Are you self employed operating through a company structure? If so, be aware of Revenue’s new guidelines in relation to the reimbursement of mileage and travel expenses free of tax.
Generally speaking, where a director/employee incurs travel and subsistence costs in order to perform the duties of their employment at a temporary work location, these costs may be reimbursed by their employer tax free.
However, there are many exceptions to this general rule.
The tax free reimbursement of travel and subsistence expenses from an individual’s home to their normal place of work is generally not allowable as this travel is not necessarily incurred by them in the performance of the duties of their employment.
It is seen that it is the employee’s circumstances that result in the travelling costs and not the duties of the office. In such cases, PAYE should be deducted on the amount reimbursed by the employer.
What happens if I operate through a company?
In recent years, many directors/employees of intermediary service type companies have been claiming travel and subsistence costs incurred on journeys to the third party premises from his/her home. This was done on the basis that the individual was not an employee of the third party and that the third party’s premises was not the ‘normal place of business’ and as such no PAYE was deducted on these amounts.
What has changed ?
Revenue has recently clarified the correct tax treatment in relation to the reimbursement of the travel and subsistence expenses where an individual’s company is engaged to supply services of the individual to a third party. Revenue will not accept that an individual’s ‘normal place of work ‘ is their home/office and, as such, expense claims to/from their client’s cannot be paid tax free.
‘Travel expenses incurred by a director/employee on the journey from his/her home to his/her normal place of work (and vice versa) do not qualify for a statutory deduction under Schedule E and may not be reimbursed free of tax’
However, where the individual travels to the customers of the third party from their normal place of work in order to assist them, these costs may generally be reimbursed tax free. The return journey however to the individual’s home should not be reimbursed tax free.
A recent Revenue example, published on their website, www.revenue.ie , clearly outlines their position on these costs:
Sally is a director of a company with a contract to provide computer programming services to X Ltd, which runs a payroll service for its clients. Her normal place of work is located at X Ltd’s headquarters.
From time to time, she brings work home with her rather than staying late at X Ltd’s premises. The expenses of travel and subsistence incurred on the return journey between Sally’s normal place of work and home may not be reimbursed free of tax even on the occasions when she brings work home with her.
From time to time, Sally is required to travel from her normal place of work to customers of X Ltd to assist them in implementing revised payroll packages. The expenses of travel and subsistence incurred on the return journey between her normal place of work and the customer’s premises may be reimbursed free of tax.