The Deputy may be aware that Revenue conducted a comprehensive review of the administratively based Flat Rate Expenses (FRE) regime in 2018 and 2019. Revenue has advised me that the purpose of the FRE review, which involved engagement with relevant representative bodies, was to ensure that the expenses granted to each employment category remain justified and appropriate to modern day employments and work practices.
Each category of FRE allowance was examined separately in the light of the legislative requirements of section 114 of the Taxes Consolidation Act (TCA) 1997, which provides that expenses are tax deductible only if they are wholly, exclusively and necessarily incurred by the employee in the performance of the duties of his or her employment and are not reimbursed by the employer. Where the FRE amount does not meet the legislative basis for tax deductibility or can no longer be justified, it cannot be expected that the FRE amount will be retained. The outcome of the review was that some FREs were planned to be removed, others were due to be increased while some were planned to be decreased.
Revenue agreed to defer the implementation of any planned changes to the FRE regime initially until 1 January 2021, pending the outcome of a review relating to the tax deductibility of expenses in employment by the Tax Strategy Group (TSG), which is overseen by my Department. At my request, Revenue agreed to further defer the implementation of any planned changes to the FRE regime until 1 January 2022 as deliberations are continuing on a number of policy options, set out by the Tax Strategy Group (TSG), as to how the flat rate expense issue could be addressed. In light of the continuing difficulties arising from the effects of the COVID-19 pandemic, I propose to ask Revenue to defer implementation of the changes for a further period. This will provide Revenue with an opportunity to update the review during 2022, including re-examining the relative positions of those working in the healthcare sector who are required to supply and launder their own uniforms.
The Deputy should also be aware that apart from the FRE regime, all employees retain their statutory right to claim a deduction under section 114 TCA 1997 in respect of an expense incurred wholly, exclusively and necessarily in the performance of the duties of their employment, to the extent which the expenses are not reimbursed by the employer.
