Red Faces as Expenses Catch 22 hits Taxman’s Union

December 14, 2015

It was red faces all round at the Civil & Public Services Union yesterday when Mark Tighe revealed in the Sunday Times that the union has recently made a  €64,000 tax arrears settlement with Revenue.

The CPSU represents the majority of Irish Revenue staff.

It seems it fell foul of the increasingly arcane and often glaringly inconsistent Revenue rules on the tax treatment of expense claims paid to officers and employees.

CPSU.jpg

I see this as the strongest sign yet that the Revenue’s catch 22 regime on expense payments is all but impossible to interpret & obey in practice.

After all, if the taxman’s union can’t get it right, who can?

Meanwhile – in an irony beyond parody – the CPSU is today hosting a self-styled “Tax Justice” Conference in Dublin.


Revenue’s Two Fingers to Road Safety Puts Lives At Risk

June 29, 2015

Today’s changes to Revenue subsistence expenses rules fly in the face of road safety messages – and common sense.

Revenue have today tightened the circumstances in which an employee or company director can claim tax-free reimbursement of subsistence costs incurred in the course of their work.

From Wednesday, 1 July, an employee or director can only claim an overnight allowance when they spend the overnight at least 100km away from both their home, and their normal place of work.

In addition, the standard a day allowance (which can be claimed for absences of 5 hours or more) can only be claimed when the employee is more than 8km away from both their home and their normal place of work.

Revenue's Two Fingers to Road Safety Puts Lives At Risk 1

The first change has rather peculiar, and worrying implications.

It means, for example, that an employee or director living and working in Portlaoise cannot claim an overnight allowance for a hotel stay at Dublin Airport, (100.88km away, according to AA Route Planner) even if they have a 7am flight!

According to Route Planner, it takes 1 hour 11 minutes to drive from Portlaoise to Dublin Airport – and Aer Lingus are now advising their customers to check-in at least 2.5 hours before Dublin departures.

So Revenue are obviously expecting employees and directors to drive from the early hours of the morning rather than incur expenses, which then can’t be reimbursed tax-free by their employer. And if they are reimbursed, they will be taxed on the privilege!

And this means that the poor worker in Portlaoise could be getting into her car as early as 3.30am, in order to have enough time to drive the journey, park her car, catch her shuttle bus and check in at the airport before finally sitting down for a well-earned coffee. All this before her flight, onward travel, and a day’s work at her destination.

The situation is actually worse still, for workers who work within, but live outside, the 100km range of their temporary work location.

It’s not inconceivable that many workers could be driving, say, 140km to a temporary work location, and needing to set off at an unearthly hour to beat the morning traffic rush.

Meanwhile the Road Safety Authority remind us that “one in every five crashes on Irish roads could be caused by driver fatigue”

This crazy move puts lives at risk and should be reversed.

The Revenue announcement is in this eBrief.  The updated Revenue Subsistence expense rules are here.


At Last! – Revenue Update Subsistence Expenses Rates

June 12, 2015

Revenue have today announced a limited and long-overdue increase in the maximum rates of subsistence expenses that  employees and directors can claim tax-free for time spent working away from their normal base.

From 1 July 2015, the following daily rates will apply:

Day Allowances From 1 July 2015  Up to 30 June 2015
10 hours+ €33.61 €33.61
 5-10 hours €14.01 €13.71

And the new overnight rates are as follows:

Overnight Allowances From 1 July 2015  Up to 30 June 2015
Normal Rate €125.00 €107.69-108.99
Reduced Rate €112.50 €92.11-€100.48
Detention Rate €62.50 €53.87-€54.48

This is the first increase in allowable Subsistence rates since the late Finance Minister Brian Lenihan slashed them by 25% during the 2009 financial crisis.

Subsistence Claims

It is telling that the maximum day rate of €33.61 (which remains unchanged since 2009, for some reason) is 13% lower than the corresponding rate of €38.57 that applied 10 years ago in 2005.

