Revenue Note for Guidance

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Revenue Note for Guidance

121A Benefit of use of van

Summary

This section charges to income tax the benefit to directors and employees derived from the private use of vans provided by their employers. The charge to tax is based on a “cash equivalent” of that benefit derived from the use of the van. This “cash equivalent” is computed as 5 per cent of the original market value of the van. Contributions which the director or employee is required to make, and actually makes, to the employer in respect of the costs of providing or running the van are deductible from the cash equivalent.

Details

Definitions

(1)van” means a mechanically propelled road vehicle which is designed or constructed for the carriage of goods or other burden, has a roofed area or areas to the rear of the driver’s seat, has no side windows or seating fitted in that roofed area or areas and has a gross vehicle weight not exceeding 3,500 kilograms.

gross vehicle weight” in relation to a vehicle means the laden weight which the vehicle is designed or adapted not to exceed when in normal use.

electric vehicle” means a vehicle that derives its motive power exclusively from an electric motor.

Application

(2)(a) The section applies to employees and directors chargeable to tax in an employment for any year of assessment in respect of the private use of a company van without any transfer to the person of the ownership of the van.

The charge to tax

In relation to such a van—

  • (2)(b)(i) the general benefits in kind charge (contained in Chapter 3 of this Part) does not apply for that year in relation to the expense incurred in connection with the provision of the van, and
  • (2)(b)(ii) the charge to tax is based on the “cash equivalent” of the benefit of the van, subject to a deduction in respect of any amount made good by the employee towards the cost of providing or running the van.

Example

An employee has the use of a company van the original market value of which is €18,000. The cash equivalent is €900 (5% of €18,000). The employee is required to pay and pays the employer €500 per annum towards the running costs of the van. The employee is, therefore, chargeable on the cash equivalent of €900 less the contributions of €500, that is, on €400.

(2)(b)(iii) Where the van made available to the employee is an electric vehicle and is provided during the period 1 January 2018 to 31 December 2018, no amount shall be treated as emoluments.

(2)(b)(iv) Where an electric vehicle is made available to an employee during the period 1 January 2019 to 31 December 2022 and the original market value of the van does not exceed €50,000, no amount shall be treated as emoluments.

(2)(b)(v) Where a van made available to an employee during the period 1 January 2019 to 31 December 2022 is an electric vehicle:

  • the original market value of the van does not exceed €50,000, and
  • the van was first made available to the employee during the period 10 October 2017 to 9 October 2018

no amount shall be treated as emoluments.

(2)(b)(vi) Where an electric vehicle is made available during the period 1 January 2019 to 31 December 2022 and the original market value of the van exceeds €50,000, the cash equivalent of the van shall be computed on the original market value of the van reduced by €50,000.

(2A) The tax charge to tax in respect of the private use of a company van will not apply where all of the following conditions are met:

  1. the van is necessary for the employee’s work,
  2. the employee is required by the employer to take the van home when not being used for work
  3. private use of the van other than travel to and from work is prohibited and there is no other private use, and
  4. the employee spends at least 80 per cent of his or her working time away from the premises of the employer to which the employee is attached.

Cash equivalent of benefit of van

(3) The cash equivalent of the benefit of a van for a year of assessment prior to 2023 is 5 per cent of the original market value of the van. From 1 January 2023 the cash equivalent of the benefit of a van for a year of assessment shall be 8 per cent of the original market value of the van.

(4) This paragraph provides that the provisions of subsections (1), (6) and (7) of section 121 (benefit of use of a car) shall apply to this section, with the exception of the definition of a car.

(5) Where a van is available to a person for part only of a year of assessment, the cash equivalent of the benefit is ascertained by apportionment on a time basis. This provision operates where a person –

  • first obtains the use of a company van during the course of a year,
  • ceases to have the use of a company van during the course of a year, or
  • changes vans during the course of a year.

Relevant Date: Finance Act 2020