Am I wrong or the employer

wally1990

Hi all,

I work in a small practice where we manage the payroll of employees and the issue I ahave is around per diems

So the employee needs to go a business trip for the employer
the employee pays the cost of the flights and hotel himself
This are vouched by receipts for the exact amount
the cost is refunded directly to him

no problem

Now the end employer agrees to pay a per diem for expenses (meals etc)
My understanding is without receipts, these are treated as round sum and are taxable which is what we are doing
but our accountants are saying the employee can claim daily subsistence allowance for where he is working from and offset this as a deduction

so

per diem €500 for example
this is generally taxable
we deduct €500 worth of daily subsistence(for example)(figures are obv incorrect)
taxable salary = €0.00

so the per diem is basically paid tax free because of the subsistence claim

this doesnt make sense to me. i believe if he/she is receiving a per diem for expenses and doesnt have receipts then it should be taxed. how can they also claim a daily subsistence as per civil service rates as a tax deduction

can someone help? is this correct or what?

can you offset daily subsistence as business expense against a per diem where no receipts are involved. (seems like a cop out to pay tax on a per diem) and if a per diem is claimed then subsistence shouldnt be claimed. its like double claiming in my opinion

thegolfer

wally1990 wrote: »

Hi all,

I work in a small practice where we manage the payroll of employees and the issue I ahave is around per diems

So the employee needs to go a business trip for the employer
the employee pays the cost of the flights and hotel himself
This are vouched by receipts for the exact amount
the cost is refunded directly to him

no problem

Now the end employer agrees to pay a per diem for expenses (meals etc)
My understanding is without receipts, these are treated as round sum and are taxable which is what we are doing
but our accountants are saying the employee can claim daily subsistence allowance for where he is working from and offset this as a deduction

so

per diem €500 for example
this is generally taxable
we deduct €500 worth of daily subsistence(for example)(figures are obv incorrect)
taxable salary = €0.00

so the per diem is basically paid tax free because of the subsistence claim

this doesnt make sense to me. i believe if he/she is receiving a per diem for expenses and doesnt have receipts then it should be taxed. how can they also claim a daily subsistence as per civil service rates as a tax deduction

can someone help? is this correct or what?

can you offset daily subsistence as business expense against a per diem where no receipts are involved. (seems like a cop out to pay tax on a per diem) and if a per diem is claimed then subsistence shouldnt be claimed. its like double claiming in my opinion

Check out IT 54 on the Revenue website. This should give you the relevant details.

wally1990

Thanks for that but it doesn't mention using the subsistence tax deduction against per diem's which are taxable

It doesn't make sense really what my employer is doing . It's like the tax rules for the per dime are simple

Here is a sum of money to cover your expenses
Have no receipts = no. Then it must be treated as income and taxed
Have you receipts yes ; ok the cost can be reimbursed tax free

But subsistence is an allowance to cover meals and lodging . But so the per diem

Surely the revenue would have an issue claiming a tax deduction by claiming subsistence allowance against a per diem

lawred2

I was never ever taxed on a per diem allowance.

What makes you think it's taxable?

wally1990

lawred2 wrote: »

I was never ever taxed on a per diem allowance.

What makes you think it's taxable?

Well that def wrong cause
Per diem are round sum and are taxable unless vouched by receipts

Also info here http://www.revenue.ie/en/tax/it/employee-expenses.html

Round sum expenses
Round-sum expenses payments (lump sum expenses payments) whether paid weekly, monthly, yearly or otherwise, which are paid to the employee to cover expenses, must be treated as pay and taxed accordingly. An example of a round sum payment is where an employer agrees to pay, say €300 per month in addition to basic salary in order to cover expenses. This €300 must be treated as pay and taxed accordingly.

A taxable benefit doesn't arise where vouched by receipts I would look into that if I was you with your accountant

lawred2

wally1990 wrote: »

Well that def wrong cause
Per diem are round sum and are taxable unless vouched by receipts

Also info here http://www.revenue.ie/en/tax/it/employee-expenses.html

Round sum expenses
Round-sum expenses payments (lump sum expenses payments) whether paid weekly, monthly, yearly or otherwise, which are paid to the employee to cover expenses, must be treated as pay and taxed accordingly. An example of a round sum payment is where an employer agrees to pay, say €300 per month in addition to basic salary in order to cover expenses. This €300 must be treated as pay and taxed accordingly.

