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| Directors' & Employees' Motoring Expenses |
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| Payments by an employer which are no more than re-imbursement of allowable expenses actually incurred by an employee, may be paid free of tax in certain circumstances in accordance with legislation. The law provides that employees’ expenses qualify for deduction by them only where they are incurred “wholly, exclusively and necessarily” in performing the duties of the employment. Expenses which are incurred by employees in travelling to and from the place of employment are not allowable for tax purposes and any re-imbursement of these expenses must be treated as pay. |
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| Where an employee’s allowable expenses are re-imbursed free of tax by an employer, the question of an income tax claim by the employee in respect of those expenses does not of course arise. |
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Where employees use their private cars for business purposes, re-imbursement in respect of allowable motoring expenses can be made by way of flat-rate kilometric/mileage allowances.
Kilometric/mileage allowances are calculated using a formula which attempts to arrive at likely allowable motoring expenses through a standard costs system. The system applies where the car is owned by the employee and all motoring expenses are met by the employee. If any specific motoring expenses (including finance costs and exceptional expenditures) are re-imbursed by the employer, Revenue should be contacted with regard to the appropriate tax treatment.
There are two types of kilometric/mileage allowance schemes which are acceptable for tax purposes, if an employee bears the cost of all the motoring expenses:- |
 | The prevailing schedule of Civil Service rates or |
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| Any other schedule with rates not greater than the Civil Service rates. |
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| Either of those two re-imbursement rates may be applied without specific Revenue approval where a satisfactory recording and internal control system is in operation. |
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| For individuals who are obliged to use their car in the normal course of their duties: |
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Rates per mile
| Engine Capacity up to 1200cc
| Engine Capacity 1201cc to 1500cc
| Engine Capacity 1501cc and over | Up to 4000 miles
| 62.94 cent
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74.42 cent
| 95.05 cent | 4001 and over
| 34.13 cent
| 38.00 cent
| 45.79 cent |
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| Rates per kilometre | Engine Capacity up to 1200cc | Engine Capacity 1201cc to 1500cc | Engine Capacity 1501cc and over | Up to 6437km
| 39.12 cent | 46.25 cent | 59.07 cent | | 6438km and over | 21.22 cent | 23.62 cent | 28.46 cent |
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Flat-rate kilometric/mileage allowances apply only to allowable motoring expenses. The expenses must be incurred by an employee who is engaged on a business journey. All the costs of motoring must be borne by the employee.
A business journey is one in which the employee travels from one place of work to another place of work in the performance of the duties of the employment.
Journeys between an employee’s home and place of work are not business journeys. |
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| Where an employee proceeds on a business journey directly from home to a temporary place of work (rather than commencing that business journey from his/her normal place of work) or returns home directly, the business Kilometres should be calculated by reference to the lesser of - |
| The distance between home and the temporary place of work or |
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| The distance between the normal place of work and the temporary place of work. |
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| An advantage of the kilometric/mileage rate system is that employees do not have to keep a precise record of actual motoring costs. They would, however, be expected to provide to their employer a record showing, for each business journey: |
| The date of the journey |
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| The reason for the journey |
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| The distance (km or miles) involved. |
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A straightforward record of this kind would, in any event, be required for an employer’s financial and internal control purposes and it should therefore not involve additional paperwork.
If an employer has doubts about the adequacy of the tax accounting records for employees (including directors), the Regional Revenue office can be consulted. All records relating to any re-imbursement of motoring expenses should be retained by the employer for examination in the event of an audit. The records must be kept for six years unless the Inspector of Taxes states otherwise.
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Re-imbursement of allowable motoring expenses without deduction of tax in accordance with acceptable flat-rate kilometric/mileage allowances avoids the need for claims by the employee for expenses deductions (and any wear and tear allowance in respect of the motor vehicle).
Notwithstanding this, an employee retains the alternative right to the statutory entitlements to claim an expenses deduction (and any wear and tear allowance in respect of the motor vehicle). However, where the employee decides to make such claims, any re-imbursement of expenses by the employer, including any scale allowances, would be regarded as pay and taxable accordingly.
The running expenses actually incurred and any wear and tear allowance, will not be fully allowed for tax purposes where a car purchased, costing in excess of €22,000, is used. In that case, the expenses and wear and tear allowance must be scaled back by reference to the figure of €22,000.
For secondhand cars costing in excess of €22,000, the wear and tear allowance must be scaled back by reference to the figure of €22,000.
These limits apply in respect of expenditure incurred, in an accounting period which ends on or after 1 January 2002 or in a basis period for 2002 and later years. |
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| Should you require any assistance in relation to this matter please email me here |
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