Thursday, 5 March 2020
Department of Finance
The flat rate expense (FRE) regime is operated by Revenue 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 Taxes Consolidation Act (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. Revenue has advised me that it will consider FRE applications where a large number of employees incur broadly identical qualifying expenses which are not reimbursed by their employer. Applications are generally made by the representative bodies in the employment sectors concerned and are considered by Revenue based on the specific commonality of expenses within the employment category and compliance with the strictly applied statutory requirement for a tax deduction.
I am aware that Revenue has recently completed a comprehensive review of their FRE regime. The purpose of the review, which involved engagement with relevant representative bodies, was to ensure that the expenses granted to each employment category remain justified and appropriate to modern day employments and work practices. Each category of FRE allowance was examined separately in the light of the legislative requirements of section 114 of the TCA 1997, which provide that expenses are tax deductible only if they are wholly, exclusively and necessarily incurred by the employee in the performance of the duties of his or her employment and are not reimbursed by the employer. Notwithstanding this review, I understand Revenue is willing to engage with representative bodies of any large groups of employees, including dental hygienists, to consider an application for flat rate employment expenses.
Revenue recently announced its decision to defer the implementation of any planned changes to the FRE regime until 1 January 2021, to allow time, as part of the annual Tax Strategy Group process, for the examination of a number policy matters that were raised during Revenue’s review. Consequently, there will be no change to FRE allowances for 2020. I am advised by Revenue that it remains committed to the FRE regime and encourages all taxpayers to avail of their full tax relief entitlements.
As I have said on previous occasions, there has been no change to the general rule set out in legislation that all employees have a statutory right to claim a deduction under section 114 TCA for any valid expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment, to the extent which the expenses are not reimbursed from any source. So while certain employees may not be able to claim a deduction on a universal “flat rate” basis, they may be able to still claim a deduction on a specific “vouched basis”.