January 29, 2020
Revenue's Tax and Duty Manual sets out the principles, based on case law, for determining the tax deductibility of general expenses incurred in the performance of the duties of an employment.
We at, John M Shanahan & Co, Chartered Accountants, Tullamore, Co Offaly have taken a moment to look at how this can implemented in practice.
In addition to expenses of travel, section 114 Taxes Consolidation Act 1997 (TCA) provides for a tax deduction in respect of expenses incurred “wholly, exclusively and necessarily in the performance of the duties” of his or her employment. The section provides that where en employee spends money wholly, exclusively and necessarily in the performance of those duties, this may be excluded from that persons taxable income of the period.
Flat Rate Expenses.
For ease of administration, where a large number of employees incur broadly identical qualifying expenses which are not reimbursed by their employer, Revenue has over the years provided a facility whereby a flat-rate expense allowance may be claimed. The expense should apply to all employees in that category and not be discretionary. The amount of the deduction is agreed with Revenue and can then claim the agreed deduction as part of their own annual tax credits.
Link here to: Flat Rate Expenses List.
Statutory & Regulatory Fees.
Where a registration fee is a statutory obligation to be a member of a particular body in order to carry out the duties of the employment (e.g. Irish Medical Council for doctors), then this is an allowable deduction and will likely be included in a flat-rate expense where one exists for the particular profession.
Professional Membership Fees.
Professional membership fees will not generally meet the test unless it is a statutory obligation, an indispensable condition of the terms of the employment and the employee works in those duties. If it is a requirement of the employment, it is likely,but not always the case that the employer covers the cost.
Continuous Professional Development (CPD).
Where an employee was required to pay for necessary CPD, the question then arises - could the employee carry out the duties of the employment without such CPD. Revenue quote Case law which dictates that CPD does not generally meet the criteria for such deduction, so again one need to be careful making the claim.
Purchase of a Computer.
There is a Benefit in Kind (BIK) exemption under section 118(5D) TCA for an employer to provide computer equipment where certain conditions are met. This arises in the case of e-working, where arrangements may allow an employer to provide computer equipment without a deduction of tax.
The normal laundry of clothing or uniforms does not meet the wholly, exclusively and necessarily in the performance of the duties of employment test. Revenue say it is possible however that specialist cleaning of a uniform may meet the test.
Uniforms & Clothing.
Vocational uniforms which staff are obliged to supply and wear generally meet the criteria for deduction. It is unlikely that clothing outside of a distinct uniform which an employee is obliged to wear daily under their contract will meet the test. Any clothing expense outside of a uniform which an employee is obliged to wear will likely fail the duality of purpose test. For a uniform to qualify the employee must bear the cost. For example, the purchase of black trousers and a white shirt for work would not be allowable.
Tools of the Trade.
Where an employee is required to supply his/her own tools, it would likely meet the wholly, exclusively and necessary test if those tools were used exclusively in the performance of the duties of the employment.
Personal Protective Equipment (PPE) / Safety Equipment.
Again it would be considered unusual for an employee to be expected to supply their own PPE. If such equipment was required to carry out the duties of the employment, the employer would supply the equipment, in accordance with the provisions of the Safety, Health and Welfare at work (General Application) Regulations 2007. The equipment in question would be items such as hard hats, high vis jackets, safety boots, etc and not personal security assets.
Trade Union Membership.
Trade Union membership does not meet the test of wholly, exclusively and necessarily in the performance of the duties of the employment.
So as you can see there are many obstacles put in the path of claiming expenses as a tax deduction, so care is needed before you proceed.
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.