Family Wages and Company Expenses


We’ll look at a dispute for a deduction for family wages and company expenses between Revenue and a taxpayer. This arises from a recent tax appeals case that has some very interesting lessons. Let’s call the taxpayer Sanjay Singh. We’ll focus on

  • Introduction
  • Background
  • Evidence for Sanjay
  • Case for Revenue
  • Outcome
  • Lessons


Sanjay is a medical professional. He provides his services through a company that he owns 50:50 with his wife Mega. Both are directors and employees of the company. They have two sons who have “worked” for the company on a few occasions but more of that later.

Revenue issued amended Notices of Assessment to Sanjay for 2016 and 2017. They are looking for €56,025 for 2016 and €33,175 for 2017. And why would Revenue do such a thing? Two issues.

Firstly, Revenue treated all but €5,198 of the salary “paid” to Mega and the children as income earned by Sanjay. Secondly, Revenue disallowed as non-deductible the travel and subsistence expenses claimed by Sanjay.

This appeal took place on the 21st of June last. Sanjay’s Accountants represented him, and Junior Counsel represented Revenue.


The company provides Sanjay’s services as a medical consultant to a locum agency. The locum agency contracts with the HSE to provide Sanjay’s services to hospitals. The HSE paid the locum agency, which then paid the company for Sanjay’s services.

Following on from that the company then paid Sanjay a salary and paid Mega and the two sons as employees. There are no employment contracts between the company and Mega and the sons.

Sanjay’s puts the case that the travel and subsistence payments are expenses incurred

“wholly, exclusively and necessarily in the performance of his duties as a director or employee”

He also contends that the payments to his wife and sons were bona fide payments to them, by the company, for their duties as employees and/or directors.

Revenue Reply

On the 18th of February 2019 Revenue issued correspondence to Sanjay. This confirmed that he had been selected for an Aspect Query concerning 2016 & 2017. Plus, they requested certain information.

On the 3rd of December 2021, Revenue sent a letter to Sanjay stating that

The income tax liability has been quantified and assessed at €51,466 for 2016 and €33,175 for 2017″

Revenue disallowed the company travel and subsistence expenses. And they also disallowed all the family wage payments to Mega and the two sons. Their view was that the salary payments was income earned by Sanjay and paid to benefit Sanjay. But Revenue did allow a salary payment of €5,198 to Mega.

Revenue gave a summary of the disallowed expenses for both years. For 2016 it is

Expenses 2016 Amount Allowed Amount Disallowed
Family wages €5,198 €52,594
Director’s salary €0 €50,000
Corporation Tax €0 €409
Diesel/Petrol €0 €1,200
Office Expenses €0 €1,500
Stationery €0 €711
Professional Fees €1,470 €6,213
Telephone €332 €1,776
Travel & subsistence €0 €23,087
Vehicle €0 €3,139
Other payments €0 €4,537
Total (2016) €145,216

Evidence for Sanjay

Sanjay gave sworn oral evidence at the appeal hearing. A summary of this would include

  • He was working in the community for many years and paying high taxes
  • The company was set up in 2011, but since 2002, he was working as a locum doctor for various locum agencies
  • In 2016 and 2017 he was travelling 300km between hospitals where he worked. He even had to rent accommodation near one of the hospitals where he worked
  • He confirmed that his wife took care of the administration work as company secretary.
  • His son assisted him by driving him to the hospital and moving around the hospital
  • There was a feeling of being unfairly treated by Revenue and this affected his mood, his family and his life in general


Sanjay was cross-examined by counsel for Revenue. In that he

  1. Confirmed that he hasn’t produced evidence of the duties of the employees of the company for the 2 years
  2. Accepted that he hasn’t produced timesheets or email correspondence issued by the company or its employees. There was no e-mail address attached to the company
  3. Produced no evidence of payments to his two sons. Sanjay confirmed that his sons were not paid by the company. But he paid college fees and accommodation fees from the company account.
  4. Stated that he had an office in the hospitals where he worked to carry out appointments. All medical records remained in the hospital.

In relation to Mega’s duties, he confirmed that she was responsible for

  • arranging his schedule
  • liaising with the locum agency
  • arranging conferences and flights and
  • dealing with invoices for the medical council

He confirmed that his sons would file his medical journals and that he went to two major conferences in the two years.

