Tax rules must clarify ‘normal place of work’, say experts

Fiona Reddan

Tax experts have called on the Government to bring the concept of the "normal place of work" into the 21st century, by updating rules on how people can claim tax relief on work expenses. A recommendation to allow non-executive directors claim tax relief on expenses, is also included in submissions to the Department of Finance's consultation on the "tax treatment of expenses of travel and subsistence for employees", which closed yesterday.

Some 9 or 10 submissions had been received by the deadline, and these will now be looked at by the Technical Support Group with a view to advising Government ahead of the forthcoming Budget.

Daryl Hanberry, global employer services tax partner at Deloitte, says the consultation has been about gathering various views as to how the normal place of work should be determined, based on international tax practice and practical experience.

Some years ago, self-employed contractors around the country found themselves the subject of a Revenue investigation, the National Contractors Project, when it came to claiming expenses on travel to and from work, and the sense is that clarity is now needed on what constitutes a “normal place of work”.

Earlier this year the Irish Tax Institute surveyed hundreds of tax advisers around the country to inform its submission. Their response was that the current regime is not "fit for purpose", given that it is nearly 50 years old, and tax advisers said there is a need for one which "addresses modern working patterns".

In particular, advisers said it is almost impossible to meet the test’s requirements in situations such as where you work form home and travel on business to clients, or where you work from a number of offices of your employer, or you arehighly mobile.

“Fundamentally, there is a mismatch between the archaic nature of the current regime and how people work and travel on business in the private sector,” the Institute found.

What Hanberry would like to see, is a situation whereby the place where an employee performs most of their duties, would be considered as their normal place of work, and that the Revenue would take a “sensible and fair” approach when interpreting this.

Director expenses

Respondents to the Government’s consultation have also suggested that travel expenses incurred by non-executive directors, when travelling to board meetings, should be reimbursed tax free, although Deloitte adds that a “level of control” could also apply. At present, these are generally subject to tax.

Brian Keegan, director of taxation with Chartered Accountants Ireland, says the issue is an anomaly, as non-executive directors of non-commercial bodies are already entitled to claim tax relief on their expenses.

“There is a clear distinction in legislation and we can’t see justification for it,” he said.

Indeed in a recent briefing, the Tax Institute asserted that the issue “ is causing uncertainty and reputational damage for some of our largest employers in the country”.

For Hanberry, it’s also a competitiveness issue.

“The issue is our tax regime for individuals is already quite high, so anything additional that places a burden on people taking up a role in Ireland, would be seen as a negative,” he says.