The classification of employee motor vehicles can make a big difference to the BIK charge. For a van, the employee is taxed on 5% of Open Market Value. Cars are taxed at 30% of Open Market Value.

In this case, the appeal related to whether the Bik rate on a Land Rover Discovery 4 should be:

Van rate                                                   5%

Car rate pre Finance Act 2023                30%

Facts outline

The vehicle was a Land Rover Discovery 4 jeep, a high-end vehicle. It had five doors and rear side windows. The company provided the vehicles to two directors. 

They charged the vehicles at the BIK rate of 5%.

Following an audit, Revenue raised an assessment based on the 30% car rate of BIK.

Revenue based their assessment on S 121 TCA 1997, which defines a car as:

• Any mechanically propelled road vehicle designed, constructed or adapted for the carriage of the driver or the driver and one or more other persons other than – a motor-cycle, a van or a vehicle not commonly used as a private vehicle.

A van is defined by S 121A as:

• A mechanically propelled road vehicle which is designed or constructed solely or mainly for the carriage of goods or other burden
• Has a roofed area or areas to the rear of the driver’s seat, and has no side windows or seating fitted in that roofed area
• It must also have a gross vehicle weight not exceeding 3,500 kilograms.

In this case, the Land Rover Discovery would not qualify as a van because of the rear doors and windows.

The company appealed the Revenue decision and based their appeal on the assertion that it was:

“of a type not commonly used as a private vehicle”.

The company argued that, in fact, no BIK rate should apply as the vehicle fell outside the statutory definitions because:

• The significant off-road capabilities of the vehicle meant that it was not solely designed for road usage. It was described as being capable of sending a gradient steeper than an Olympic ski slope.
• Its very high load-bearing capacity meant that it was not mainly a passenger vehicle
• The Land Rover marque has only of 1% share of the Irish market and this particular model would be even smaller. Therefore, it was not “commonly” sold for road usage
• The vehicle was deemed “commercial” for VAT, VRT and insurance purposes

Result

The Appeal Commissioners found against the company because:

• regardless of the load bearing capacity, the vehicle was designed for the carriage of passengers by road
• the market share was irrelevant because the vehicle was of a similar type to other SUVs
• VAT, VRT and insurance treatments do not automatically carry over to Income Tax or Corporation Tax

Sometimes, taxpayers are assured by dealers that a vehicle qualifies for the van rate of BIK, however, it is always advisable for the client to seek expert advice first, determining the correct treatment before purchase.

This appeal determination reinforces the need to always get professional support on such matters.

We hope you find this information useful. Please reach out if you have any queries regarding this blog, or indeed, if you require any tax advice