Can the shortfall be explained by lower food and other costs? I don’t think so…

There is no mention by Revenue of any changes to the allowable rates for motor expenses. Did the recent falls in global oil prices allow the government off the hook here?

An increase in the allowable motor expenses rates is long overdue. Like the subsistence rates, motor expense rates were dramatically cut by 25% in March 2009, and haven’t been restored since.

At that time, the price of a litre of motor diesel was below €1. Today, despite recent falls, it is still over 30% higher.

The updated Revenue guide to subsistence claims also outlines their notoriously complex terms and conditions.

if these are breached, some or all of the payments will attract a tax charge, and possibly interest & penalties.  So tread carefully…


Revenue Once Again Turn Screw on Contractors

April 7, 2014

The seemingly interminable Revenue Contractors Tax Project took another twist today with the issue of a fresh letter from Revenue South West Region to the Irish Tax Institute.

Revenue are now promising a speedy resolution to their audits of “some 550” contractor companies, whose tax position has not yet been resolved.  These form part of an ongoing project to claw back travel expenses and other tax deductions claimed by such companies.

The letter concedes that from Revenue’s viewpoint, “progress has been disappointing in the first Quarter of 2014” and complains of “widespread evidence of delay and reluctance to agree settlement”.

Revenue Contractors Tax Project

Presumably, this is a reference to the increasing numbers of contractors who are opting t0 formally challenge Revenue assessments with the Appeal Commissioners.

Revenue now state that:

  • Where taxpayers have made submissions that have not yet been processed by Revenue, responses will now “issue as a matter of urgency”.
  • Enquiries where “there is no evidence of significant liability” will be closed.
  • In cases where a liability has been determined, but no settlement has been made, the taxpayers concerned will be notified of Revenue’s intention to raise assessments within a further 10 days.
  • Where taxpayers have failed to reply to Revenue information requests, Revenue will raise assessments based on disallowing all expenses claimed.
  • Where taxpayers previously filed a “Notice of Intention” to make a disclosure, but haven’t subsequently done so, Revenue will withdraw the concessions “set out in (our) letter of January 2013 within 20 days.
  • Ongoing audits which started after 1 January 2014 will progress normally.
  • Taxpayers who cite inability to pay liabilities must first agree their liabilities before any discussion can take place on how they can pay the settlement amounts.

Ironically, today’s letter was unveiled only hours after the UK House of Lords slammed the ongoing campaign by Revenue’s counterparts in the UK, HMRC,  to disallow tax benefits accruing to “personal service companies” through the controversial IR35 legislation in that jurisdiction.

It’s worth noting that no equivalent legislation applies in Ireland and the entire Revenue campaign here has been based, not on the laws of the land, but on Revenue’s own interpretation of the law.

Based on the UK experience, there is no guarantee whatsoever that the Revenue stance will withstand a future challenge in the courts.

If you have concerns about your own position, you should review the implications of the current Revenue contractors project with your accountant or tax advisor, and if necessary, seek independent professional advice, as soon as possible.

The Irish Tax Institute have published the Revenue letter in pdf format here. Otherwise you may access it on this blog, here.


Revenue’s latest letter to Contractors – In Full

April 7, 2014

The following is a transcript of Revenue’s letter of 3 April to the Irish Tax Institute in relation to their ongoing Contractors Project, challenging travel expenses and other overhead cost  claims by owner-managed contractor companies.  The original is here. See also my commentary.

Revenue

 

 

“Office of the Revenue Commissioners

South West Region

Revenue House

Blackpool

Cork, Ireland

 

Cora O’Brien

Irish Taxation Institute

South Block

Longboat Quay

Grand Canal Harbour

Dublin 2

3 April 2014

 

Re: Revenue Contractors Project

Dear Cora

I wish to brief you on developments in the contractors project, which will be of interest to ITI members.

