Minister McGrath announces temporary change to Benefit-in-Kind regime for vehicles in Finance Bill 2023 (Cost of Living Measures)

The government has today (Tuesday 7 March) approved the publication of the Finance Bill 2023. The Bill will give legislative effect to the taxation measures recently announced by the government to continue to assist families and businesses deal with high energy prices and cost of living challenges. In addition Minister for Finance Michael McGrath has announced a temporary change in the Benefit-in-Kind regime for vehicles. The Bill will be published in the coming days.

While the move to a CO2 based Benefit-in-Kind system, which incentivises the use of Electric Vehicles and lower emission cars, is an important element of achieving our climate targets, a significant number of employees with vehicles in the typical emissions range experienced large increases in their income tax liabilities since the start of 2023.

To address the issue, the Minister for Finance has received agreement from his government colleagues to introduce a relief of €10,000 to be applied to the Original Market Value (OMV) of cars in Category A-D in order to reduce the amount of Benefit-in-Kind payable (this is not applicable to cars in Category E).

In effect, this means that, for the purposes of calculating BIK liability, employers may reduce the OMV by €10,000. This treatment will also apply to all vans and electric vehicles. For electric vehicles, the OMV deduction of €10,000 will be in addition to the existing relief of €35,000 that is currently available for EVs, meaning that the total relief for 2023 will be €45,000.

The upper limit in the highest mileage band is amended by way of a 4,000km reduction, so that the highest mileage band is now entered into at 48,001km (see table).

These temporary measures will be retrospectively applied from 1 January 2023 and will remain in place until 31 December 2023. It is proposed to introduce the measures at Committee Stage of the Finance Bill 2023.

Speaking after the government meeting, Minister for Finance Michael McGrath stated:

“The government remains committed to the environmental rationale behind the current emissions-based vehicle Benefit-in-Kind regime which has been in operation since 1 January 2023. In the current inflationary context, however, we recognise the difficulty experienced by some people facing BIK increases under the new regime. To that end, I am announcing that the government is providing temporary changes to BIK for the current year which will help to mitigate some of the increases associated with the new emissions-based calculation."

Finance Bill 2023

Finance Bill 2023 will give legislative effect to the taxation measures announced by the government on 21 February, to continue to assist families and businesses deal with high energy prices and cost of living challenges. Once enacted, the Bill will give full legal effect to the Financial Resolutions passed by Dáil Éireann on 22 February.

The Bill is expected to be published later this week and provides for:

amendments to the rates of Mineral Oil Tax to provide for the phased restoration of the rates in relation to petrol, diesel and marked gas oil by 31 October 2023
the extension of the temporary reduction in VAT on gas and electricity, from 13.5% to 9%, to 31 October 2023
the extension of the temporary reduction in VAT on Tourism and Hospitality, from 13.5% to 9%, to 31 August 2023
the zero VAT rating of supplies of COVID-19 testing kits
amendments to the Temporary Business Energy Support Scheme (TBESS)
the further extension of six agri-tax reliefs that are forms of permissible state aid which are currently due to expire on 30 June 2023, and a number of technical amendments required by the revised EU Agricultural Block Exemption Regulation (ABER)

Minister McGrath said:

“The publication of this Bill later this week represents an important step in the implementation of the changes announced recently to provide additional supports to families and businesses in Ireland. It will give full legislative effect to the measures already provided for by Financial Resolution and I look forward to taking it through the Houses of the Oireachtas.”

Further information

Finance Act 2019 introduced a new CO2-based Benefit-in-Kind (BIK) regime for employer-provided cars, which applies from 1 January 2023. The amount taxable as BIK is determined by the car’s Original Market Value (OMV), the annual business kilometres driven and CO2 emissions-based bands.

Table 1: Updated BIK Mileage Bands for cars

Business Mileage		Vehicle Categories
Lower limit (1)	Upper limit (2)	A (3)	B (4)	C (5)	D (6)	E (7)
Kilometres	Kilometres	Per cent	Per cent	Per cent	Per cent	Per cent
-	26,000	22.5	26.25	30	33.75	37.5
26,001	39,000	18	21	24	27	30
39,001	48,000	13.5	15.75	18	20.25	22.5
48,001	-	9	10.5	12	13.5	15

Rates of Mineral Oil Tax

With regard to Mineral Oil Taxes applying to auto-fuel, the VAT inclusive per litre reductions of 21 cent in respect of petrol; 16 cent in respect of diesel; and 5.4 cent in respect of Marked Gas Oil were due to expire on 28 February. A Financial Resolution extended these reductions to 31 May 2023, and provided for an incremental restoration to full rates by 31 October 2023 as follows:

1 June - rates will increase by 6 cent for petrol, 5 cent for diesel and 1 cent on MGO (per litre)
1 September - rates will increase by 7 cent for petrol, 5 cent for diesel, and 1 cent for MGO (per litre)
31 October – rates will be fully restored with an increase of 8 cent for petrol, 6 cent for diesel and 3.4 cent for MGO (per litre)

The Bill will give full legal effect to this Resolution.

TBESS

In relation to the Temporary Business Support Scheme (TBESS) the Minister has extended the scheme, by Order, to 30 April 2023 and increased from 1 March the monthly limit on aid under the scheme to €15,000 per qualifying business in relation to a trade or profession, subject to an overall cap of €45,000 in cases where a business is carried on from more than one location.

The Bill provides for the additional changes announced as follows:

the Scheme will be extended, to 31 May 2023 with flexibility to further extend the scheme until 31 July 2023
the threshold for qualification will be reduced from a 50% increase in electricity or gas costs to 30% increase (to apply retrospectively from 1 September 2022)
from 1 March 2023 the level of relief will increase from 40% to 50% of eligible costs

These changes are subject to State Aid approval.