Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Section 114 of the Taxes Consolidation Act 1997 provides for a tax deduction solely in respect of expenses of travel necessarily incurred in the performance of the duties of an office or employment. In general terms, this means that travel expenses incurred by an employee or office holder travelling to or from work do not qualify for a tax deduction and, where an employer pays or reimburses such expenses, they are taxable.

In the case of an executive director or employee, this means that travel expenses incurred travelling from his or her normal place of work to attend board meetings will generally qualify for a tax deduction and an employer may pay or reimburse such expenses free of tax. The reason for this is that the director or employee is travelling from his or her normal place of work to another work location and is travelling “in the performance of” his or her duties.

However, in the case of a director living outside the State who has no executive or other duties within a company, travel expenses incurred travelling to attend board meetings in the State do not qualify for a tax deduction and where an employer pays or reimburses such expenses, they are taxable. The reason for this is that the director is merely travelling to work. It is important to distinguish between individuals who have executive functions in a company and those who do not. In the case of the former, there is no issue in relation to the taxation of travel expenses. In the case of non-executive directors, I am conscious of the need for companies to maximise the range of skills, experience and independence on their boards. This is important for a number of reasons, not least in the interests of good corporate governance.

While I do not propose to accept the Deputy’s amendment, and this is an issue that has already been raised with my Department recently, I understand the Revenue Commissioners will commence a broad review of the tax treatment of travel expenses in early 2015. As part of this review, they will look at the tax treatment of travel expenses incurred by non-executive directors in travelling to attend board meetings, including expenses incurred by those who travel from outside the State. The review will take account of the longstanding principles governing the taxation of travel expenses, existing guidance issued by the Revenue Commissioners and the need to re-examine such principles and guidance to ensure consistency of treatment as between taxpayers. The review will also have regard to implications for the Exchequer. Consultation with stakeholders will also form part of the review.