We have reviewed progress on the audits remaining open in Phase I of the project, which relate to some 550 cases. At the outset, it was our intention to progress cases quickly. In the event, there have been delays, largely arising from the focus on travel and subsistence expenses which became central to the project. Requests for clarification of the rules applying to such expenses delayed progress and resulted in the issue of Tax Briefings 3 and 4 of 2013 and in some correspondence and meetings. All general issues of clarification and interpretation were dealt with by the end of 2013, so there is no longer any justifiable reason for delay. Accordingly, it is now appropriate to move towards conclusion of this phase of the project.

It is our intention to conclude Phase I of the project by July 2014. Notwithstanding the extensive clarifications given by Revenue, progress has been disappointing in the first Quarter of 2014, and there is widespread evidence of delay and reluctance to agree settlement on the part of many taxpayers. The project team has therefore been asked to review all open cases, and to proceed as follows:-

  • Where there is material on hands awaiting a Revenue response, responses will issue as a matter of urgency.
  • Cases where there is no evidence of significant liability will be closed.
  • Cases that received an audit notice before 31 December 2013 —

o        where all material issues have been decided but without settlement will be notified of our intention to raise assessments within 10 working days of the issue of the notice in the absence of agreement;

o        where there has been no response to the initial request for information will be notified of intention to raise assessments based on disallowance of all expenses claimed;

o        where intention to make a disclosure was indicated but no qualifying disclosure has yet been made will be notified that the concessions set out in my letter of January 2013 will be withdrawn 20 working days from the issue of the notice, after which full Code of Practice terms will apply.

  • Cases that received an audit letter since 1 January 2014 will be progressed normally, within the terms of the project.

It appears that some taxpayers may be reluctant to agree a settlement due to fear of inability to pay the agreed liability. I would like to emphasise that no discussion on ability to pay can take place until the liability is settled. We remain open however to discussion of timing and methods of payment to ensure there is no undue hardship. In that regard, the Collector-General’s procedures for dealing with difficulty in payment will apply, including verification of inability to pay, and instalment arrangements in appropriate circumstances. Guidelines can be viewed at http://www.revenue.ie under the link “Tax Payment Difficulties”.

Each case will be considered separately. Taxpayers are of course entitled to adequate time in which to respond to Revenue queries, and the letters described above will issue only where the caseworker is satisfied that there is no good reason for the delay experienced. Every effort will be made to arrive at an agreed settlement, but it is unfortunately clear at this stage that there is widespread delay, and this cannot be tolerated indefinitely. Assessments will be raised where necessary, and interest and penalty will apply as appropriate.

Yours Sincerely

 

Anthony Buckley

Assistant Secretary”

If you have concerns about your own position, you should review the implications of the current Revenue contractors project with your accountant or tax advisor, and if necessary, seek independent professional advice, as soon as possible.

 


Revenue’s Latest Letter on Contractors Project

March 14, 2014

The following is a copy of Revenue’s letter of 10 March last to the Irish Tax Institute in relation to queries they raised on their ongoing Contractors Project.

Revenue

“ITI Queries on Revenue letter of 27 November 2013

Query 1. We would like to have some sense of how Revenue will determine whether a taxpayer falls within the remit of Tax Briefing No.3 i.e. how Revenue will determine whether a taxpayer is supplying the services of an individual under the end-user’s control, rather than otherwise supplying services. Is this based on a review of the contract terms, working arrangements etc?

Revenue Response: Unfortunately, as the question implies, there is no short answer that will cover every case. There are several indicators however, which enable classification of most cases. •

  • The first question is whether the company in question has an establishment (i.e. premises, employees, business) beyond the conclusion of contracts for an individual contractor. This would establish that the company is in the business of providing a service to the market generally.
  • The next issue is how the contract was obtained – was it through a procurement process aimed at securing a defined service, or was it recruitment of an individual with specified skills/characteristics? •
  • The terms of the contract will show whether it is a contract defined by completion of a project or task, or defined by period, or openended/ renewable. •
  • Where the position is unclear, the actual arrangements will determine our view, and working arrangements, reporting/supervision, length spent with one client, actual employment experience, and other arrangements would be considered.

