Question: An employer purchased a set of tools for an employee to the value of €600. It was agreed that the employee would reimburse the employer at a rate of €50 per week over a period of 12 months. Should this be treated as a preferential loan for BIK purposes?

Answer: Yes, this is a preferential loan as the employer has advanced a form of credit to the employee which will be repaid over a 12 month period. As no interest has been charged by the employer, the BIK should be calculated based on the Revenue specified rate of 13.5%. The BIK can be calculated on a reducing balance basis as each repayment is made.

Where the cost of the tools was wholly, exclusively and necessarily incurred in the performance of his duties of employment, the employee could consider submitting a claim for tax relief from Revenue.