Directors who have not paid benefit in kind (BIK) tax on company loans are currently being targeted by the Revenue Commissioners.
This can result in substantial tax liabilities as the Revenue are also applying interest of 13.5% on the loans when they are calculating the BIK tax payable.
And penalties and interest could more than double the amount due.
It currently appears, if directors make a BIK declaration before a Revenue Audit is notified, penalties and interests may not be applied.
Any BIK tax due may be levied on the individual director involved if the company has gone into liquidation.
Subject to certain exceptions, benefits-in-kind including private use of a company car, free or subsidised accommodation and preferential loans from an employer to an employee whose total remuneration (including benefits-in-kind) is €1,905 or more in a tax year are taxable.
Where the employee receiving such benefits is a director of the company concerned, the benefits are taxable regardless of the level of remuneration.
The following are some of the benefits which if paid by an employee’s employer may be taxable:
- Private use of company cars / vans
- Free or subsidised accommodation
- Preferential loans
- Medical insurance premiums
- Crèche / childcare facilities
- Sports and recreational facilities e.g. golf club subscriptions
- Private use of corporate charge cards
- Professional subscriptions i.e. where the employer pays a subscription to a professional body on behalf of the employee and which is not in relation to the business of the employer.
- Exceptional performance awards
- Staff suggestion schemes.
It is essential that all companies should review any benefits paid by the company on behalf of its employees to ensure that these benefits are taxed correctly via the PAYE/PRSI system.
Also it imperative that the company reviews on an annual basis any payments made for employees in order to take account of any increases or decreases in the annual costs for example changes in medical insurance premiums and company cars.