The Minister for Finance has initiated a consultation process on the tax treatment of expenses of travel and subsistence for employees and office holders to facilitate a review of current Irish law and practice in this area.

The current statutory position is that, where travel and subsistence expenses are incurred “wholly, exclusively and necessarily” in the performance of the duties of the employee or the office of the director, the payment or reimbursement of such travel expenses is not subject to payroll taxes. 

The interpretation of the statutory position has been the subject of considerable uncertainty, in particular in relation to the tax treatment of expenses of non-executive directors (NEDs). Many tax practitioners had been of the view that such expenses (including the costs of international flights and hotel accommodation) were incurred wholly, exclusively and necessarily in the performance of a NED’s duties and should not be taxable.  However, in an e-brief released in July 2014, Revenue cast doubt on such views. 

The e-brief outlined that for expenses to be treated as wholly, exclusively and necessarily incurred for the purpose of a director’s duties, the necessity must be imposed:

  • By the duties of the office itself rather than the personal circumstances of the office holder
  • On every director regardless of their personal circumstances or where he or she lives

The result of this clarification is that all expenses paid or reimbursed to a NED for travelling from his/her home to and from work (i.e. to attend board meetings) are subject to payroll taxes. This has a harsh impact on NEDs who reside abroad and travel to Ireland solely for the purpose of attending board meetings. Given this impact, various industries and stakeholders, including the funds industry, have lobbied for the position to be clarified. Such lobbying has led to the current Consultation. 

The Consultation is broad and will include a review of:

  • The granting of a tax deduction in respect of travel expenses incurred by employees and office holders
  • The circumstances under which travel and subsistence expenses may be reimbursed free of tax by an employer to an employee or office holder

The deadline for responses to the Consultation is 17.00 on Friday, 21 August 2015.