Motoring Expenses Allowances
Some employees use their private cars for business purposes.
Re-imbursement of motoring expenses incurred can be dealt with in various ways. Employers are reminded that round-sum motoring expenses payments are taxable in full and must be treated as pay. Please see earlier paragraph ‘Round-Sum Expenses’.
Re-imbursement of Motoring Expenses by Flat-Rate Kilometric allowances
Where employees use their private cars for business purposes, re-imbursement in respect of allowable motoring expenses can be made by way of flat-rate kilometric allowances.
There are two types of kilometric allowance schemes which are acceptable for tax purposes, if an employee bears all the motoring expenses:
- The prevailing schedule of Civil Service rates or
- Any other schedule with rates not greater than the Civil Service rates
No tax liability is incurred where there is reimbursement by the employer of vouched expenses incurred for the purposes of the trade.
If a round sum expense allowance is given to an employee, it is regarded as income and
taxed accordingly under PAYE. Subsequently, a claim for refund of income tax can be made based on allowable business expenditure incurred.
An employee may claim a mileage allowance, where they use their own private cars for business purposes and pay all expenses including petrol/diesel, insurance and other overheads. Provided the reimbursement is in accordance with Revenue guidelines at rates
not in excess of Civil Service Mileage Rates, no prior agreement with the Inspector of Taxes is required.
Mileage rates are a good way to reimburse employees tax free. How does it work?
Where employees use their private cars or motorcycles for business purposes, reimbursement by the employer in respect of allowable motoring expenses can be made by way of flat-rate mileage allowances.
The key issue is whether an employee bears all the motoring expenses. If so, the expenses that can be paid are any amount not exceeding schedule of Civil Service rates. The employee has to submit detailed expense claims which must be kept by the employer as they could be subject to a future Revenue audit. Therefore, the employee just gets compensated for the use of their car on business trips so it is not a tax scheme to get a lot of tax free income to the employee.
The Civil Service motor mileage rates per KM for individuals who are obliged to use their car (or motorcycle) in the normal course of their duties are (with effect from 5 March 2009).
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.
- 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.
- 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 6 years.
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
- 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.
There is also a similar system for subsistence payments.
Subsistence allowance can be paid to staff who work away from base in carrying out their duties of employment.
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.
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.
Current Subsistence Rates are:
Class A Salary Excess – €69,659
Class B Salary – €69,659