When employers provide goods or services at a reduced or discounted price to their employees, Revenue will generally not seek any Benefit In Kind (BIK) when goods are sold to the employees at cost price or more than the cost price incurred by the employer.
As the employer may be reclaiming VAT on the goods purchased, then the employer will also have to pay the VAT to the Revenue on the sale value of the goods. Where the goods are sold at or above cost price then there is no issue. However, if the goods are sold at less than the cost price, the Revenue will regard the difference as giving rise to a BIK.
Employees who avail of this concession cannot also avail of the Small Benefit Exemption (SBE) in the same tax year.
An exception occurs where goods are sold at market value, which is less than the cost to the employer. For example if an item is shop soiled or devalued in some way, the employer may sell the goods to the employee at a discounted price which equates to the appropriate market value of the soiled item without incurring BIK.
For further information and assistance on processing payroll for employees, speak to Niamh on +353 (0)41 686 3000 or Request a callback from our Payroll Team today.
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