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Getting paid expenses of travel and subsistence from your employer - Part 1

We can’t start off without mentioning the hurling. What an amazing weekend of hurling and I was just delighted with the Cats victory over Limerick on Saturday evening. We were hugely outnumbered by confident Limerick supporters. 6 Limerick fans to one Kilkenny fan would be a conservative guess. We hit them hard and early and Limerick were chasing for the rest of the game. After the first 20 minutes KK were ahead by 9 points and Limerick won the remaining 50 minutes by 8 points so to win 5/7ths of the game and still lose is very hard to take for them. Limerick were seriously rattled and hit some bad wides throughout and yes it was a 65 at the end as we were directly in line with where the line ball was being taken from. I was so delighted I watched it again, the build-up and first half when I got back to Tramore at midnight and caught the second half on Sunday morning.  I know most will be disgusted with this serious KK addiction!! Then we had the game on Sunday afternoon which was another absolute epic. It had everything, goals, amazing points, a sending off, controversial refereeing decisions, mostly against Tipp and when you thought Wexford had it Tipp rallied to close it out with their bench proving pivotal to them getting over the line. You would have to feel sorry for Wexford who have just amazing supporters and travel in vast numbers to support their team. There has been great progress made down there and no doubt the big hope is that Davy will stay on for another year.

You poor people I am not going to inflict one but two blogs on you around this topic. If you can keep your eyes open and the smelling salts close to hand it will be worth sticking with me on this topic as this should be quite useful to employers, employees and company directors alike.

Revenue released a 38 page guide on this topic in July – hence two part blog – see link attached

Two Scenarios

One of two possible scenarios will usually happen;

The employer does not reimburse the employee for the cost of travel and subsistence, or

The employer does reimburse the employee  for the cost of travel and subsistence

If, as an employee you are not reimbursed for travel and subsistence that you have incurred in performing the duties of your employment, then you can claim a tax deduction for this by submitting a claim form to Revenue.  See link attached to the claim form

The main topic of these blogs is to look at the circumstances where an employer can reimburse an employee, including directors, for these expenses tax free.

 Overview

A significant body of case law exists which confirms that expenses of travel from home to work and work to home are NOT necessarily incurred in the performance of the duties of an office or employment and hence one cannot claim tax-free expenses for that travel. If an employee or director has been reimbursed for these expense than that is incorrect and those expenses should be treated as taxable pay subject to PAYE, PRSI & USC. There are a few limited circumstances where such expenses could be claimed which we will touch on in the next blog.

Paperwork

The employer must retain appropriate back-up for any expense claim made, based on the Revenue approved rates of payment, and this must have the following information;

  • ·         The name and address of the director or employee,
  • ·         The date of the journey,
  • ·         The reason for the journey,
  • ·         The kilometres travelled,
  • ·         The starting point, destination and finishing point of the journey, and
  • ·         The basis for the reimbursement of travel and subsistence expenses [e.g. An overnight stay away from an individual’s normal place of work]    

Should an employer only reimburse expenses of travel and subsistence based on receipts then the employer should retain those receipts and attach them to a claim form that has the above information. Those records should be retained for a period of 6 years after the end of the tax year to which the records relate to. So, if the expense claim form relates to the business year end 31 December 2019 then the records need to be kept for the years 2020 to 2025 and can be destroyed in 2026.

Guiding Principles

Employers can reimburse certain expenses tax free to employees subject to certain conditions being met, namely

  1. The employee must be temporarily away from his/her normal place of work performing the duties of their office or employment
  2. The travel expenses must be necessarily incurred in the performance of the duties of the office or employment
  3. The subsistence expenses must attach to travelling necessarily incurred in the performance of the duties of the office or employment

Normal Place of Work

The employee’s normal place of work will depend on the specific set of circumstances of each case but is usually the place where the individual performs the duties of the employment.

A business may have a number of different locations where an employee can perform his/her duties. There could be a main base and a number of other subsidiary locations so it is possible to have two employees with the same employer having different normal places of work.

In most cases the employer will provide the facilities that are required to carry out the work duties at a specific location. The employee’s home would not be regarded as the normal place of work unless there is a specific requirement that the duties of the office or employment must be performed at home

It will often be the case that an employee may carry out some of the duties of their employment at home and that they decide to do that work at home rather than their normal place of work. The Revenue guidance gives the example of teachers who prepare work at home but the school would be the normal place of work.

Also the employer’s premises would usually be regarded as the normal place of work for employees where travel in a major part of their work.

Business Journey

This is where an employee travels from one place of work to another place of work in the performance of the duties of their employment and will generally involve a temporary absence from their normal place of work.

Travelling between different locations

As mentioned in the overview above one cannot claim expenses or subsistence payments when travelling from home to their normal place of work and vice versa. If an employee has received expenses for such travel then that is treated as pay and that pay would be subject to normal payroll taxes.

Similarly where an employee holds more than one employment, the travel between those separate employments is regarded as travel to and from work and is therefore not a qualifying business journey. Therefore any expenses paid for that travel or subsistence is treated as taxable pay.

However where an employee is travelling to a number of locations on a daily basis with the same employment then the reimbursement of expenses of travel that were necessarily incurred in travelling between those separate locations can be made tax-free.     

Example

Edwina lives in Portloaise and travels every day to work in Carlow. One day she works, in the morning, for a couple of hours in Carlow and then travels to Kilkenny for a lunchtime seminar. After that she travels to Clonmel to another company site and finishes work there and travels home to Portlaoise.

Edwina can claim expenses for her travel between

  • Carlow & Kilkenny and between
  • Kilkenny and Clonmel

She would not be entitled to claim expenses for travel between

  • Portlaoise and Carlow and between [home and first location]
  • Clonmel and Portlaoise [last location and home]

Where an employee starts a business journey directly from home or returns directly to home, then the travel and subsistence expenses that can be reimbursed tax free are the lesser of those incurred on the journey between

  1. Home and the temporary work location or
  2. The normal place of work and the temporary work location

Example

Assumpta is an employee with State Star and she lives in Malahide. Her normal place of work is the company head office in Dublin docklands. She is required to attend a temporary place of work in Bray. She is entitled to claim for allowable travel expenses that were incurred on the return journey between the Docklands and Bray which is the lesser of a) and b) above.

Travelling from home in Ireland to a temporary work location abroad on a temporary work assignment and returning home at the end of that temporary assignment is regarded as a business journey.

Where an employee works part-time at home and part-time at the office the work base is regarded as the office and any expenses of travel between the two locations cannot be paid tax free.

Rates of reimbursement

Where the employee bears the cost of all expenses of travel, and the costs of subsistence relating to such travel, Revenue will not seek to impose tax on the reimbursement of the expense of travel and subsistence where the reimbursement is made by way of;

  1. A flat rate up to, but not exceeding the prevailing Civil Service Rates for travel and subsistence [See Appendix 1 below]
  2. A flat rate based on any other schedule of rates and related conditions of travel and subsistence which do no more than reimburse the employee for expenditure necessarily incurred

No Revenue approval is required for scale 1 above but Revenue approval is required for scale 2.

PS. Don’t forget to tune in next week where we will get into some of the finer details



 

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