Is the Land Rover Discovery a car or van for BIK? This is relevant to other similar types vehicles taxed as “commercial” for Vat and VRT.
You will get to meet Tom Dunne and Bill Flynn, directors of Bigbiceps Ltd [BBL], a supplement supplier. The main areas of focus are
- Car or Van – what’s the difference?
- Bigbiceps Ltd V Revenue
- The case for BBL
- The case for Revenue
- Appeal Commissioner Decision
- Lessons
Car or Van – what’s the difference?
In tax terms, the difference is 25%. Or I should say was 25% up to 1 January 2023. BIK was at 30% of the original market value [OMV] for a car and 5% for a van. From 1 January 2023, there has been a change in the rates with a reduction for lower-emission cars. The BIK rate on vans has increased to 8% of the original market value.
| BIK Commercial Vehicle – Van OMV | €80000 |
| BIK 8% | €6400 |
| Assume employee tax rate 52% | €3328 |
| Monthly cost to employee | €277 |
| BIK Car [Category D] OMV | €80000 |
| BIK 33.75% | €27000 |
| Assume employee tax rate 52% | €14040 |
| Monthly cost to employee | €1170 |
Bigbiceps Ltd V Revenue
BBL provided a Land Rover Discovery 4 to Tom and Bill, for their personal use, in the tax years 2015 to 2017. Both had 5 doors, side windows and rear seats
BBL paid tax to Revenue for BIK at the rate of 5% of the original market value applicable to vans.
In 2018 Revenue opened an intervention into the tax paid on the two vehicles for the relevant years. On the 11th of December 2018 Revenue issued its Notice of Estimation of amounts due of €31680. Their calculation was at the rate of 30% of the OMV applicable to cars.
What is a Car?
The law 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 motorcycle
- A van or
- A vehicle of a type not commonly used as a private vehicle and unsuitable to be so used. A hearse or lorry would be examples.
Asking the boss to buy a hearse for you could lead to a few raised eyebrows!
Revenue wants an extra €32k and BBL doesn’t want to give it to them. The case goes to the Tax Appeals Commission
The Case for BBL – not a car or van
BBL go a bit leftfield in their argument. They put the case that the Land Rover Discovery 4 doesn’t fall within the definition of a car. As a result, it is not a benefit in kind at all. They had submitted BIK as a van for the years in question. Now their view was that it was neither a car nor a van.
If this was successful there would be no charge to tax. Their first argument was that you couldn’t consider the Land Rover Discovery 4 a “road vehicle”. Their view is that the vehicle’s use is “restricted to…the road”.
Not a road vehicle
They produced a variety of facts and claims to its capabilities in off-road terrain like
- It could function in temperatures ranging from -40 to +50 degrees.
- Had a wading depth of 900 millimetres.
- Could tilt to 30 degrees and
- Ascend a steeper gradient than a ramp in an Olympic ski-jump competition.
As such it wasn’t restricted to road use in the way a Toyota Corolla or a Ford Focus was. Therefore, it fell outside the statutory definition of a car.
There was a further argument that the vehicle wasn’t designed for the carriage of a driver. They backed this up with the much greater level of capacity behind the second row of seats. This, they maintained, showed a design purpose that was for the carriage of goods. Plus, at a weight of 6630 kg, more than twice of a Ford Focus, showed a design purpose other than the carriage of persons.
Not commonly used as a private vehicle and unsuitable to be so used
In the relevant tax years, the sale of Land Rover passenger cars was less than 1% of the total in Ireland. The figures included all Land Rover models with the share of Discover 4 models still lower. One couldn’t take a vehicle which such small numbers to be “commonly used” as required by tax law.
BBL pointed out that the vehicle was large and quite cumbersome with a poor turning circle. So, it was big and difficult to park and unsuitable for road use. Also, the two Land Rover Discovery 4s were “commercial vehicles” for VRT, VAT, and insurance.
The Case for Revenue – It’s a car
Their view was pretty straightforward. The Land Rover Discovery 4 cars, owned by BBL, were given to Tom and Bill. They had the vehicles for their private use, and they were a car for the purposes of the tax law. As such, they were liable to BIK
Revenue confirmed that BBL had believed the vehicles were liable to BIK. This was at the lower rate of 5% applicable to vans. It was only after the Revenue intervention and the imposition of the 30% rate of tax that BBL changed its mind. That change of mind was to argue that the vehicles fell outside the tax law relating to BIK. As a result, no charge to BIK would apply.
Revenue argued that they were road vehicles designed and constructed for the carriage of passengers. Their view is that it wouldn’t be credible to say they were uncommon on the roads. And that was the purpose that Tom and Bill were using them for in a personal capacity.
The fact that the vehicles were commercial for VRT, VAT, and insurance was irrelevant. Irrelevant to the question of whether the vehicles were “cars” for the tax law and hence liable to BIK.
Appeal Commissioner Decision
In all the Tax appeals cases the AC confirms the burden of proof rests with the taxpayer. So, the taxpayer must prove the liability shouldn’t apply. The AC confirmed that
- The “commercial” classification for VRT, VAT, and insurance is not relevant.
- He confirms that the law doesn’t impose a rule that to be a road car, a vehicle must be designed only for use on the roads.
- Also, the law doesn’t suggest a car must be designed with a single purpose, being the carriage of passengers.
- The vehicles are more rugged and have greater capabilities than an average saloon. But that doesn’t bring a Land Rover Discovery 4 outside the definition of a car.
“The Commissioner finds that a Land Rover Discovery 4, which vehicles the Directors of the Appellant had the use of for the relevant tax years, is a road vehicle designed for the carriage of driver and passengers and thus meets the essential definition of a car under section 121(1) of the TCA 1997″
He goes on further to quash the argument that they are not commonly used as private vehicles. The AC confirms that one sees this SUV-type vehicle frequently in such use. The relative scarcity of a particular model doesn’t mean it is a type that is not commonly used as a private vehicle.
In light of the above the contention of BBL that there should be no charge to tax fails. The result is that the amount due to Revenue for PAYE/PRSI and USC for the years 2015, 2016 and 2017 of €31680 must stand.
Lessons
The lessons are simple. You have an issue, or you don’t. Is your company providing you with a “commercial” vehicle? If so, is it a car or a van? If a car and you are paying the lower rate for a van, then you have an issue.
This is something that you will need to tidy up and the best advice is to go to Revenue before they come to you. They have records of who owns vehicles. It’s an easy win for them if you are not applying the right BIK rules with the correct rates.
The obligation rests with the employer to deduct the right payroll taxes. If you are not doing this, the employer will owe money to Revenue. If this is happening over a few years, the costs will increase over time with interest and penalties. Penalties will be lower if you get to Revenue first.
Do you need help going to Revenue to get this sorted? If so, start here