Case for Revenue

In the case for Revenue, they accepted vouched expenses in support of some company expenses. This would reduce the liabilities by a small amount for the relevant years.

Of the €23,087 of expenses claimed in 2016 approximately €20,000 related to travel from home to the hospitals and back to home again.

Their key point is the difference between

  • travelling to perform your duties and
  • travelling in the performance of his duties

In their view, Sanjay was travelling to the relevant hospital so that he could perform his duties at that location. This was a personal expense and not a business one.

Revenue noted that there was a double company expense claim. Sanjay was claiming travel and subsistence using civil service rates. But the actual diesel expenses were going through the accounts too.

Further evidence

A summary of further evidence to support Revenue’s case was

  • Revenue allowed a sum of €5,198 in 2016 and 2017 for Mega for director’s duties
  • They disallowed the balance of Mega’s salary of €28,594 for 2016 and €19,594 for 2017
  • Sanjay has access to a full range of admin supports at his places of work
  • There is no evidence of Mega or the two sons carrying out working duties that warrant the level of salary claimed
  • A couple of Tax cases which confirmed the decisions that

payments arising or deriving from a person’s efforts in their office or employment, even if they are redirected, still fall to be taxed on the person who earned the income”

For the salary payments to Mega and the two sons not to be treated as income of Sanjay, he would need to show that

  1. The payments were made on a bona fide basis to remunerate them for work done and
  2. Were not redirected payments to Sanjay for the duties carried out by him.


The outcome of this case will come as no huge surprise. As is usual at the start of her analysis the Appeal Commissioner talks about the burden of proof. This rests with the taxpayer who must prove that an assessment to tax is incorrect.

She agreed with Revenue about the expenses. The expenses of travelling from home to his place of work at the hospital are

“ordinary commuting expenses and are not deductible under the Taxes Act”

The taxpayer must show that the expenses were incurred necessarily in the performance of his duties. And that they were icurred wholly and exclusively in the performance of his duties.

The commissioner is satisfied that the taxpayer has failed to discharge that burden.”

Family wages

The level of family wages that Sanjay was looking for a deduction for was significant at €80,000 over two years. This is €80,000 worth of work done by his wife and sons in that time. In her summary, the Appeal Commissioner reflected on the evidence to support the payments. And highlighted that

  • No contracts of employment existed between the company and the wife and sons
  • There was no documentation relating to the duties to be undertaken by his wife and sons
  • No evidence of salary negotiations or salary paid in relation to the duties carried out
  • The Commissioner didn’t get any documentary evidence to support that actual work was carried out. Like an e-mail or other written correspondence.

Having regard to the lack of evidence…….the Commissioner considers that there existed no genuine employment relationship”

She further went on to state that there was no evidence of any payments to the sons. And that’s apart from any evidence that work was actually carried out.

With the appeal denied the tax liabilities stood. The liabilities reduced a small bit to €53,786 for 2016 and €32,285 for 2017. Bad news for Sanjay and an easy win for Revenue.


What lessons do we learn from this case?

  1. No employment contracts. Not unusual in a family company case but having one looks good
  2. No payslips
  3. The payment wasn’t coming from the company account for the two sons. Money must leave the business account and go to the employee account
  4. Actual physical workplace. Does your employee have a workstation?
  5. Timesheets to show work done. They didn’t exist
  6. Evidence of work. E-mails, phone calls or other correspondence from your employee
  7. Travelling to and from work is always personal. It can be a grey area in certain situations about your “normal place of work”
  8. Was the taxpayer well advised by his accountants or advised but not listened to? An annual salary of €80,000 doesn’t make sense for minor admin duties.
  9. What is a more accurate level of salary for the duties performed? What would you pay a third-party unrelated individual?
  10. A result in that Revenue will allow a salary for Director’s duties. As such this can be an advantage if not availing of this already.
  11. Did they fill out expense claim forms? Do you have this evidence to support the amount of company expenses claimed?
  12. How wise was it to take this appeal? Think of the time and cost and the likelihood of a successful outcome.

It’s a harsh lesson for Sanjay but a fair outcome all the same. Sometimes you have to hold your hands up and admit you did wrong. Pay what you owe and move on.

Worried about Revenue? Want to make sure you look after your company. If so, start here



67 thoughts on “Family Wages and Company Expenses

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