The Department of Public Expenditure and Reform has issued updated mileage rates effective from April 1, 2017.
This is the first change in the mileage rates since 2009.
These updated rates mark a significant drop in the rates applicable to the first 1,500km, a slight increase in the rates available between 1,501km and 5,500km, and a 15% drop in the rates applicable to mileage rates beyond 5,500km.
For employees and company officers, such as secretaries and directors, the mileage regime offers an
opportunity for employers to make tax-free payments to
reimburse vouched travel
incurred by employees, in the case of genuine travel for work purposes.
The mileage system has worked well for both parties.
For example, an employee using their own car to make a return journey from Cork to Dublin could, under the old regime, received a reimbursement of up to €258 tax free from their employer, to cover the cost of the journey.
The change in rates means that, in most instances, the amount that can be reimbursed is reduced significantly.
For employees who regularly used their cars to undertake journeys for work purposes, the reimbursement of mileage rates allowed
employers to give a generous top-up to the employee’s basic wages, at no tax cost.
In the case of the self-
employed, it is abundantly clear from Revenue that it is not possible to claim mileage for one’s own self-employed income, rather the actual costs of using your own
vehicle, such as fuel, repairs, car tax and insurance, can be claimed as deductible
expenses, in calculating the taxable income of the trade.
In the case of an employer who provides an employee with a car, such as a company car or company van, or similarly for vehicles provided by self-employed persons to their employees, there is no basis for reimbursing
employees tax free for using vehicles owned by the business.
However, in the case of an employee working for a self-employed person, the self-employed person can pay the employee mileage for journeys undertaken for the purpose of work.
In the case of companies, company officers, directors, secretaries and employees can claim mileage.
From an employer’s
perspective, special care needs to be taken to ensure that relevant records are
All of the following
information is required to be retained for each journey:
1) name and address of the employee;
2) date of the journey;
3) reason for the journey;
4) distance (km) involved;
5) starting point, destination and finishing point of the journey;
6) and the basis for the
reimbursement of the travel expenses (for example,
temporary absence from an individual’s normal place of work).
Only journeys occurring for the purposes of work qualify. So, for instance, travel from home to work and from work to home obviously do not qualify for tax-free reimbursement.
In the event that an
employer does not operate the mileage regime correctly, the payments to the employee could be regarded as additional taxable pay, resulting in a significant liability.