The decision to choose one car over another involves many factors. Suitability of the vehicle for purpose, purchase price and cost of ownership as well as the way a car looks and feels are all important factors in the buying decision.
However in today's economic environment it is also important that the car chosen is a sound financial decision. That is never more vital than when the car is purchased or leased by a company for the use of an employee. Taxation through Benefit in Kind to the employee and taxable allowances to the employer become key decision factors. The choice must be right for both the employee and the employer.
For cars purchased since July 2008, the carbon dioxide (CO²) output of the car is a major factor in the tax payable, as CO² is recognised as a significant contributor to global climate change. Cars in Bands A (up to 120g/ km), B (121-140g/km) and C (141-155g/km) provide the lowest BIK and maximise capital allowances.
For the Employee
|CO² Emissions (g/km)
||BIK % |
|| 0g/km - 120g/Km
|| >120g/km - 140g/km
|| >140g/km - 155g/km
|| >155g/km - 170g/km
|| >170g/km - 190g/km
|| >190g/km - 225g/km
The Benefit in Kind, calculated by multiplying the OMSP** by the BIK% as above for the relevant vehicle category. The resulting figure is added to the individuals taxable salary for the year, the tax payable being at the appropriate marginal rate.
There are lower BIK% available for higher mileage users, those travelling 24,001km per year on company business.
**OMSP = Open Market Selling Price, a figure determined by the car manufacturer and Revenue, but typically between 92 – 96% of the recommended retail price of the car.
For the Employer
Since July 2008 the availability of capital allowances will depend on the level of carbon emissions of cars. The capital allowance is determined by the emission figures as follows:
|Carbon Dioxide Emission Figure
||Capital Allowance cost threshold |
|Up to 155g/km
||The lower of 50% of €24,000 or cost|
||No Capital Allowances|
The €24,000 limit applies irrespective of the actual cost of the vehicle.
Volvo and CO²
In Ireland 90% of all the Volvo cars sold in the last 12 months were in either Band A, B or C. In fact all Volvo C30s, S40s and V50s available are in the lower categories. The average emissions of all Volvo cars sold in Ireland in that period was just 134g/km, equivalent to an average vehicle category of Band B.
Volvo uses the DRIVe badge to denote its high efficiency, lower emission variants. DRIVe cars use a combination of light aluminium diesel engines, advanced aerodynamics and engine, transmission and tyre technology to reduce rolling resistance and minimise the environment impact. It is the science of small improvements, individually small steps but collectively add up to big savings in emissions, fuel consumption and consequently tax paid.