Insurance premiums, motor tax, fuel prices, servicing – a blend of these considerations can make ownership in Ireland a bit of a cash trap, and that’s omitting the largest outlay – the price of the car itself and/or the interest paid on finance used to purchase. Leading tax refund specialists Taxback.com contend that a combination of financial and time expenses has led more and more people to the realisation that they don’t need a car on a permanent basis and would be financially better off renting one only as and when they need it.
The tax experts say that because “car sharing” is a relatively new phenomenon, users are unaware of the tax implications & benefits, particularly where they use a car for work.
Eileen Devereux Commercial Director at Taxback.com says,
“Whether it’s a result of price, time, or environmental consciousness, or a combo of all 3, the habitual car rental idea is definitely growing in popularity. This is particularly true for two car households which are coming more and more into question with the advent of more sophisticated car sharing options. An example of this is the growth in the use of the likes of GoCar and other car-sharing services in Ireland. The car rental providers offer a variety of observations to promote the use of their service, and while the benefits of ditching your private vehicle are obvious in terms of cost reduction and environmental impact, few people have considered the tax benefits it could offer if you use the car for work”.
Taxback.com advise that the costs of habitual car-rental to get to a work meeting is largely tax deductible.
Ms Devereux explained,
“If you can distinguish between the business and private element of the expense, Revenue may allow the business element to be deductible. The implications are different based on whether you’re self-employed or in the PAYE system.
If you’re self-employed and use a rental for business, then you can claim only on the cost of what was used for your business. Any expenses you claim are deductible only if they were expended wholly and exclusively for the purposes of your trade or profession.
So, for example, if you use a car rental to travel to a client for a business meeting, then you can claim on the cost of the mileage the rental. However, if you use it to give Uncle Kevin a lift to his weekly Zumba class, this part of the trip is non-deductible!”
A study into the potential of organised car sharing in Ireland conducted by the Irish Transport Research Network in 2015, found that on average, GoCar customers made 1 trip every 2 months, cars were booked for 2.3 hours, travelled 21.67km and operated as per the basic monthly membership package. The estimated average usage of GoCar members in Dublin was 130km/year.
Ms. Devereux commented,
“The study concluded that car sharing in Ireland holds immense potential in terms of cost savings to members, reduction of travel-related CO2 emission, and increased share of sustainable modes of travel.”
Taxback.com say the implications are more complex if you’re a PAYE employee.
Ms Devereux outlines two scenarios:
1. “Sometimes employers provide employees with a company car, which they can also have for private use. So, if your employer provides the use of a GoCar you can have for private use, a taxable benefit arises.
The taxable benefit is reduced by the number of business kilometres.
Business kilometres happen when:
– You travel from your normal place of work to another place of work in the performance of your employment
If you take a business journey directly from home or your normal place of work to a temporary place of work, then you can calculate the business mileage with reference to the lesser of these two:
– Distance between home and temporary place
– Distance between the normal place of work and temporary place
2. If you get a GoCar for business purposes and claim mileage from your employer, then mileage under civil service mileage rates can be paid without deduction of tax. This typically arises when:
– An employee provides their own car for the purposes of employment
– Payment is genuine business mileage
Mileage payments are deemed to be sufficient, therefore an employee can’t get a reimbursement of motoring expenses. i.e. the cost of the GoCar rental.”