Generally, an employee or director is liable to tax on expenses received from an employer. However, where an employee or director incurs motor or subsistence expenses in the performance of the duties of their employment/office then the reimbursement can be made tax free with certain conditions.
Employees or directors must be on a business journey from their normal place of work to claim tax free mileage and subsistence.
A common mistake that sole traders make is to claim mileage and subsistence using Civil Service Rates.
They can only claim for the actual expenses they incur so they should keep receipts for the business portion of motor expenses (fuel, motor tax, motor insurance), hotels and related expenses.
The Revenue Commissioners are always reviewing mileage and subsistence claims so make sure your expense claims and records will withstand detailed Revenue scrutiny. If they don’t it will cost you!
At present Revenue are undertaking a national review of mileage and subsistence claims (the National Contractors Project) relating to contractors. Revenue have advised that cases are selected based on “high levels of tax-free deductions from gross income”. Apparently the average settlement with Revenue is €60,000 plus.
If you have been claiming mileage and subsistence expenses in your own business my advice is that you should immediately review your records and if they are deficient in any respect you should:
- Correct your errors now so that any future claims are valid and
- Seek advice on the extent of your potential tax liabilities and penalties and the proper course of action to take.
Mileage
Remember that travelling to and from home cannot be claimed as mileage. Where an individual sets out on a business journey directly from home without calling into the office or where the employee or director returns home directly from a customer’s business premises, the distance travelled is decreased to be the shorter of (i) the distance between home and the customer’s business premises and (ii) the distance between the office / normal place of work and the customer’s business premises.
There are two normal methods of tax free reimbursement of expenses from an employer to an employee/director.
1. The repayment of the expense incurred by the employee/director for travel or subsistence on production of a receipt by the employee/director, for example a petrol receipt or a receipt for a hotel.
2. Using mileage rates within current civil service limits. This method of reimbursement can be done without the production of receipts but detailed records relating to each business trip must be kept and retained for 6 years. The rates depend on the cc of the car and can be found here.
Records
In order for a reimbursement to be made without the deduction of PAYE/PRSI a detailed record of all journeys must be maintained, and include the following:
- Name and address of employee/director
- Date of the journey
- Reason for the journey
- Distance
- Starting point, destination and finishing point of the journey
- Basis for reimbursement of the travel expenses e.g. meeting client.
Without this record the Revenue Commissioners may be in a position to apply PAYE/PRSI on reimbursements. All records relating to reimbursements should be retained by the employer for examination in the event of an audit.
If you want a copy of the form that we strongly recommend should be kept call Sinéad on 021 4310266.
Subsistence
An overnight allowance covers a period of 24 hours from the time of departure, as well as any further period not exceeding 5 hours, which is spent away from the normal place of work on a business trip.
- Where an absence exceeds 24 hours, a day allowance at the appropriate rate may be paid only if the last period of 24 hours is exceeded by 5 or more hours.
- The normal rate is payable for absences up to 14 nights.
- The reduced rate is payable for each of the next 14 nights.
- The detention rate is payable for each of the next 28 nights.
For absences over 56 nights, employers should make an application to the appropriate Revenue Office with a view to agreeing the rate to be applied.
The period of subsistence at any one location is limited to six months.
As with mileage, proper records must be kept.
Subsistence rates can be found here.
Certain industries have agreed different rates with the Revenue Commissioners, such as “country money” for construction workers and electrical contractors and various subsistence rates for road haulage drivers. It is worth checking with the representative body of your industry (e.g. Road Haulage Association) to see if specific rates have been agreed with the Revenue Commissioners.
NEXT STEP:
For sample record templates, please email me on blog@parfreymurphy.ie.
We have worked with a number of firms in Ireland to streamline the process of recording mileage within organisations. The solution calculates distances between locations and applies the civil servant rates or user-defined rates.
It provides secure logins for each employee and administrative functions to run reports and analyse usage.
The product is available to try for free at http://www.mileagesheet.ie.
