Duncan Smith (Dublin Fingal, Labour)
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228. To ask the Minister for Finance if he will provide an update on the implementation of the findings of the review of the flat rate expenses system conducted by the Office of the Revenue Commissioners in 2018 and 2019; if he has sought a further deferral while the matter is being considered by the Tax Strategy Group under the auspices of his Department; and if he will make a statement on the matter. [11041/23]

Duncan Smith (Dublin Fingal, Labour)
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230. To ask the Minister for Finance if he will provide an update on the implementation of the findings of the review of the flat rate expenses system conducted by the Office of the Revenue Commissioners in 2018 and 2019 (details supplied); and if he has sought a further deferral while the matter is being considered by the Tax Strategy Group under the auspices of his Department.; and if he will make a statement on the matter. [11053/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 228 and 230 together.

Section 114 of the Taxes Consolidation Act 1997 (TCA) 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 and 2019 and the implementation of those findings has been deferred a number of times, pending consideration by the Tax Strategy Group (TSG) of the tax deductibility of expenses in employment.

The matter was most recently considered by the TSG in 2022, with further details set out in the Income Tax TSG paper (TSG 22-02), that can be located at the following link on the Department’s website: www.gov.ie/en/collection/d5b41-budget-2023-tax-strategy-group-papers/

In February 2022, Revenue announced its decision to further defer the implementation of the findings of its review of the FRE regime to 1 January 2023. I am advised by Revenue that, in light of some changes in work practices for certain employments arising from the COVID-19 pandemic, together with other relevant factors and considerations, including the passage of time since the 2018/2019 review, it may be necessary for Revenue to further review a number of the FREs and therefore they propose to broadly postpone full implementation to allow for this work to be carried out.

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.