Minister McGrath announces temporary change to Benefit-in-Kind regime for vehicles in Finance Bill 2023 (Cost of Living Measures)
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.
If you have any queries in relation to these matters, please call or email your usual CHK contact.
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Updated guidelines for the Temporary Business Energy Support Scheme (TBESS)
The Minister for Finance has announced a number of enhancements to the Temporary Business Energy Support Scheme (TBESS), including the extension of the scheme beyond the end of February 2023.
Changes to the TBESS already made.
Some of the changes have already been introduced by Ministerial Order, as provided for in Finance Act 2022. The scheme has been extended to 30 April 2023. For claim periods from 1 March 2023 onwards:
the €10,000 monthly limit on payments under the scheme has been increased to €15,000 per trade or profession carried on by a qualifying business, and
the €30,000 limit has been increased to €45,000 per trade or profession in cases where the trade or profession is carried on from more than one location.
Proposed changes to the TBESS, subject to State aid approval
A number of other proposed enhancements to the scheme are subject to State aid approval. These are as follows:
Extension of the scheme to 31 May 2023
Reduction of the energy costs threshold from 50% to 30%, with effect from 1 September 2022,
Increase of the amount payable under the scheme from 40% to 50% of a business’ eligible costs for claim periods from 1 March 2023, and
Extension of the time limit for all claims to 31 July 2023.
Revenue will update the TBESS guidelines once State aid approval for these changes to the scheme is received.
Submitting TBESS claims from March 2023
Qualifying businesses can continue to make claims for the September 2022 to February 2023 claim periods. Revenue will advise businesses in due course when claims can be made for the March 2023 claim period.
Once State aid approval is received to revise the energy costs threshold, Revenue will automatically process claims using the revised 30% threshold. Businesses will not need to amend claims that have already been submitted.
Eligible businesses can continue to register for the TBESS as normal.
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The new Rent Tax Credit is available for the tax years 2022 to 2025 inclusive. The Rent Tax Credit reduces the amount of Income Tax that you are due to pay for a tax year.
The amount of Rent Tax Credit you can claim will be calculated for you when you submit your claim. This amount will depend on the amount of:
- Rent you pay
- Income Tax you pay.
The maximum value of the Rent Tax Credit is €1,000 per year for jointly assessed married couples or civil partners. The maximum value is €500 in all other cases including single persons. This is the case no matter how many properties you pay rent for during the year.
There are several conditions which must be met for all claims of the Rent Tax Credit.
- You must make a formal claim to receive the credit for 2022 by completing your Income Tax return for 2022. If you are claiming the credit for 2023, you will be able to make your claim in real time when the online facility becomes available on myAccount.
- Your claim must relate to rental payments which were due and were paid during the relevant tax year. You should provide as much information about your rental arrangement as possible when making a claim. You should also retain all records related to your rental arrangement so that you can provide them to Revenue if requested.
- The payment must have been made under a tenancy. A tenancy must have been entered into with the consent of the landlord.
- Certain tenancies must be registered with the Residential Tenancy Board (RTB). This includes Student Specific Accommodation (SSA) provided by universities, colleges or private sector organisations. If this registration is not complete, the claimant will not be eligible for the Rent Tax Credit. The RTB website sets out full details of the various tenancy types and conditions required for registration.
- In certain cases, the Rent Tax Credit applies for tenancies which do not need to be registered with the RTB. This includes ‘rent-a-room’ or ‘digs’ type arrangements. However, the Rent Tax Credit will not be available for ‘rent-a-room’ or ‘digs’ type arrangements if: you and the landlord are related or you are paying rent on behalf of your child.
- The property concerned must be a residential property located in the State. A residential property for this purpose may be an entire property or selected rooms within a property.
As well as the conditions above, some further conditions apply to your claim for Rent Tax Credit, depending on the category of your rental arrangement. Please see Revenue’s website for details.
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Generally, where an employer provides a voucher or other incentive to an employee, it is subject to payroll tax. However, tax legislation provides that a voucher or incentive may be given to an employee without giving rise to a charge to tax where certain conditions are met. There has been a significant update to the small benefit exemption scheme included in the 2022 finance bill as follows:
- the aggregate value of vouchers or benefits cannot exceed €1,000 in value (previously €500),
- the combined number of such benefits that can be given in a tax year is two (previously one),
- the voucher or benefit cannot be part of any salary sacrifice arrangement between the employee and employer, and
- the voucher or benefit can only be used to purchase goods or services and cannot be exchanged in part or in full for cash.
The increase in value of the exemption is very welcome and provides a tax efficient opportunity to reward staff for their hard work during the year.
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The TBESS will provide support to businesses impacted by the increase in energy costs. If you are operating a trade from business premises and have an MPRN or GPRN, it is likely that your business will qualify for the cash benefit. The benefit will be calculated by reference to a calendar month and is expected to run from September 2022 to February 2023.
The following is a summary of the key features followed by a couple of examples. No claim should be made without reading the full Revenue guidance which can be found here.
Some of the key features of the scheme are as follows:
- The business must be able to demonstrate that the average unit price for electricity or natural gas in each claim period has increased by 50% or more as compared to the average unit price in the reference period
- Average unit price – Total bill charges, exclusive of VAT, divided by the number of units of electricity or gas consumed during the period covered by the bill.
- Claim period – Each calendar month within the intended operation of the scheme from September 2022 to December 2022 (likely to be extended to February 2023).
- Reference period – The reference period is generally 12 months prior to the month to which the relevant bill relates. For example, a September 2022 claim period will be compared to a September 2021 reference period.
- Business must be tax compliant and be eligible to obtain a tax clearance certificate.
If all of the conditions of the scheme are met a business will be considered eligible and will qualify for a cash payment of 40% of the year-on-year increase in their energy or natural gas bills for each claim period.
There is a cap of €10,000 per trade or €30,000 where a business operates across multiple locations. Businesses need to be mindful of amounts charged on an electricity or gas bill for a claim period that is not expended wholly and exclusively for the purpose of the trade or profession of the eligible business. An example here would be where the business premises has a domestic dwelling attached to it. There are additional conditions that groups need to be aware of as set out in the manual.
Businesses will need to Register for the TBESS through ROS and make the claim through ROS no later than four months from the last day of the month to which the claim relates. For example, claim period September 2022 must be made by 31 January 2023.
Revenue will publish a list of the names and addresses of all businesses who avail of the TBESS. The list will include the total amounts they have claimed.
A TBESS payment will be taken into account when calculating the taxable trading profits of a business by reducing the amount of expenditure that can be deducted in arriving at taxable trading profits.
Registration for the TBESS is now open.
Example 1
In this example the bills fall in the calendar month. The average unit rate has increased by 114% from €0.155 to €0.331, so the business is eligible to make a claim. The amount that can be claimed is 40% of the increase in the bill from the reference period to the claim period.
Example 2
In this example the billing period is longer than the reference period, so an adjustment must be made using a formula provided by Revenue as outlined below. Again, there is an increase in the unit rate of 109% so the company is eligible to claim a rebate of 40% of the increase in the reference cost.
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