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Tax Treatment of the Reimbursement of Expenses and Travel and Subsistence

The reimbursement of travel and subsistence tax-free is always a topical issue for Employers and Revenue alike and updated Civil Service rates are in effect since 1 April 2017. It is vital that employers understand the rates and, if not, take the necessary actions to rectify any issues in order to remain compliant from a PAYE perspective.

Domestic Subsistence Rates

  • A day allowance may be paid to an employee working away from his/her normal place of work where he/she is away for over 5 hours and is at least 8km away from that normal place of work or his/her home (whichever is the lesser). The day rates remain unchanged at €14.01 for absences of 5 hours to 10 hours, and €33.61 for absences of 10 hours or more.
  • An overnight rate may be paid to an employee to cover a business related absence for a period of up to 24 hours, subject to conditions including the employee is working at least 100km away from his/her normal place of work, or home (whichever is lesser). The Normal rate (up to 14 nights) has increased to €133.73, the Reduced rate (next 14 nights) to €120.36, and the Detention rate (next 28 nights) to €66.87.
  • A Vouched Accommodation rate of up to €133.73 plus the appropriate day rate was introduced for use in Dublin only, where accommodation cannot be sourced within the normal overnight rate cost.

Motor Travel Rates

Where an employee is required to use their own vehicle for business purposes, only business travel up to the acceptable Civil Service rate can be paid free of tax. The following sets out the key rates and also some key issues to consider when implementing a policy of reimbursement: 

  • A qualifying business journey always requires an employee to be temporarily away from their normal place of work in the performance of duties. In general, the normal place of work is straightforward to determine and will be the employer’s main business premises. However, exceptions may apply to where the “Normal” place of work is.
  • Any travel to and from an employee’s private home to their normal place of work is never considered a business journey and any reimbursement of such expenses will always be taxable e.g. the cost of a taxi fare where an employee has been required to work late.
  • The allowable rate per kilometre for a Car depends on the engine capacity of the car and the level of annual business mileage in a calendar year. Separate rates apply for Motor Cycles and Bicycles.
BandDistanceEngine Capacity
up to 1200cc 
Engine Capacity
1201cc - 1500cc
Engine Capacity
1501cc and ove
r
10 - 1,500 km37.95 cent39.86 cent44.79 cent
21,501 - 5,500 km70.00 cent73.21 cent83.53 cent
35,501 - 25,000 km27.55 cent29.03 cent32.21 cent
425,001 km and over21.36 cent22.23 cent25.85 cent
  • Where an employee commences a business journey from their home (e.g. travel direct to a customer/supplier premises at the start of the working day), the allowable business journey will be restricted to the lesser of:
    • The distance travelled from home to that temporary place of work, or 
    • The distance from the normal place of work to the temporary place of work. 
  • Particular care should be taken where employees are required to be away from the normal place of work on an ongoing basis for a considerable length of time. It is advisable in these cases to evaluate the position to ensure that the normal place of work has not changed.
  • A new condition is the exclusion of these rates where the trip might be associated with an individual’s job, but not in the performance of those duties, e.g. attendance at lectures, etc.
  • It is important to note also that there are specific rates available for foreign trips that may be applied separately.

Country Money 

Employees in the construction industry are often required to travel to work at different sites. Expenses of travel and subsistence may be paid tax free to a site-based employee, up to €36.34 per day where the employee is working at a site that is 32km (20 miles) or more from the employer’s base. They may not be paid tax free where the employee is provided with transport or lodgings by the employer or recruited to work at one site only.

Provision of a Company Vehicle 

Where an employee is provided with a company vehicle, a taxable benefit should not arise where the employee spends at least 80% of his/her working time away from the employers base and, other than travel to and from the employee’s home, any private use is strictly forbidden. The retention of appropriate documentation is vital in such a case.

Conclusion 

The above is just a summary of the broad guidelines but further detail applies to each area. The importance of administering your tax obligations as an employer in the area of travel and subsistence payments cannot be underestimated. Employers should be vigilant in terms of retaining appropriate documentation and records to ensure that any PAYE risks are minimised. A strong policy document and good internal controls are key to achieving this as failure to apply correctly could result in exposure to interest and penalties in a Revenue audit. 

To discuss how your business manages its travel and subsistence policy, please contact Mairead O’Grady on (090) 64 80600.

Mairead O'Grady

Taxation Partner

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