Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am making this reply on behalf of the Minister for Finance, Deputy Cowen. There has been no change in taxation legislation or policy regarding the basic rules governing expenses for members of boards of governors and VECs who sit on interview panels. While the reimbursement to an employee of expenses of travel is a matter for the relevant body or employer, a separate and distinct issue is the tax treatment of such reimbursement. Day to day decisions regarding the tax treatment of expenses are matters for the Revenue Commissioners and they have set out their practice in this regard in their publications. The Minister for Finance will arrange for copies of the relevant material to be sent to the Senator for her information and I will give an overview of the position.

The basis for the reimbursement tax-free of expenses of travel and subsistence is as follows: the officeholder or employee must have a statutory entitlement to a tax deduction in respect of the travel expenses — in particular, the travel expenses must be necessarily incurred in the performance of the duties of the office or employment; the subsistence expenses must be incurred for that travel; and for ease of administration, rather than have employers deduct tax at source from the reimbursement of expenses of travel and subsistence and the officeholders and employees submitting individual claims to their tax office for a tax deduction in respect of such expenses, the regulations governing the operation of the PAYE system empower Revenue to disregard certain expenses payments as emoluments for tax purposes. Hence employers may, within certain limits, reimburse to officeholders and employees the expense of travel and subsistence relating to that travel necessarily incurred in the performance of their duties without deductions at source under the PAYE system.

In most instances, therefore, officeholders and employees who bear the cost of the travel and subsistence will be reimbursed by their employer in respect of qualifying expenses of travel necessarily incurred in the performance of the duties of their office or employment on the basis of either an acceptable flat-rate allowance up to, but not exceeding, the prevailing Civil Service rates for travel and subsistence or the actual expenses vouched with receipts, and Revenue will not seek to have tax applied to the amount of the reimbursement.

However, it is long established principle of tax case law that the expense of travelling from home to the normal place of work and from that place of work to home is not treated as an expense of travelling necessarily incurred in the performance of the duties of that office or employment, so an individual cannot claim a tax deduction or receive a payment tax-free in respect of such expense. In addition, where an individual holds more than one office or employment, a tax deduction may not be claimed and expenses may not be paid tax-free in respect of the expense of travel between those separate offices or employments.

While I have summarised the position regarding expenses payments, one cannot, without knowing the precise circumstances surrounding the interview panels on which members of boards of governors or VECs sit, give a definitive view of the appropriate tax treatment of the expenses paid in respect of such interviews. This will be determined by the facts of the individual case, including whether the person concerned is travelling as a member of a board of governors of VEC to his or her normal place of work in that capacity, or to another place, and if to another place, whether this represents a temporary absence from the normal place of work for the purpose of performing the duties of the board or VEC of which he or she is a member, and also whether the membership of the interview panel concerned in effect constitutes a separate engagement of the person.

The onus is on employing organisations to ensure that their practices are in line with Revenue rules. In some cases an incorrect tax treatment can come to light, for example, from an audit by the employer's own auditors or from an audit carried out by the Revenue Commissioners. While such events can give rise to changes in that employer's practice to bring him or her back into compliance, these do not themselves arise from any change in the underlying legislation. The Minister for Finance has been informed by the Revenue Commissioners that if the Senator has a particular case in mind, they would be happy to examine such case and make a determination as to the correct tax treatment of the reimbursement of expenses in such case.