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Irish Payroll System

Benefit In Kind

Benefit in Kind

In this article we examine what Benefit in Kind (BIK) is, how it is calculated and how you can provide BIK’s  to your employees tax free.

BIK is a perk, it is notional pay, it’s any non-cash benefit (that has monetary value) that employers provide. As a BIK has monetary value it must be taxed. The appropriate level of PAYE, PRSI and USC must be deducted from the employee’s pay by the employer – the appropriate level of deduction depends on the value of the benefit. Employer’s PRSI is also due on the combined total of the pay and the BIK value.

 

How to Calculate BIK

General rule for calculating the value of a benefit:

If you don’t know the actual value of the BIK you must estimate it. Revenue states that:

The value of a benefit is the higher of:

  • your cost in providing the benefit
  • the market value of the benefit (if converted into money).

If you receive a repayment from your employee for the benefit, the value is reduced by that amount.

 

Specific Rules for Valuing Benefits:

Certain benefits are calculated differently, each BIK in the below list has its own rules. Click on the links for more information.

private use of company cars

private use of company vans

free/subsidised accommodation

free use of “other” assets

medical insurance

preferential loans

3rd party benefits.

 

 

Employers can pay employees’ BIK

If employers want to pay the tax due on their employees’ BIK they can do so through an arrangement with Revenue. When calculating this, be sure to “gross up” the value of the Benefit. Follow the link for more details on Grossing Up.

 

Tax free BIK

Small Benefits are exempt from tax under certain conditions. Employers can give each of their employees a benefit of up to €500 in a tax year, tax free. The benefit must not be cash and must not be redeemed by the employee for cash.(It is also worth noting that recent concessions to the Small Benefits Exemption Scheme afford employers the opportunity to provide employees with two gifts with a combined value of €500 in 2022.)

 

This small benefit tax exemption is a great opportunity for employers to cost effectively reward their staff. Many employers avail of this opportunity particularly over the Christmas period. To let employers reward their staff compliantly we introduced our Paycheck Plus Rewards Card. These are prepaid Mastercards that are Revenue approved for the Small Benefit Exemption which can be used at 32 million locations worldwide. This is a simple, quick and cost effective resource for employers, saving tax and allowing staff to spend their employee reward wherever they choose.

 

 

For more on BIK and other allowances read:

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