Posted by Revenue eBrief No. 067/24
Returns by Employers in Relation to Reportable Benefits – Enhanced Reporting Requirements (ERR)
Tax and Duty Manual Part 38-03-33 – Returns by Employers in Relation to Reportable Benefits – Enhanced Reporting Requirements (ERR),has been updated, in a new paragraph 4.2.1, to provide guidance in regard to an optional new administrative practice in regard to advance payments of travel and subsistence.
EXTRACT:
4.2. Travel and subsistence payments
Where an office holder or employee is paid an advance in respect of expenses, that payment is subject to tax as a perquisite and income tax, USC and PRSI must be deducted.
Arising from an employee’s or office holder’s entitlement to a tax deduction in respect of certain expenses under section 114 TCA 1997, there exists a long-standing administrative practice under which employers may reimburse the expenses of travel (and subsistence relating to that travel), without deduction of income tax, USC and PRSI, subject to certain conditions being fulfilled.
Guidance for the travel and subsistence measure is available in TDM Part 05-01-06 Tax treatment of the reimbursement of expenses of travel and subsistence to office holders and employees.
4.2.1 Advance travel and subsistence payments and ERR
As noted above, an advance payment is subject to tax and as such would not fall within scope of ERR reporting, as the payment does not relate to travel or subsistence incurred by the office holder or employee and because the payment is subject to tax via the payroll when it is paid
However, when the office holder or employee submits a claim for the related travel and subsistence expense incurred to his/her employer, and the employer wishes to avail of the section 114 administrative practice (i.e., not tax the travel and subsistence expense) this may require an adjustment within payroll to give the effect of no tax applying to the expense amount incurred by the individual, thus at this point the travel and subsistence expense would then be subject to ERR.
Revenue recognises that this may give rise to certain practical issues for employers in terms of its interaction and obligations with ERR requirements. Thus, to facilitate a simplification process and to alleviate additional administrative burdens on employers, Revenue will implement an optional administrative practice in respect of advance travel and subsistence payments.
Under this administrative practice, an advance travel and subsistence payment may be treated, in certain circumstances, as not being subject to tax via the payroll when paid, but instead treated as a payment where no tax is deducted in respect of travel and subsistence and thus subject to ERR reporting at the time of payment. Then, when the expense is incurred and the claim submitted by the employee/director, the employer will be required to update their ERR submission to Revenue to reflect the actual travel and subsistence expense amount in respect of that employee/director. The conditions that must be satisfied for this administrative practice to apply are as follows;
* The employer must have appropriate controls in place to track and reconcile all travel and subsistence advance payments.
* The advance travel or subsistence payment must be reported under ERR when the payment is made using a new subcategory of Travel and Subsistence – see paragraph 5.3 below.
* The travel or subsistence advance payment must be a reasonable estimate of the expected claim amount, which must qualify for relief under section 114 TCA 1997.
* A claim for the actual travel or subsistence cost must be received by the employer without any undue delay, with the ERR submission subsequently updated in respect of this claim.
* Any excess in payment should be recouped by the employer without undue delay or subject to tax if not so settled.
* Once the software solution to facilitate this practice is in place the employer must commence reporting to Revenue.
As noted above, a timely reconciliation of the advance payment with the actual claim is required in order to avail of the administrative practice, therefore Revenue does not expect that an employee/director would have more than one open advance payment at any time, but this may arise in exceptional circumstances.
The functionality in the ERR system for advance travel and subsistence payments is currently being developed. It is anticipated that the Revenue ROS online/file upload and API will be available in approximately two months. It is understood that third party software solutions may not be available until later in the year.
It is not proposed that an employer must notify Revenue in advance if they wish to avail of this new administrative practice. The employer must however have appropriate governance and controls in place together with supporting documentation to demonstrate the required conditions are met. In addition, the
employer must immediately report all advance travel and subsistence payments on a going forward basis under ERR when the employers chosen IT reporting mechanism becomes available. Broadly, this will require the advance travel and subsistence payment to be reported under ERR when paid to the employee/director and the employee’s/director’s ERR submission updated once the expense is incurred and the claim is made.
There is no obligation on any employer to adopt this administrative practice. In the case where an employer chooses not to operate the practice, the normal rules apply, and the advanced travel and subsistence payment is taxable in full through the payroll. In such cases, there is no obligation to report under ERR as the payment has been subject to tax. When the Revenue IT development is available this manual will be further updated.
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