September 27, 2019
Revenue will say that you can pay your employees' expenses when they travel on business journeys; you can also pay subsistence if employees are working away from their normal place of work and you can repay your employees when they use their private car for business purposes, that all seems fair and expected to be paid tax free.
But then there are instance that are not as obvious to the average employee carrying out work duties on behalf of his/her employer.
We at, John M Shanahan & Co, Chartered Accountants, Tullamore, Co Offaly have taken a moment to outline how it may effect you and your business.
Lets start off by looking at what Revenue require as documentation.
As an employer you must retain appropriate back-up for any expense claim made, based on the Revenue approved rates of payment, and this must have the following information;
Should an employer only reimburse expenses of travel and subsistence based on receipts then the employer should retain those receipts and attach them to a claim form that has the above information. Those records should be retained for a period of 6 years.
Basic Principles for reimbursement.
Employers can reimburse certain expenses tax free to employees subject to certain conditions being met, namely:
What constitutes a Normal Place of Work.
The employee’s normal place of work will depend on the specific set of circumstances of each case but is usually the place where the individual performs the duties of the employment.
A business may have a number of different locations where an employee can perform his/her duties. There could be a main base and a number of other subsidiary locations so it is possible to have two employees with the same employer having different normal places of work.
In most cases the employer will provide the facilities that are required to carry out the work duties at a specific location. The employee’s home would not be regarded as the normal place of work unless there is a specific requirement that the duties of the office or employment must be performed at home.
It will often be the case that an employee may carry out some of the duties of their employment at home and that they decide to do that work at home rather than their normal place of work. The Revenue guidance gives the example of teachers who prepare work at home but the school would be the normal place of work.
Also the employer’s premises would usually be regarded as the normal place of work for employees where travel is a major part of their work.
What constitutes a Business Journey.
This is where an employee travels from one place of work to another place of work in the performance of the duties of their employment and will generally involve a temporary absence from their normal place of work.
Travelling between Locations.
As you know, one cannot claim expenses or subsistence when travelling from home to their normal place of work and vice versa.
Similarly where an employee holds more than one employment, the travel between those separate employments is regarded as travel to and from work and is therefore not a qualifying business journey. Therefore any expenses paid for that travel or subsistence is also treated as taxable pay.
However where an employee is travelling to a number of locations on a daily basis with the same employment then the reimbursement of expenses of travel that were necessarily incurred in travelling between those separate locations can be made tax-free.
Ted lives in Tullamore and travels every day to work in Carlow. One day he works, in the morning, for a couple of hours in Carlow and then travels to Kilkenny for a lunchtime meeting. After that he travels to Thurles to another company site and finishes work there and travels home to Tullamore.
Ted can claim expenses for his travel between:-
• Carlow & Kilkenny and between
• Kilkenny and Thurles
He would not be entitled to claim expenses for travel between:-
• Tullamore and Carlow and [i.e. home and first location]
• Thurles and Tullamore [i.e. last location and home]
Where an employee starts a business journey directly from home or returns directly to home, then the travel and subsistence expenses that can be reimbursed tax free are the lesser of those incurred on the journey between
1. Home and the temporary work location or
2. The normal place of work and the temporary work location.
If you want to read what Revenue now say in detail follow the link.
We at JOHN M. SHANAHAN & CO. are here to help you with all your business, financial, accounting, statutory and taxation requirements, by providing expert, specialist and professional service tailored to meet your needs.