Russell & Co.’s expertise enables companies to save money by taking advantage of tax-free mileage rates
- How to claim Mileage Rates
- Changes in Mileage and Subsistence Rates
- Payment of Mileage Rates
- Company Directors
- Site-based Employees
- Sole Traders
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How to claim tax relief on the mileage rates and subsistence costs of your business?
The reimbursement of mileage rates tax-free is always a topical issue for both employers and revenue. Employers need to understand mileage and subsistence rates and, if not, take the necessary actions to rectify any issues in order to remain compliant from a PAYE perspective.
Russell & Co.’s expert team can advise you on the best process for your business to take advantage of the savings available to your company from utilising mileage and subsistence rates. Our experienced team ensure your claims withstand detailed Revenue scrutiny and are fully reimbursed.
What are Mileage Rates?
Mileage rates are applicable to every Irish business where employees are required to travel for their job.
When employers are travelling as part of a business journey, employers can pay their expenses. Importantly, employees or directors must be on a business journey from their normal place of work to claim tax free mileage rates and subsistence.
Instead of paying PAYE which is non-deductible for net profit purposes, the employer can pay mileage rates and subsistence which can be deducted as an expense.
Usually, the reimbursement of an employee for mileage rates and subsistence is a matter for individual employers. However, when the reimbursement is made without the deduction of tax it is a separate and distinct issue. Russell & Co. can handle the complexities of mileage rates for you and take the stress out of calculating payments.
Mileage rates are applicable when an employee uses their private cars, motorcycles or bicycles for business purposes.
This payment can be made tax free, by the amount of business kilometres travelled. We advise our clients to use the current schedule of Civil Service rates when they’re making the payments. Civil Service rates can be used by non-public sector employers and are commonly used as a benchmark throughout the economy.
It is important to note that when an employee is travelling to and from home the journey cannot be claimed as mileage.
What are Subsistence Costs?
Employees are entitled to be compensated for expenses while they are temporarily away from their normal place of work. Subsistence costs refer to expenses incurred by employees while they are travelling as part of their employment. We advise our clients to pay their employees subsistence rates using the current schedule of Civil Service subsistence rates.
How Russell and Co. can help?
Experts in Mileage and Subsistence rates, Russell & Co. have provided direction to clients from a variety of sectors in Cork for over 40 years. Our in-depth understanding of the procedures involved enable us to provide comprehensive guidance on how you should compensate your employees tax free.
The importance of administering your tax obligations as an employer in the area of mileage rates and subsistence payments cannot be underestimated. Russell & Co.’s expertise in the area is key to achieving this as failure to apply correctly could result in exposure to interest and penalties in the case of a revenue audit.
How much should I pay my employee for mileage?
The amount you pay an employee for mileage varies depending on whether they were driving a car or motorcycle and the distance traveled. Revenue recently changed how businesses can pay certain expenses to employees without deducting PAYE. On the 1st April 2017, Revenue published new guidelines for the civil service mileage rates and subsistence rates in Ireland. The changes aren’t complicated but there are some factors employers should be aware of. Some of the key changes include:
- There has been an increase in the number of distance bands
- There has been a reduction in the rate paid to employees for the first 1,500 km
- The amount reimbursed for those doing between 1,501km to 5,500km per annum has been increased
- Employees with vehicles with lower engine sizes and emissions will be entitled to more favourable rates
We have provided a detailed review of the civil service mileage and subsistence rates below. If you have any queries on the subject feel free to contact us and we will take the time to explain the mileage rates process to you.
Cars (rate per kilometre)
Motorcycles (rate per kilometre)
Motorcycle rates are unchanged.
Civil Service Subsistence Rates were also adjusted.
Domestic overnight subsistence rates (from 1st October 2018).
-normal rate is up to 14 nights
-reduced rate covers the next 14 nights
-detention rate covers each of the next 28 nights
The guidance regarding the tax treatment of subsistence rates vary depending on the length of the stay. If you have any queries feel free to contact our team at Russell & Co.
Domestic day subsistence rates.
The job must be further than eight kilometres from the employee’s home or normal place of work to be valid.
How do you reimburse employees for mileage?
Most organisations will pay employees travel and subsistence reimbursements by way of ‘flat rate’ allowances. This is when an employer pays the same amount to an employee for every trip. However, there are other options available. The reimbursement by way of vouched receipts is a popular option. This is when an employee is compensated based on vouched receipts only.
There are different methods companies should be aware of as they weigh out the best way to pay mileage and subsistence rates. This mainly depends on the industry and the amount of time employees spend on the road. We can advise employers on the best method of paying the mileage rates to suit their business.
Unfortunately, as every business owner knows, running a business is not straightforward and there are certain scenarios that will affect how rates and subsistence is paid. Certain roles where an employee is required to travel in the course of their job like a salesperson or where travelling is an integral part of their job like a van driver fall under different categories for payment of mileage rates. We can help you identify the best method of paying mileage rates for your business to save you money and make the process as streamlined as possible.
Can company directors claim mileage rates?
Depending on certain requirements being met, company directors are entitled to claim for travel. Company directors are categorised as officers of the company even when they own, or part own the company. This means that the same tax legislation and conditions apply to them in relation to mileage and subsistence rates as standard employees.
However, the vehicle for which the mileage rates are being claimed must be in the directors name. A vehicle owned by the company is invalid.
If you are a company director, you will no doubt be familiar with the term ‘normal place of work’. As is the case for a company’s employees, the journey from a company’s directors home to work (and vice versa) does not qualify as ‘mileage rates’ and is therefore subject to PAYE.
A director is not entitled to claim mileage from the company if the petrol has been paid for through the company’s own funds, for example, a company cheque. It is essential that proper records are kept to prove to Revenue that the claims are legitimate.
It is common for company directors to hold more than one directorships at the same time. When this is the case, the payment of mileage rates regarding:
(a) journeys from home to the normal place of work of each directorship (and vice versa)
(b) journeys between each company are taxable and subject to PAYE deductions.
How can site-based employees claim mileage rates?
Site-based employees are constantly working in different locations and do not have a fixed base of employment. This means site-based employees cannot claim that the ‘normal place of employment’ is there employer’s base.
However, Revenue guidelines state that expenses of travel and subsistence not exceeding €181.68 per week may be paid to a site-based employee. This payment is called ‘country money’. However, the employee must be employed and working at a site which is 32km or more from the employer’s base.
Employers may also pay an ‘eating on site’ allowance, tax free, to site-based employees dependent on the following factors:
-There are no facilities for making tea, coffee, or other refreshments provided by the employer.
-The site-based employee doesn’t receive any other form of tax-free subsistence payment.
-Your employee works on the site for at least 1.5 hours and 1.5 hours after their normal lunch break.
-The maximum allowance paid is €5 per day.
Are sole traders entitled to mileage rates?
There is a common misconception amongst sole traders that they are entitled to claim mileage and subsistence expenses. Unfortunately, this is not the case. However, it is important to note that although sole traders cannot claim mileage rates, their employees can.
Sole traders themselves are only entitled to claim for the exact expenses they incur. It is important that they retain all the receipts relating to their motor expenses, accommodation and related expenses.
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We always ensure high professional and ethical standards while we are carrying out mileage rates and subsistence services including integrity, objectivity, professional competence, confidentiality and professional behaviour.
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Russell & Co.’s knowledge ensures you compensate your employees travel expenses correctly. We also supply a full range of Accountancy Services to assist your company including; Payroll, Forensic Accounting and Company Audit services.