Michael McGrath (Cork South Central, Fianna Fail)
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I am advised by Revenue that the flat rate expense (FRE) regime it operates is done so on an administrative basis. It applies 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 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. A further requirement is that such expenses are not reimbursed by an employee’s 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.

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.

In relation to the building industry, the FRE categories are published on Revenue’s website and included in a table below for the Deputy’s convenience. Apprentices who operate in any of the employment categories outlined below are entitled to claim the corresponding FRE for their trade.

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.

It should be noted that all employees retain their statutory right to claim a deduction under section 114 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.