Mileage and Subsistence Update
The tax free reimbursement of motor and subsistence expenses is becoming an area of increased focus for Revenue Audits and it is timely to revisit the fundamental rules relating to same.
Basic Rules
Where office holders and employees necessarily incur expenses of travel and subsistence (relating to the travel) in the performance of the duties of their office or employment the reimbursement of such expenses may within certain limits be made tax free. The following conditions must be met:
- The office holder or employee must be temporarily away from their normal place of work in the performance of the duties of their office or employment.
- The travel expenses must be necessarily incurred in the performance of the duties of the office or employment.
- The expenses of subsistence must attach to travelling necessarily incurred in the performance of the duties of the office or employment.
If these conditions are not met any reimbursement of expenses is liable to PAYE / PRSI as if it was a payment of wages.
Travel Between Work and Home
Expenses incurred in travelling from home to work and from work to home cannot be reimbursed tax free. You should note the following:
- Where an individual holds more than one office or employment the travel between those separate offices or employments is considered to be travel to and from work and therefore tax free reimbursement of expenses is not allowed.
- Where an employee works at a number of locations on a daily basis in the same employment the reimbursement of expenses of travel necessarily incurred in travelling between these separate locations may be made tax free.
- Where an office holder or employee begins a business journey directly from home or returns directly home then the expenses of travel and subsistence that may be reimbursed without the deduction of tax are the lesser of those incurred on the journey between (i) home and the temporary work location or (ii) the normal place of work and the temporary work location.
Basis of Reimbursement
If the abovementioned conditions are met the office holder can be reimbursed tax free on the basis of (i) vouched receipts or (ii) round sum expenses.
If the vouched receipts method is used then the office holder or employee presents the receipts of the expenses incurred together with details of the travel and subsistence and he is reimbursed accordingly.
If the round sum expenses method is used the office holder or employee must present a detailed mileage and subsistence sheet to the employer and can be reimbursed in accordance with the current approved civil service rates.
Example
John’s normal place of employment is Cork City. He uses his own car (a 1.8 litre Honda Accord) to drive to Dublin on 23 March 2009 at 3 p.m. to meet a client and he pays for the petrol himself. He stays overnight in Dublin at a hotel which he pays for using his own credit card as he is meeting a second client at 9 a.m. the next morning. He meets the client and then arrives back to the Cork office at 5.30 p.m.
John travels 500 km. in total. 500 km. x €0.5907 = €295.35.
Overnight allowance (A class normal rate) = €108.99.
On the following day he is away from the office from 9 a.m. to 5 p.m. and therefore he can claim an additional day allowance (between 5 and 10 hours) of €13.71.
Therefore he can claim back €418.05 from his employer on presentation of the completed mileage and subsistence sheet (see Appendix II and III).
Please note that the overnight allowance reduces on long term assignments away from the normal place of business.
Books and Records
When the reimbursement is based on vouched receipts the employer must retain the receipts together with details of the travel and subsistence.
When expenses are based on an acceptable flat rate allowance the employer must retain a record of all the following:
- Name and address of the director or employee.
- The date of the journey.
- The reason for the journey.
- The kilometres involved.
- The starting point, destination and finishing point of the journey.
- The basis for the reimbursement of travel and subsistence expenses (e.g. an overnight stay away from an individual’s normal place of work).
We would also suggest including the normal place of employment and the time of departure and date and time of return.
The employer must retain the records for 6 years after the end of the tax year to which the records refer.
Normal Place of Work
It is absolutely crucial to note that the whole basis of the tax free reimbursement of expenses is centred around the office holder or employee being temporarily away from their normal place of work in the performance of the duties of their office or employment.
The normal place of work of an employee may not necessarily be the place of business of the company. While there isn’t a comprehensive definition of “normal place of work” the Revenue Commissioners have stated that the normal place of work of company directors is where the duties of the office are normally performed.
This would suggest that directors would need to spend the majority of their time at the company’s premises to claim it as their normal place of work.
If an office holder or an employee spends little or no time at their employer’s place of business and all their time, for example, on site, the Revenue Commissioners may argue that the normal place of business of the office holder or director is in fact the site and not the employer’s place of business. This would mean that the journeys from home to site are not business journeys from a normal place of work to a site but rather a journey from home to work which of course cannot be reimbursed tax free.
Site Based Employees
A site based employee may be described as one who does not have a fixed base and who, in the course of their employment, performs substantive duties on behalf of the employer at different locations. By definition such an employee cannot claim that the normal place of employment is at the employer’s business premises.
A site based employee can however receive “country money” tax free from an employer where the employee is working at a site which is 32km (20 miles) or more from the employer’s base under agreement between Construction Industry Federation and the Construction and Electrical Workers Unions.
The tax free payment of country money will not apply where:
- The employee does not incur the expense of travelling to and from the site.
- The employee is provided with board and lodgings by the employer.
- The employee is recruited to work at one site only.
Employers will sometimes simply provide accommodation and meals at the temporary location where the employee is working. A taxable benefit will not arise where the following conditions are satisfied:
- The accommodation is not the principal private residence of the employee.
- The rent paid by the employer is reasonable for the location.
- The reimbursement for the meals represents no more than a reasonable reimbursement of the cost.
If you have any question on the above, please leave a comment or email me on blog@parfreymurphy.ie.
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