New Revenue rules on paying employee expenses

The Revenue Commissioners have changed the rules for how businesses can pay certain expenses to their directors and staff without deducting PAYE. From July 1, new rates for what is termed “subsistence” will apply and the Revenue Commissioners have also made a number of changes to the rules governing such payments.

These changes are of relevance to every Irish business where the directors and staff are required to travel in relation to their work. Reimbursement of expenses without deducting tax is allowed in one of two ways:

  • Where a director or employee provides vouched expenses, or
  • Where flat rate allowances based on so-called Civil Service rates apply

In the latter case, businesses are allowed to pay to directors and staff, motor travel and “subsistence” expenses which are designed to cover other expenses incurred when they are away on business. Certain conditions must be met. The rates for both sets of expenses are equivalent to scales in use within the Civil Service.

Subsistence rates

There are three bands:

  • The “normal rate” which is payable for absences up to 14 nights
  • The “normal rate” which is payable for absences up to 14 nights
  • The “detention rate” which is payable for each of the next 28 nights

The new subsistence rates from effective from 1 July 2015 are:

Night allowances Day allowances
Normal rate Reduced rate Detention rate 10 hours or more 5 hours (but less than 10 hours)
€125 €112.50 €62.50 €33.61 €14.01

Mileage rates

From 1 July 2015, the allowance payable is no longer related to the employee’s salary. The night allowance can only be paid where the employee is at least 100 km away from an employee’s home or place of work and covers a period of up to 24 hours from the time of departure, and any further period not exceeding 5 hours. The day allowance may only be paid where the employee is at least eight km away from the employee’s home or normal place of work.

There are no changes to the mileage rates which became effective in March 2009. They are based on a rate per kilometre, the engine capacity and the amount of mileage conducted in a calendar year, as shown below.

Engine capacity   Up to 1200 cc  1201 to 1500 cc 1501cc and over 
Rate per km up to 6,437 km  39.12c  46.25c  59.07c
Rate per km 6,438 km and over  21.22c  23.62c  28.46c

Record-keeping/further information

For both forms of expenses, records have to be maintained for a set period and a number of other conditions have to be met. These are detailed in a new Statement of Practice leaflet and a brochure which the Revenue Commissioners has published.

As with all tax compliance and financial planning matters, you should seek prior advice from your accountant or financial adviser about the tax treatment of business expenses.

July 2015