 |
| 6000 | 115.38 | 23.07 | 9.23 | 32.30 |
| 4500 | 86.51 | 17.30 | 6.92 | 24.23 |
| 3000 | 57.69 | 11.53 | 4.61 | 16.15 |
| 1500 | 28.84 | 5.76 | 2.30 | 8.07 |
Monthly Calculations Chart (Based on PAYE level of 20% excludes income levy)
| Yearly Notional Earning Liability | Calculated Monthly Notional Earning Liability (Yearly divided by 12) | Monthly PAYE at 20% | Monthly PRSI at 8% ( Includes Health Levy ) |
Total Monthly PAYE & PRSI Deduction
(or what the car costs you each week) |
| 7500 | 625 | 125 | 50.00 | 175.00 |
| 6000 | 500 | 100 | 40.00 | 140.00 |
| 4500 | 375 | 75 | 30.00 | 105.00 |
| 3000 | 250 | 50 | 20.00 | 70.00 |
| 1500 | 125 | 25 | 10.00 | 35.00 |
Payslips:
The notional earnings amount (BIK) may appear on the earnings section of your payslip as if you had earned this amount. This is done only for the purposes of calculating PAYE and PRSI but if it does appear in the earnings side of your payslip it will be deducted again in the deductions section to remove it from earnings.
There are many areas not covered in this brief explanation of BIK/ Notional Earnings such as use of a company car for less than one year, changing cars during the year etc. For a more detailed explanation which covers all areas of BIK On Company cars please refer to the Revenue Commissioners Guide to BIK on line @ http://www.revenue.ie
