What is benefit in kind (BIK)?
Benefits you obtain from your employment which are cash-convertible (also known as perquisites or “perks”,) are taxed as income. Examples of such benefits are vouchers, annual holidays, or where your employer pays your private bills (for example, life insurance, medical insurance).
A benefit in kind arises when you receive a non-cash benefit from your employer, i.e., your employer pays for accommodation, entertainment, domestic or other services, or any other benefits or facilities, on your behalf. You are taxed on any part of the benefit you do not “make good” to your employer. Examples of such benefits include cars/vans provided for your private use, private accommodation provided for you, personal loans provided on favourable terms, etc.
A cash benefit received from a third party can be taxed as income. For example, if you are employed as a taxi driver, although the tips you receive are not paid to you by your employer, such tips are taxable as they derive from your employment. However, a special gratuity paid, for example at Christmas, may not be taxable.
Your employer must apply PAYE/PRSI to “notional pay”, i.e., your employer’s best estimate of the amount chargeable to tax in respect of the benefit. Your employer should also ensure that the cumulative tax being deducted on a monthly or weekly basis will equal the liability for the tax year. This may mean, for example, revising the figure for notional pay to take account of any increase or decrease in kilometres travelled.
BIK (other than for company car) only applies if the emoluments exceed €1,905.