Hi Peter,
We signed up for this a few weeks ago. It is a very useful product that takes the drudgery out of preparing mileage sheets and ensures that they are calculated correctly.
All the best,
Orla
Hi Orla,
I just realised that after I posted. Great blog by the way.
The product is proving to be very popular with companies that have 1 to 8 employees claiming mileage and subsistence.
Yesterday we setup a company that had 6 employees, they re-entered their mileage sheets for last month and found that collectively their employees claimed over 2000km by over estimating their journeys.
In this case the companies instant saving and increase in efficiency is certainly a win-win.
Thanks,
Peter
Can a lorry driver claim subsistence or vouched meal expenses (when 5-10 hrs away etc)directly from revenue if employer does not pay it. IT54 states that employees can but stonewalled by revenue when speaking to them on the phone. Thanks
Jas,
In ordinary circumstances the expenses are paid by the employer. I suggest that you get professional advice about making an expenses claim under IT54.
Seamus.
This is my first time intro to mileagesheet.ie
– thanks. Small world – marvellous the connections
Hi Orla,
Great blog I have to say!
I have one question – if an employee is on a business journey and he gets the mileage and subsistence expenses paid as a part of his salary, are bills for accomodation still to be treated as company’s expenses?
Zuzana
Hi Zuzana,
Thank you for the compliment. Much appreciated!
There are a few different ways that bills for accommodation can be treated:
1. The business pays for the accommodation directly. In this case the accommodation bill is a company expense.
2. The employee pays for the accommodation, sends an expense sheet to the company and gets reimbursed by the company. The expense to the company in this case is the reimbursement of the employee (which should equate to the accommodation bill).
3. The company pays the employee a flat rate for overnight expenses (subsistence). In this case the subsistence becomes the expense of the company not the accommodation bill.
The above all assumes that the accommodation bill is a legitimate business expense.
Best regards,
Orla
If you are recieving a monthly car allowance to use own car on business trips and also entitled to fuel receipts which are treated as non taxable exps can you also calim a milage allowance based on miles travlled at applicable milage rate ?
Hi Michael,
Thank you for your query.
No, if you are claiming a monthly car allowance and are reimbursed for fuel you cannot claim mileage.
If you have any further queries please contact our office on 021 4310266.
Kind regards,
Cathy
Good Afternoon,
I currently have two sales reps on the road, they have been using the civil service rate since 2010, as they use their own cars. My question is, does the employer by law have to offer the civil service rate? Can an employer reduce the millage rate as a cost cutting measure?
John,
I don’t see why not as long as it does not disagree with their employment contracts – however check it with your solicitor before you do anything.
Hope it works out.
Seamus
Many thanks for your speedy and informative response Seamus, great Blog and nice to see a service like this.
I work as a merchandiser in various shops. My employers base in 120 miles away and I’ve never been in it.
Is the journey from my house to my first job claimed for mileage? It’s 20km. After I’ve traveled to three different shops I might be 60km from home at the last shop. Is this 60km not claimable either as mileage? I do not have a set base. I work between 5 shops, limerick and Ennis
Mary,
Mileage cannot be claimed for these trips with Revenue. Check what your Employment Contract states re expenses.
Seamus
Hi, I am working as a National H&S officer over 16 locations throughout Ireland and use my own vehicle . Yesterday we received a memo from my employer that they cut the highest tier ( 1501- 5500 km ) which was 73 cents for my car’s size . Now , they only have two tiers up to 5500 – 39cents and 5501 -29cents – this is a big difference – can they just do that ?
Inga,
Check your employment contract
Seamus
Hi, I receive car allowance in my salary per month (fully taxable). Can I still claim for mileage that I use for business purposes?
Ciara,
You Would need to check your employment contract but normally the round sum car allowance paid by an employer is expected to cover all costs associated with your car. You may be entitled to claim from Revenue, see following link; https://www.revenue.ie/en/employing-people/documents/claim-car-expenses-capital-allowances.pdf
Seamus