I am advised by Revenue that in accordance with section 114 of the Taxes Consolidation Act 1997, where an employee is necessarily obliged to incur and defray out of the emoluments of the employment expenses of travelling in the performance of the duties of the employment, or otherwise to expend money wholly, exclusively and necessarily in the performance of those duties, there may be deducted from the emoluments of the employee to be assessed to income tax the expenses so necessarily incurred and defrayed.
Arising from an employee’s entitlement to a tax deduction under section 114, in respect of certain expenses, there exists a long-standing Revenue practice under which employers may reimburse tax-free to employees the expenses of travel (and subsistence relating to that travel), subject to certain conditions being fulfilled. I am advised by Revenue that the conditions under which the reimbursement to employees of the expenses of travel and subsistence may generally be made without deduction of tax are as follows:
(a) firstly, the employee must be temporarily away from his/her normal place of work in the performance of the duties of his/her employment;
(b) secondly, the travel expenses must be necessarily incurred in the performance of the duties of the office or employment, and
(c) thirdly, arising from a long-accepted position, supported by tax case law, the expenses of subsistence must attach to travelling necessarily incurred in the performance of the duties of the office or employment.
Moreover, provided the employee bears the cost of all expenses of travel necessarily incurred in the performance of the duties of his/her employment (and bears the cost of subsistence relating to such travel), Revenue will disregard for income tax purposes the reimbursement of expenses of travel and subsistence, where such reimbursement is made by way of:
(a) a flat rate up to, but not exceeding, the prevailing Civil Service rates for travel and subsistence, or
(b) a flat rate based on any other schedule of rates and related conditions of travel and subsistence, which do no more than reimburse the employee for actual expenditure necessarily incurred.
I do not consider that the conditions outlined above create unreasonable restrictions in the deductibility of travel expenses. Consequently, I do not see the need to consider an alternative approach.
As the Deputy has mentioned in his question, a public consultation was held in 2015 on the tax treatment of expenses of travel and subsistence for employees and office holders. Arising from that consultation a number of issues were identified, which resulted in the introduction of legislation in the Finance Acts of 2015 and 2016 to exempt certain expense payments of non-resident non-executive directors and members of the State Examinations Commission (2015), and of resident non-executive directors (2016). I have no plans to introduce further legislation on this issue at present.
Finally, it should be noted that Revenue has published extensive guidance on the Tax Treatment of the Re-imbursement of Expenses of Travel and Subsistence to Office Holders and Employees, which is available on the Revenue website: Part 05-01-06; https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-06.pdf.
Revenue are always willing to provide clarification to employees, businesses and tax practitioners in relation to all areas of taxation, including travel and subsistence expenses, if requested to do so.