A taxable benefit doesn't arise where vouched by receipts I would look into that if I was you with your accountant

It was some years ago. Worked for a MN at the time. It was never taxed and it was about $70 a day. Was also paid alongside vouched expenses

wally1990

lawred2 wrote: »

It was some years ago. Worked for a MN at the time. It was never taxed and it was about $70 a day. Was also paid alongside vouched expenses

I think since the contractor project in 2013/2014 it's all changed and accountants are now doing t correctly . I'm just not sure about the offsetting of subsistence against a taxable per diem . Doesn't make sense the daily subsistence as per civil service rates are to covere meals and so is a per diem it's one or the another either a taxable per diem or tax deductible subsistence . Shouldn't be offsetting one against the other

Walter2016

I'm no tax expert but I have travelled and received tax free payments for the days I've been away.

I think the OP is naming it incorrectly - per diem is a way of increasing someone's pay without having to do it for everyone.

What I think the op needs to do is rename it "subsistence allowances "

All details are here

http://www.revenue.ie/en/tax/it/leaflets/it54.html

wally1990

Walter2016 wrote: »

I'm no tax expert but I have travelled and received tax free payments for the days I've been away.

I think the OP is naming it incorrectly - per diem is a way of increasing someone's pay without having to do it for everyone.

What I think the op needs to do is rename it "subsistence allowances "

I work in tax and unfortunately I am not naming it wrong . Subsistence allowance is a deduction against earned income to reduce a tax liability to cover expenses for an employee on business travel

Per diem are round sum which are added on top of income

The problem is offsetting a subsistence allowance against extra per diem income

Per diems are paid outside / added to your salary

Subsistence is not ,subsistence values are deducted from your salary to to reduce your taxable salary

The problem is my accountants is offsetting a taxable deduction (subsistence ) against a taxable payment in order to reduce the tax on the per diem but there both for expenses and in my opinion should be one or the other

Stheno

Id consider per diems subsistence to be honest

wally1990

Beginning to give up caring and let my employer deal with the revenue if tax liability arises for our clients I'm not taking the blame I've raised my concerns about the methods

wally1990

Stheno wrote: »

Id consider per diems subsistence to be honest

What? That doesn't make sense sorry

Subsistence is a tax deduction based on civil services rates

Per diem are payments made in excess of salary to cover expenses

Cant call it per diem subsistence ,there 2 different reimbursement methods

wally1990

wally1990 wrote: »

What? That doesn't make sense sorry

Subsistence is a tax deduction based on civil services rates

Per diem are payments made in excess of salary to cover expenses

Cant call it per diem subsistence ,there 2 different reimbursement methods within taxation

It's like saying a Ford Punto, both cars but 2 different types ha (worst example ever )

wally1990

I spoke to a tax analyst and she advised I am right and I spoke to my employer and she just said that's what we do( that means nothing to me and shows a lack of understanding) but or clients in reality would have a tax liability arise if audited

They don't care anyway all they want is all there money and hate paying tax unless revenue knocks and then it's like but sure you deal with it ha

Stheno

wally1990 wrote: »

What? That doesn't make sense sorry

Subsistence is a tax deduction based on civil services rates

Per diem are payments made in excess of salary to cover expenses

Cant call it per diem subsistence ,there 2 different reimbursement methods

Read the link provided above per diems are covered as flat rate expenses

wally1990

Stheno wrote: »

Read the link provided above per diems are covered as flat rate expenses

Flat rates are different they are Introduced to cover the cost of certain expenses employees incur in the course of their profession or trade, the relief cover expenses such as acquiring tools, equipment for a classroom, or buying or laundering uniforms, that PAYE employees would otherwise not be reimbursed for.

Per diem is added to salary to cover costs on a business trip eg( trip to states and given an allowance of $50 a day for food) this is treated as round sum and taxable unless vouched by receipts

wally1990

I just need to speak to another professional accountant or tax analyst . My payroll manager isn't given me satisfactory or giving me solid information but the tax agent I spoke to said I was right and we shouldn't be doing it. But would like to hear another professional

wally1990

Flat-rate expenses are available to a wide range of professions and serve as a means of relief for equipment needed for work, such as tools, uniforms, stationery, etc.

