Example 8An employer is willing to provide a company car up to the value of €25,000. The employee has a particular car in mind costing €29,000. The employee agrees to pay the difference of €4,000 to the employer and is supplied with the car valued at €29,000.
The employee travels 19,000 business kilometres annually and contributes €1,000 per annum directly to the employer for the private use of the car.
Year 1
The notional pay is calculated as follows:
€29,000 x 30% = €8,700
Less
Lump sum payment to employer €4,000
Annual amount made good €1,000
Notional Pay in year 1 €3,700
Year 2 and following years
The position is:
€29,000 x 30% = €8,700
Less
Annual amount made good €1,000
Notional Pay in year 2 €7,700
Where, exceptionally, the lump sum cannot be fully set off in computing the notional pay of the first tax year the benefit is chargeable, the balance of the lump sum may be set off in computing the notional pay in respect of the car for the subsequent tax year.