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 FRE amount will be retained.
Outside of the FRE regime, all employees retain their statutory right to claim a deduction under section 114 of the 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.
Revenue agreed to defer the implementation of any planned changes to the FRE regime, pending the outcome of an examination of a number of policy issues that arose during its review relating to the tax deductibility of expenses of employment. This latter examination was carried out by the Tax Strategy Group (TSG), which is overseen by my Department and which met on 10 September 2020. A TSG paper that sets out the consideration of the policy matters that arose during Revenue's FRE review has now been published as part of the regular Budget process. It is available online at https://assets.gov.ie/86995/006fad3c-ebb5-4b0e-b067-92f8102d6e43.pdf.
Given that the deliberations on the policy matters set out in the TSG continue, it would not be unexpected that any changes to the FRE regime might await the outcome of those deliberations. Similarly, the question of the timing of the introduction of any changes to the FRE regime is solely a matter for Revenue.