Round-sum expenses are lump sums that are effectively added to salaries to cover any possible expenses that may be incurred. No proof of payment is required. Although these are allocated to cover expenses, they are considered by Revenue as additional income, and are taxed as such.

Vouched expenses are expenses for which there is proof, such as a receipt. They are incurred by employees in performing duties as part of their job, and are required to be “wholly, exclusively and necessarily so incurred” for them to be reimbursed.

Where flat-rate expenses are allocated for day-to-day expenses, vouched expenses are commonly used for out-of-the-ordinary events, such as business meetings held outside the office.

Choc Chip

I think you're confusing flat rate expenses (http://www.revenue.ie/en/tax/it/employee-expenses.html) with flat rate allowances (IT54 - see earlier post).

Flat rate allowances can be paid free of tax up to the prevailing civil service rates. IT54 covers this on pages 4 and 5. It sounds like this is the "per diem" allowance you are referring to (though I haven't seen the payments and this shouldn't be considered tax advice).

kaymin

wally1990 wrote: »

Round-sum expenses are lump sums that are effectively added to salaries to cover any possible expenses that may be incurred. No proof of payment is required. Although these are allocated to cover expenses, they are considered by Revenue as additional income, and are taxed as such.

Round-sum expense payments are taxable

http://www.revenue.ie/en/tax/it/employee-expenses.html

Stheno

Choc Chip wrote: »

I think you're confusing flat rate expenses (http://www.revenue.ie/en/tax/it/employee-expenses.html) with flat rate allowances (IT54 - see earlier post).

Flat rate allowances can be paid free of tax up to the prevailing civil service rates. IT54 covers this on pages 4 and 5. It sounds like this is the "per diem" allowance you are referring to (though I haven't seen the payments and this shouldn't be considered tax advice).

Thats how i interpreted it.

Àny job i had which involved overseas travel had daily allowances which were unvouched and tax free

Lockedout2

As I understand it there are two ways of paying for travel by employees allowed in IT 54

A. reimbursement of expenses up to the amount of the civil service rates without producing invoices i.e. €30 per day where the employee is away from the office 5-10 hours.

B. Reimbursement of expenses on production of invoices.

I think if the employee is reclaiming accommodation on the basis of the invoices and then not producing invoices for the meals then the provisions of IT54 are not being complied with.

The employer is exposing themselves by not comply with the terms of the guidance.

I would advice the employer to review their policy and perhaps pay for the accommodation on a company credit card and then a subsistence (per diem) allowance for food but only up to the overnight civil service rate allowed.

lawred2

Stheno wrote: »

Thats how i interpreted it.

Àny job i had which involved overseas travel had daily allowances which were unvouched and tax free

Same

Walter2016

Why not call revenue and get an answer from them - surely that's the best way to get a definitive answer.


There are two types of payments

In lay man's terms one is an "allowance" which is taxable and the other is unvouched expenses in relation to specific trips away from the office that have set maximum limits.

The reason for the unvouched option is that it is unreasonable to get receipts for every cup of coffee and every sandwich, so a "reasonable" daily figure is allowed (see limits set by revenue) for when an employee is representing / working for their employer away from the normal place of work.

Different amounts apply depending on whether its a day away or overnight away.

And this payment is not taxable. - Technically the employee has no personal gain from the payment.
The 10 hour+ day rate is just over €33, so if accommodation is being paid directly, I would assume that €33 is the appropriate daily unvouched rate.
If €300 was paid for 5 days, then I'd assume €165 is not taxable and €135 is taxable.


From revenue.ie

Reimbursement by employer by way of flat-rate allowances
or vouched expenses
Where an employee performs the duties of his or her
employment whilst temporarily away from his or her normal place
of work or is working abroad on a foreign assignment, allowable
subsistence expenses can be reimbursed tax free on the basis of
either -
• acceptable flat-rate allowances [see (a) overleaf]; or
• actual expenses which have been vouched with receipts