Benefits in Kind

Charge to PRSI

PRSI and health contributions did not apply to benefits in kind prior to 2004. Income tax on benefits in kind was not collected under the PAYE system. As of 2004, benefits in kind and non-pecuniary emoluments are included in reckonable earnings and are subject to PRSI and USC

PAYE must now be operated on benefits in kind regarding income tax, employer and employee PRSI contributions, and USC. Both employer and employee PRSI arise and must be collected by the employer on the value of the benefit.

Tax is payable on the notional payment. This amount is the best estimate that can be reasonably made of the value of the benefit. Where there is insufficient income against which to deduct PRSI, the obligations nonetheless  applies.

The PAYE due must be paid by the 14th of the month following the period in which the benefit is provided. If the benefit is referable to a number of periods, it can be apportioned.

Basis of Charge

The notional pay is the higher of the expense incurred by the employer in connection with the benefit or the value realisable by the benefit in kind. In principle, the position in respect of income tax applies. Perquisites, which are capable of being valued in money, are taxable with reference to their pecuniary amount.

Benefits in kind are subject to separate legislation. In the case of benefits in kind, the cost to the employer is taxed.

Payments made on behalf of employees are readily determined. There are specific and somewhat artificial valuation rules for certain kinds of benefits, including cars and vans provided by companies, accommodation and preferential loans.

Exemptions

There are exemptions for the following:

• subsidised meals in staff canteens available to all;
• medical check-ups which employees are required to undertake;
• certain small long service awards;
• provision of railway, bus or ferry travel passes;
• provision of bicycle or bicycle safety equipment for the purposes of travel to and from or journey within work.

Minor benefits not exceeding €250 within a tax year, are ignored for PRSI purposes.

Salary sacrifice is permitted in limited circumstances, whereby an employee foregoes remuneration in return for a benefit. Such arrangements may be allowed for travel passes and  bicycle as above.

Arrangements

Revenue may agree arrangements in relation to payment of minor benefits on a regular basis. PRSI is paid on the grossed up value of the benefit. The benefit is grossed up at the marginal rate of income tax plus USC.

Employers are obliged to keep records of benefits paid to employees.

Share Based Remuneration

Since 2011, PRSI applies to share based remuneration realised, acquired or appropriated is taxable as benefits in kind.  This includes benefits or gains on shares, gains arising from exercise of share options, and gains from the realisation or release of rights to shares.

The employer must collect income tax, USC and PRSI arising.