Private use of company cars

How to calculate the taxable benefit (cash equivalent)

You will need to calculate the ‘cash equivalent’ of your employee’s private use of the company car. This is the amount that you will add to your employee's pay.

The cash equivalent is a percentage of the Original Market Value (OMV) of the car. The percentage is based on the amount of mileage for business purposes.

The cash equivalent can be reduced if your employee contributes to the running costs of the car.

Original Market Value (OMV)

The OMV is the cost of the car, in Ireland, prior to its first registration, including all Irish taxes and duties.

Generally, this is the list price of the vehicle, including  Value-Added Tax (VAT) and Vehicle Registration Tax (VRT) at the time of first registration.

The OMV is to be used, even if you purchased the car second hand.

OMV of imported cars

If you imported the car any foreign taxes and duties applicable should be ignored.

Effect of a purchase discount on OMV

If you received a discount when you purchased the vehicle, you may reduce the OMV to reflect the discount received.

The maximum discount is usually the amount an ordinary customer would receive when buying one car in a dealership. This amount typically does not exceed 10%.

Higher discounts may be available where you can prove they would have been available to an ordinary retail customer.

In cases of doubt, you can agree in advance the level of discount with your Revenue Office.

How to calculate the cash equivalent

The cash equivalent is calculated by applying a percentage to the OMV.

The percentage you use in the calculation depends on how many kilometres your employee drives in a year for business. The greater the level of business kilometres, the lower the cash equivalent will be. You should review notional pay regularly (at least quarterly) to ensure the payments reported to Revenue are as accurate as possible. 

Please see the table below for the applicable percentages.

Annual business kilometres - Cash equivalent

Kilometres Driven(% of OMV)

24,000 and below

30%

24,001 to 32,000

24%

32,001 to 40,000

18%

40,001 to 48,000

12%

48,001 and over

6%

Your employee may not have documents proving private kilometres driven in a year. Where this happens, you must assume 8,000km are private kilometres.

Employee contributions towards cost

Your employee may pay towards the running costs or for the use of the car. You can deduct the amount they pay from the cash equivalent.

The reduction can only be applied if your employee pays the amount directly to you.

Employee contribution to the purchase of the car

Your employee might make a lump sum contribution towards the purchase of a company car. The amount contributed reduces the cash equivalent in the first year.

Next: Employees with low business kilometres