Pearse Doherty (Donegal, Sinn Fein)
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354. To ask the Minister for Finance if he will provide an update on the implementation of the findings of the review undertaken by Revenue in 2018 and 2019 with respect to the flat rate expenses regime; and if he will make a statement on the matter. [27209/23]

Michael McGrath (Cork South Central, Fianna Fail)
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Section 114 of the Taxes Consolidation Act (TCA) 1997 provides for a tax deduction in respect of expenses incurred wholly, exclusively and necessarily by an individual in the performance of the duties of his or her employment.

I am advised by Revenue that the flat rate expense (FRE) regime it operates is done so on an administrative basis, where both a specific commonality of expenditure exists across an employment category and the statutory requirement for the tax deduction as set out in section 114 of the TCA 1997 is satisfied - namely, that the expenses are wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment by the employee concerned and that such expenses are not reimbursed by his or her employer.

The FRE regime was established to apply a uniformity of approach to tax deductibility for expenses of large groups of employees and to facilitate ease of administration for both Revenue and employees. The expense should apply to all employees in that category and not be discretionary.

A review of the FRE regime was undertaken by Revenue in 2018/2019. Implementation of those findings has been deferred a number of times, pending consideration by the Tax Strategy Group of the tax deductibility of expenses in employment.

Given the time since the 2018/2019 review, it may be necessary for Revenue to further review a number of the FREs. With this in mind and given the prevailing circumstances, Revenue has deferred the implementation of the findings of the 2018/2019 review to allow time to complete its further review of certain FRE rates. Once this work is concluded, a further update on the implementation of changes to the FRE regime will be made available and published on the Revenue website.

In the meantime, where the 2018/2019 review identified FRE categories for which an increase in the existing rate is appropriate, Revenue will implement these changes so that the benefit of such a change will apply from 1 January 2023. The Revenue website will be updated with regard to the necessary steps to avail of the increases once arrangements are finalised.

Revenue also advises me that it remains committed to the FRE regime and encourages all taxpayers to avail of their full tax relief entitlements. It should be noted that 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 to which such expenses are not reimbursed by the employer.

Michael Healy-Rae (Kerry, Independent)
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355. To ask the Minister for Finance if he will address a matter (details supplied); and if he will make a statement on the matter. [27249/23]

Michael McGrath (Cork South Central, Fianna Fail)
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A person engaged in the microgeneration of electricity is taxable each year on their profits/gains from the sale of electricity as calculated under Schedule D Case I or Case IV, as the case may be. Profits arising from the carrying on of a trade are chargeable to tax under Case I whereas profits generated from activities which do not have the characteristics of a trade are chargeable to tax under Case IV.

Revenue have advised me that, generally, profits earned from the micro-generation of electricity by private individuals in a domestic setting are liable to tax under Case IV on the basis that the individual is not trading or in the business of generating electricity for sale or supply. In assessing income under Case IV there is no specific provision in the tax code setting out allowable or dis-allowable costs. However, it is Revenue practice to allow a deduction for incidental costs directly associated with the generation of Case IV profits. In calculating such profits, a deduction is allowed for any expenses of a revenue nature (for example, costs of repair and maintenance of equipment) incurred wholly and exclusively in generating the profits. As there will be a personal element to any expenditure incurred, a just and reasonable apportionment of the expenses will be necessary. No deduction is allowed for any capital expenditure incurred (for example, the cost of purchasing and installing the solar panels). Additionally, no capital allowances are available in relation to such expenditure as the profits do not arise from the carrying on of a trade.

I would note, however, that section 216D of the Taxes Consolidation Act 1997 provides that up to €200 per year of profits arising to an individual from the generation of electricity from renewable, sustainable or alternative sources of energy at the individual’s sole or main residence (referred to as the micro-generation of electricity) is exempt from Income Tax, USC and PRSI. There is no requirement to include the exempt profits in an income tax return. However, should the individual have profits exceeding €200 from the micro-generation of electricity in a year of assessment, the excess is taxable as outlined above and should be included in a return of income.