Claiming Tax Relief on your Mileage and Subsistence Costs while Contracting

Considering claiming tax relief on your mileage and subsistence costs while you are contracting? Check out this week’s Contractor Tax Tip packed with answers on the most frequently asked questions on Mileage and Subsistence.

What is mileage?

Mileage is where employees use their private cars or motorcycles for business purposes, reimbursement by the employer in respect of allowable motoring expenses can be made by way of flat-rate mileage allowances.

It is important to be aware that you are not entitled to claim for mileage to and from your home and your normal place of work (and vice versa). Only mileage relating to business journeys away from your normal place of work are allowable.

What is subsistence?

Subsistence is where you perform the duties of your employment while temporarily away your normal place of work or working abroad on a foreign assignment, allowable subsistence expenses can be reimbursed tax free.

Time spent at the normal place of work and on journeys between home and the normal place of work do not reckon as a qualifying absence.

What is my normal place of work?

For contractors, there is an additional important Revenue document now available, known as Tax Briefing 03/13, which is essential reading for contractors trying to understand Revenue’s opinion on where their own normal place of work is.

How will I be reimbursed?

There are normally two ways to be reimbursed:

  1. You present your employer with the receipts for expenses (e.g.  hotel bill) and the employer reimburses you for this amount
  2. You can record how many kilometres were travelled and how many hours/nights away and present these to your employer. If your employer is satisfied he/she will then reimburse you at the appropriate mileage and subsistence rates.

How do I calculate my journey?

Where you start a business journey directly from home to a temporary place of work or return home directly, the business kilometres should be calculated using the Revenue approved rates below.

Mileage rates are dependent on the engine capacity of the car used. Subsistence rates vary depending on the number of hours away from the normal place of work.

What are the pre-approved mileage and subsistence rates?

Please see Revenue’s link to the mileage and subsistence rates: https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/civil-service-rates.aspx

What costs are covered in pre-approved subsistence rates?

The overnight subsistence rates includes the cost of one night’s accommodation and three meals.

The daily subsistence rate of ten hours or more, includes the cost of two meals.

The daily subsistence rate between five and ten hours, includes the cost of one meal.

How do I keep a record of my mileage and subsistence claims?

It is important that you retain proper records of each business trip. Otherwise Revenue may insist that salary taxes be applied to these payments. The records required are:

  • Name and Address
  • Date(s) of business trip
  • Reason for the trip (e.g. meeting client)
  • Distance travelled
  • Starting point, destination and finishing point of trip
  • Basis for reimbursement (i.e. actual receipt or mileage/subsistence rate)

Records should be kept for 6 years.

Can a Sole Trader claim mileage and subsistence?

Sole traders themselves cannot claim mileage and subsistence, although their own employees can. Instead sole traders can claim the actual expenses incurred in business trips and should keep receipts for motor expenses, accommodation and other travel expenses. It may be necessary to add back a portion of motor expenses to represent private expenditure when preparing the income tax return.

Where can I find more information?

If you need more information on the rules surrounding mileage and subsistence claims and normal place of work rules, take a look through Revenue’s Leaflet IT51, IT 54 and Revenue’s tax briefings numbers 3 and 4:

Revenue’s Leaflet IT51 and IT 54

Tax Briefing No 04

Tax Briefing No 03

For more information, please contact Icon Accounting on 01-8077106 or via email info@iconaccounting.ie and we will be happy to help!