January 2023
As has become the norm in recent years, there was significant Revenue activity prior to the holiday period, which saw the publication of a number of ‘eBriefs’ and the updating of various Tax and Duty Manuals (TDMs). In this bulletin we cover the recent updates from an employment and income tax perspective.
Please note that TDMs reflect Revenue’s position and interpretation only on a given matter. While such positions and interpretations are generally reasonable and appropriate, full facts/documentation should be reviewed before concluding the appropriate position to take in any scenario.
Employer-provided vehicles
TDM 05-01-01b has been updated to reflect the following clarifications / changes:
● Confirmation that an employer can reimburse an employee for home electricity costs incurred in relation to charging a company car which is an EV. It must be shown that the employer is only reimbursing for the running costs of that employer vehicle and the employer must retain sufficient supporting documents to verify the amount of the reimbursed cost. Unfortunately however, the TDM does not provide any guidance / examples on how employers can verify such expenses, and therefore employers will have to determine their own process for verifying employee home charging costs;
● The tax treatment of employer provided vehicles for 2023 and subsequent tax years is now outlined in Section 10 of the TDM. See our prior bulletin for further information on these changes;
● The simplification arrangement which is available for employees in the motor industry (whereby an agreed average of OMV of vehicles is used due to the frequent change of employer provided vehicles) has been
updated to reflect the changes to the BIK rules. From 2023 onwards Revenue will allow the category C band to be used as an average for the purpose of calculating the BIK charge. Where availed of it must be consistently applied for the year of assessment (i.e. it is not possible to use the simplification measure and switch to the statutory basis during a tax year).
Termination payments
TDM 05-05-19 has been updated to outline Revenue’s position in relation to the following:
● Termination payments received on / after 1 January 2018 are taxed on the receipts basis;
● Redundancy not regarded as taking place where, following termination, the individual takes up employment with another group company;
● Where a contract provides for Pay in Lieu of Notice (PILON), the payment is taxable as employment income and the exemptions provided in Section 201 and Schedule 3 TCA 1997 are not applicable;
The TDM also includes a new section to provide detail on the interaction between Covid19 supports and the exemptions provided in Section 201 and Schedule 3 TCA 1997. References to reliefs which no longer apply (e.g. Top Slicing Relief and Foreign Service Relief) have been removed.
Cycle to Work Scheme
TDM 05-01-01g has been updated in Section 7 to reflect the Finance Act 2022 amendments.
The guidance now includes a definition of cargo bike for the purposes of availing of the higher exemption limit of €3,000, together with updated examples.
Rent Tax Credit
TDM 15-01-11A has been published, which outlines details of the rent tax credit announced in Budget 2023. The credit will be available for the tax years 2022 to 2025.
The credit is available where the claimant makes a ‘qualifying payment’ in respect of:
● Their principal private residence;
● A ‘second home’ used to facilitate attendance / participation in an office or employment, trade, profession or an approved course; or
● Property used by their child to facilitate the latter’s attendance at, or participation in, an approved course.
The value of the credit is the lower of:
● the total rent payments made by the claimant during the tax year at 20%; and
● the specified amount at 20% (€5,000 for a jointly assessed couple and €2,500 in all other cases).
The conditions that must be met in all cases are as follows:
| A formal claim (either via tax return or Revenue’s Real Time Credit facility) must be made to receive the credit. | The payment must have been made under a tenancy (either (a) registered with the RTB or (b) a licence for the use of a room(s), in another person’s principal private residence). |
| The property concerned must be a residential property located in the State. | The claimant must not be a ‘supported tenant’ (e.g. cannot be in receipt of the Housing Assistance Payment (HAP). |
| The landlord must not be a Housing Association or Approved Housing Body. | The property and tenancy must not be held by a Minister of the Government or Commissioner of Public Works in Ireland in his or her official capacity. |
Checklists of all conditions for each category of claimants are also outlined in Appendices 2 to 4 of the TDM.
Small Benefit Exemption
As announced on Budget Day, from the 2022 tax year onwards the Small Benefit Exemption, which allows employers to provide a voucher or other non-cash benefit free of tax to employees, has been increased from €500 to €1,000. In addition, two separate benefits can now be provided (not exceeding a total combined €1,000 benefit), an increase from one previously.
Finance Act 2022, which reflects these changes, has now been passed and states that a qualifying incentive (i.e. small benefit) means the “first or second relevant incentive that is provided to an employee in the year of assessment”. Recent interactions with Revenue suggest that the legislation will be strictly applied, meaning that employers will not have the ability to choose the benefits to which the exemption is applied, i.e. that it must be applied to the first two qualifying incentives.
For example, if an employer provides an employee with a €20 food voucher in February, an easter egg in April, and a €500 Christmas voucher in December, applying a strict legislative interpretation would mean the exemption could not be utilised against the Christmas voucher (even if the employer covered the tax on one of the earlier qualifying incentives via payroll).
Such an interpretation, if applied, will undoubtedly reduce the attractiveness of the exemption for many employers as it has traditionally been used to provide tax-efficient Christmas vouchers, in particular. It remains to be seen whether this will be addressed, through legislative intervention or otherwise. In the meantime, it is important that employers are aware of the matter and carefully consider and track the provision of vouchers and non-cash benefits to employees during the tax year.
Please reach out to your normal Vialto Partners contact or any of the below to discuss further:
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