Expences – Getting it right.

In light of the taxation issues, the most prevalent method in respect of payment of employee expenses is by the re-imbursement of vouched expenses i.e. repayment to the employee of expences actually incurred for which they have appropriate receipts for. When such payments are made to the employee and the payment is no more than reimbursement of a receipted expense, it is not treated as pay for tax purposes.
Other methods of dealing with employee expenses include:-

Flat rate employment expenses.

A standard flat rate expenses deduction is set for various classes of employee’s. The amount of the deduction is agreed between Revenue and representatives of groups or classes of employees in advance (usually the employees are represented by trade union officials). Such groups of employees that are entitled to this flat rate expense include nurses, teachers, firemen, journalists, certain professions/trades employed by the civil service and local authorities, shop assistants to name a few. A detailed list is available on the revenue website.
Round Sum expenses.

This is where the employer agrees to pay an employee an agreed amount each pay period in addition to normal salary to cover expenses. The expense amount agreed is treated as “Pay” and is taxable in the same way as if it were part of the normal salary payment.
Meal allowances: In the same way as agreed flat rate expenses, where employers pay a sum towards the costs of employee’s meals, it is treated as taxable pay.

Meal Vouchers.

Where an employer provides luncheon or meal vouchers to employees, the value of the voucher (excluding the first 19 c per voucher) must be treated as pay and appropriate PAYE/PRSI deducted in the normal manner.

Canteen Meals.

Where an employer provides free or subsidised meals in a staff canteen for staff generally, the value of the meals provided to employees are not treated as pay for tax purposes. However, the facility must be available to all employees in the company. If the facility is only available for certain employees, then the exemption will not apply and tax will need to be deducted on the value of the meals to the employees entitled to the facility.

How should I claim for my motor expenses?

Following on from the post – Can I claim for my lunch expenses – let’s look now at clearing up the sometimes grey area of motor expenses, mileage rates and who can and cannot claim them. The prevailing schedule of Civil Service rates orAny other schedule with rates not greater than the Civil Service rates

The payment of motor expenses relates to an employee of a business (including company directors) and not to sole traders – where the actual motor running costs incurred are claimed as a business expenses in the financial accounts. Motor expenses can be paid to an employee where the employee uses their own private car for business purposes. For example, where an employee is required to travel to a client or customer’s place of business in order to carry their job.

Where an employee uses their own private car to make this journey, the employee may be paid an expense by the employer. The payment is designed to cover the additional costs of fuel, wear and tear etc of the employee in having to use their car for the business purpose. This payment is generally a tax free payment (although there are some exceptions, so be careful). In the case of company directors, the expense payment can only be made where the directors use their own personal vehicle, not any vehicle owned by the company. In all cases, travel to and from an employee’s home and place of employment is not allowed for tax purposes. Any payment made to an employee in this regard needs to be treated as taxable pay.

There are a number of ways for calculating motor expenses to be paid and the method adopted by the employer will generally depend on the nature of the business, frequency of travel and length of stay away from the normal place of business. The different methods may also have different tax treatments, so make sure you take this into account when deciding on the most appropriate method.

1. Re-imbursement of Motoring Expenses by Flat-Rate Kilometric allowances.There are two types of kilometric schemes which are acceptable for tax purposes, if an employee bears all the motoring expenses:

This is probably the most common method used as it is not difficult to administrate and the payments are calculated by predefined rates.

For any rates to be paid to employees that are greater than the prevailing civil service rates, an application must be made to Revenue for approval to use any such increased rates.

2. Expenses claims submitted to RevenueAnother option is for the employee to submit a claim to Revenue for an expenses deduction (and any wear and tear allowance in respect of the motor vehicle). Where the employee this type of claim, any payment of motor expenses by the employer, including any scale allowances, must be treated as pay and taxed accordingly.

3. Round Sum Expenses:Where the employer agrees to pay an employee an agreed amount each pay period in addition to normal salary to cover expenses. The expense amount agreed is treated as “Pay” and is taxable in the same way as if it were part of the normal salary payment. Any round sum motor expense paid by the employer to the employee

It is good to remember that the above specifically relate to motor expenses and do not include reimbursement for other expenses that maybe incurred as a result of having to travel for work purposes.