Company vans kept at home will be exempt from benefit-in-kind (BIK) tax, provided they are used for work purposes, the Minister for Finance, Mr McCreevy, has announced.
The U-turn was welcomed by employers' organisation IBEC, the Small Firms Association (SFA) and the Technical Engineering and Electrical Union (TEEU).
From January 1st, 2004, all benefits-in-kind currently taxable will be brought in line with the PAYE system, meaning PRSI and the health levy will be applied to the benefits for the first time.
Under the Revenue Commissioner's guidelines, PAYE and PRSI will be levied on the private use of company vans. Travel to and from work is included in the definition of private use.
However, the Minister said yesterday that vans would be exempt from BIK if employers require the employee to bring the van home, if other private use is prohibited and if the employee spends most of his or her working time away from the employer's workplace.
The general secretary of the TEEU, Mr Owen Wills, told the Revenue last week that it would be punitive to tax craft workers who provide emergency cover from home, 24 hours a day, and who keep tools and spare parts in their vehicles.
"It was bizarre for Mr McCreevy to describe having to travel to work at 3 a.m. or driving 50 miles to carry out emergency repairs to power lines as 'private use' of a company vehicle. This is not something that can be put on a par with a routine drive to work in a company car," Mr Wills said.
Employees viewed keeping vehicles at home as an imposition rather than a benefit, he added.
The Department of Finance has already indicated that mobile phones, home-based computer equipment and high-speed internet connections for business use will also be exempt from BIK taxation provided that private use is incidental.
The Minister reiterated that the new scheme would come into effect in January, as announced in last year's Budget. No further changes are envisaged.
The director general of IBEC, Mr Turlough O'Sullivan, has written to the Taoiseach calling for a one-year delay on the implementation of the scheme, due to the failure of the Revenue to finalise details until last month.
Yesterday IBEC said levying PAYE and PRSI on employees obliged to park a van at home would have been unwarranted and commercially damaging.
It warned in a statement that businesses would find it very difficult to implement the new measures to other benefits by January.
"Competitiveness is under pressure and such additional taxes on employment will do nothing to aid the economic recovery," according to IBEC.
Mr Pat Delaney, director of the SFA, applauded the exemption for company vans as a victory for common sense and open government. The tax would have undermined any prospect of wage moderation and job creation, he said.
