Let’s talk about expenses: what can I reimburse my employees for?
Employees, including directors, can be reimbursed tax-free for certain travel and other costs built up during work done by them. These reimbursements can operate as a flat rate allowance or on the basis of vouched expenses.
Entitlement to any reimbursements comes with a few strings attached.
The employee must be temporarily away from their normal place of work; the expenses must be necessarily incurred in the performance of their duties and any subsistence must be directly related to the travel. Moving between work and home isn’t recognised as a reasonable expense and finally, up-to-date records of spending will need to be provided in order to claim anything back.
Defining business travel?
The phrase ‘business travel’ is used to outline an event where an employee travels from their ‘normal place of work’ to another location during employment.
Where an employee works at more than one location on a regular basis travel between these locations is regarded as business travel.
Where a journey commences from home, the amount to be claimed is the shorter of
- journey between home and the temporary work location or
- the normal place of work and the temporary work location.
What exactly does ‘normal place of work’ mean?
This is where the employee normally carries out their duties – for example, at the main business address, at home (if required to do so by the employer) or other locations related to projects such as a site office.
If an employee works part-time in the office and part-time at home, then the ‘normal place of work’ is the office.
What to do if you don’t have a fixed base?
First, let’s explore this scenario…
A site based employee performs substantive duties on behalf of their employer at different locations, generally for a period of more than one day, e.g. construction workers.
In this case, travel and subsistence allowances not exceeding €181.68 per week, may be paid tax-free where the employee is:
- Fully employed;
- Working at a site which is 32km or more from the employer’s main base.
The above is known in the construction industry, as ‘country money’ and doesn’t apply when the employee is:
- Given transport to and from the site by the employer;
- Provided with board and lodgings by the employer;
- Recruited to work at one site only.
Added on to this, an ‘eating on site’ allowance can be paid to these employees when:
- Facilities for making hot drinks are not provided;
- The employee isn’t getting any other form of tax free subsistence;
- The employee works on site for at least 1.5 hours before and after the normal lunch break;
Keep in mind the allowance must be no more than €5 per day.
Travelling on appointment?
When an individual needs to travel in the course of their work or when regular travel is an integral part of their job – we call it a ‘travelling appointment’.
In general, reimbursements will only happen for subsistence but when use of a personal car is required for business purposes, there may be travelling expenses available.
When do we pay out flat rate allowances?
In situations where an employee has to pay the total cost of business travel, then a flat rate allowance (up to the prevailing Civil Service rates) can be paid.
An alternative flat rate scheme may also be applied when prior Revenue approval is received.
We’ve broken down the flat rate allowances for mileage and subsistence in 2022:
Mileage
Current rates per km:
| Annual distance | Up to 1200 cc | 1201 cc to 1500 cc | 1501 cc and above |
|---|---|---|---|
| First 1,500 km | 39.75 cent | 39.86 cent | 44.79 cent |
| 1,501 to 5,500 km | 70.00 cent | 73.21 cent | 83.21 cent |
| 5,501 – 25000 km | 27.55 cent | 29.03 cent | 32.21 cent |
| 25,001 km and above | 21.36 cent | 22.23 cent | 25.85 cent |
Reduced rates will apply when the journey was connected to an individual’s job but not directly linked to carrying out their duties – e.g., attendance conferences, training etc.
Separate rates apply to bicycles and motorcycles.
Subsistence
| Period of absence (more than 8km from home/normal place of work) | Current Allowance | Previous allowance |
|---|---|---|
| 5 to 10 hours – more than 8km from home/normal place of work | €16.29 | €15.41 |
| Over 10 hours – more than 8km from home/normal place of work | €39.08 | €36.97 |
| Overnight – more than 100km from home or work or 50km where there are is an operational need for the absence | €147.00 |
€147.00 |
When an absence exceeds seven nights, alternative rates will apply. Different rates will also apply when an individual is only temporarily working in Ireland.
What records do I need to have on-hand?
Now to the bookkeeping.
When you’re looking to reimburse employees on the basis of actual expenses incurred, you should keep copies of those receipts. Alongside this, save details of any travel and other related expenses.
If reimbursement is operating on a flat rate allowance, you’ll need:
- Name and address of the employee;
- Date and reason for journey;
- Kilometres travelled;
- Starting point, destination and finishing point of the journey;
- Basis for the reimbursement – e.g. duration of absence from normal place of work and rate applied.
What happens if employees aren’t reimbursed for travel expenses?
Ultimately, they can submit a claim to the Revenue for tax relief which can be claimed in their annual tax return. Relief for certain motor expenses relating to business travel can also be claimed using a separate form.
What’s more, if the expenses incurred by an employee exceed the amount reimbursed by the employer, they can make a claim for a tax deduction in relation to this excess.
Sole traders and Civil Service rates?
As a sole trader or partnership, you can only claim for expenses on the basis of actual receipts.
Have more questions on how to navigate the world of expenses? Get in touch and one of our team members will be more than happy to lend a hand!