Tax Return Question - Mileage Rate

AtticusFinch86

Hi Guys,

My friend became self employed late last year and she has to file her first tax return this year. I'm trying to give her a hand in preparing her return and have a question about her mileage rate.

She gives talks regionally on behalf of a charitable organisation. She may give 10-12 talks per month, so it involves quite a bit of travel from her home to each event. At the end of every month she receives a payment (from the charity) based on the number of talks she has given. On top of this payment, she receives a re-reimbursement of her mileage costs (I think the rate is somewhere in the region of 50c per kilometre i.e. if she were to travel 1000km in the month she would receive €500 on top of the payment for her services.)

My question is, how much of that 50c per kilometre re-reimbursement should be added to her taxable income?

I've seen some schedules on the Revenue website relating to the issue, but my interpretation of them was that they related to "employees" and not the self-employed.

Any help appreciated. Thanks.

barneystinson

AtticusFinch86 wrote: »

Hi Guys,

My friend became self employed late last year and she has to file her first tax return this year. I'm trying to give her a hand in preparing her return and have a question about her mileage rate.

She gives talks regionally on behalf of a charitable organisation. She may give 10-12 talks per month, so it involves quite a bit of travel from her home to each event. At the end of every month she receives a payment (from the charity) based on the number of talks she has given. On top of this payment, she receives a re-reimbursement of her mileage costs (I think the rate is somewhere in the region of 50c per kilometre i.e. if she were to travel 1000km in the month she would receive €500 on top of the payment for her services.)

My question is, how much of that 50c per kilometre re-reimbursement should be added to her taxable income?

I've seen some schedules on the Revenue website relating to the issue, but my interpretation of them was that they related to "employees" and not the self-employed.

Any help appreciated. Thanks.

Those rates are specifically for employees or public servants.

Self employed people claim their expenses on an incurred basis. So what she needs to do is keep some reasonable record of her total motor expenses, and the proportion of them that relate to business.

So if she drives 20k kms in the year and 12k of this is business then she claims 60% of her total motor expenses as a deduction from her income.

AtticusFinch86

Thanks for the quick response.

What's deemed a "reasonable record"? She won't have petrol expense receipts but what she would have is a sheet she sends to the organisation that pays her. This sheet is the basis on which her reimbursement is assessed and it describes where she was on a particular day, and the length of the journey e.g. 50km.

From a tax perspective. Could she calculate the average cost per km to her (e.g. 20c per km) and, multiply that by the number of km's she has traveled for business purposes and then subtract that from the mileage expense payment she received for the year?

E.g. if she were paid 2000e in mileage re-imbursements in 2014 and travelled 3000km that year for business. By my calculations she would be taxable on an additional €2400? (3000 x 0.20c = 600€. THerefore €3000- 600€ = €2400)

Alan Shore

Her income is the total fees for giving talks and the mileage.

The question is how much of the motor expenses she incurs in a year are allowable.

So say she gets €2,000 in mileage that's 4,000kms. If her total travel in the year is 10,000kms the 40% of the motor expenses petrol, motor tax, insurance, servicing/repairs are allowed.

drunkmonkey

Get a fuel card there free and can save you a few cent every time...at least you have a record then every time you get juice...or get an aib platinum card and you'll get €225 cash back a year if you spend enough...no harm having both..

Calahonda52

May not be relevant here but just in case.
One of the thorny issues here with Revenue is for folk like the Op's friend, what is the normal place of work, because travel to the normal place of work is not allowed as an tax deductible expense.
So if the Revenue see a big mileage claim, then they may come look-see what the basis of the calc is and disallow the deduction as they deem the location of the gigs to be her normal place of work.

I know one IT contractor who was hit for 70k due to overcooked mileage.

The new guidelines on normal place of work are wooly to say the least
there is a consolation process in hand
http://www.finance.gov.ie/what-we-do/tax-policy/consultations/consultation-tax-treatment-expenses-travel-and-subsistence

my3cents

Calahonda52 wrote: »

May not be relevant here but just in case.
One of the thorny issues here with Revenue is for folk like the Op's friend, what is the normal place of work, because travel to the normal place of work is not allowed as an tax deductible expense.
So if the Revenue see a big mileage claim, then they may come look-see what the basis of the calc is and disallow the deduction as they deem the location of the gigs to be her normal place of work.

I know one IT contractor who was hit for 70k due to overcooked mileage.

The new guidelines on normal place of work are wooly to say the least
there is a consolation process in hand
http://www.finance.gov.ie/what-we-do/tax-policy/consultations/consultation-tax-treatment-expenses-travel-and-subsistence

Would claiming for a home office settle your "normal place of work"?

dbran

Hi

It does not matter whether you claim that your home is your office. The revenue will not accept that your home is your normal place of work in these circumstances.

The amount that is allowable is the lesser of the journey from home to the venue or the journey from the charity's main office to the venue.

If you never in fact work at the charity's main office, then there is an argument that none of the travel is allowable and it is all personal. You decide where you live and where you work.

dbran

AtticusFinch86

dbran wrote: »

If you never in fact work at the charity's main office, then there is an argument that none of the travel is allowable and it is all personal. You decide where you live and where you work.

dbran

My friend has never worked at the Charities main office as far as I'm aware. The only time she goes there is for on-site training 2-3 times a year (maybe slightly more).

When you say "there is an argument that none of the travel is allowable and it is all personal", it suggests that it's quite a grey area. Would she have the book thrown at her if she deducted her travel expenses?

Duckett

Folks - see link below for information re consultation on tax treatment of travel expenses announced today

http://www.finance.gov.ie/what-we-do/tax-policy/consultations/consultation-tax-treatment-expenses-travel-and-subsistence

barneystinson

I think there's a bit of confusion here.

The above link, and several of the replies so far, have been treating the taxpayer as an employee/office holder. But the OP has stated they are a sole trader.

The test for a deduction for an employee/office holder is at section 114 TCA 97 and it is the inclusion of the words "necessary", "necessarily", and "in the performance of the duties", that make it such a difficult test to meet.

The test for a deduction for a sole trader is at section 81 TCA 97 and is that an expense is "wholly and exclusively laid out or expended for the purposes of the trade".

The body of case law in relation to these tests would suggest that once a sole trader can demonstrate that their home is actually the base of their sole trade business (the "locus in quo") then they can deduct travel expenses from that base to other places.

I'm not saying that the OP's friend can or cannot deduct her expenses, she should seek agreement with her Inspector of Taxes (via a good tax advisor) if she wants any degree of comfort on the issue.