Consideration of the foregoing will lead to the conclusion that a majority of professionals working in the Irish market are outside the scope of tax briefing 3 and 4 of 2013 in relation to their travel and subsistence expenses, because they are in business, offering a professional service on the open market. It is also the case that a company may have a combination of contracts, some obtained through normal service procurement, and others that constitute provision of an individual’s services. In such situations, expenses arising in the business are treated as such, while travel connected with the individual’s contract must be treated as set out in Tax Briefings 3 & 4.

Query 2. On a related point, in “case 2” on page 7 of your letter you note that the contractor is clearly not within the category to which the Briefing applies – is this because of the number of contracts he has, or because of other factors?  

Revenue Response: The number of contracts certainly indicates that the contractor is operating as a business, seeking and accepting contracts for project management service wherever the opportunity arises. The product consultancy service he provides is a professional service, similar to the giving of legal or accountancy advice. Finally, he is working to complete delivery of a service, not under the direction of the client. Overall, this is a business, and expenses incurred in conducting the business are allowable for tax purposes.

Query 3. There is a reference on page 5 of the letter to “…the well accepted view” that if an employee has no fixed base then he/she cannot claim a deduction for travelling expenses under Section 114. Our members are unclear as to where this view comes from.

Revenue Response: There is a slight misquotation in the query. My letter refers to the expenses of travelling to a job. If an employee has a fixed base, and is required to attend for work at some other location, then expenses may be reimbursed, calculated on distance from home or fixed base, whichever is less. If however there is no fixed base the expense of getting to work is the cost of commuting, for which no deduction is allowed.

Query 4. In relation to “country money”, the letter notes that country money applies to employees and not to contractors. Members have queried why country money is not available when Revenue are treating those who fall within the Tax Briefing as defacto employees i.e. “working under the general direction and control of the enduser”.

Revenue Response: We have pointed out several times that we are not, in this project, addressing the issue of whether some contractors should be regarded as employees. The application of “country money” is a concession made to deal with specific features of employment in the construction and electrical industries. In practical effect, it deviates very little from the regime described in Tax Briefings 3 & 4, since tax-free expenses are not paid where travel is to or from the employer’s headquarters or the site for which the employee was recruited. Expenses are tax-free only where the  employee is required to attend for work at other sites, all more than 32km from employer’s headquarters. The rate of payment of country money is then set to eliminate the need for detailed computation. In the case of a contractor required to attend temporarily at a site other than the contract site, expenses are similarly payable tax-free, and are not confined to the country money rates.

Tony Buckley 10 March 2014″


Revenue Auditing TDs’ & Senators’ Expense Claims

March 21, 2013

RTE News are reporting this evening that a Revenue are currently carrying out a tax audit on the Houses of the Oireachtas.

This is the public body responsible for the payment of expense allowances to TDs and Senators.

Oireachtas Revenue Audit - RTE

Members of the Dáil and Seanad Éireann enjoy expense allowances (technically termed the “Parliamentary Standard Allowance”) that comprise two elements:

  • Travel and Accommodation Allowance. This is based on the distance to Leinster House from the Member’s home, and verified by Leinster House attendance records.
  • Public Representation Allowance. This is  to cover office and other expenses, which can be claimed on a flat-rate unvouched rate of up to €15,000 per annum (nice!) or on a vouched basis up to €25,700 per year (nicer still!)

The Oireachtas.ie website includes a wealth of information on both allowances and the claims made by each lucky recipient.

It will be interesting to see what view Revenue take of the generous expense regime enjoyed by our TD’s and Senators.

Revenue insist that unvouched expense payments to public- and private-sector employees and directors must in all cases be treated as taxable pay, although our leading politicians have traditionally appeared immune from such inconvenience.

Is this about to change?