Business expenses – what are legitimate expenses?

Employers can compensate their employees for out-of-pocket costs incurred while carrying out their day-to-day job. A valid expense must be incurred by the employee wholly, exclusively, and necessarily in the course of their work for that employer. Employees in this regard also include company directors.

Some legitimate examples.
• Travel e.g., mileage, train, parking, bus, taxi in the course of their work e.g. If based in Cork.. client in Dublin, visit to
machine manufacturer in Germany, specific work-related training in Limerick
• Food/subsistence – breakfast, lunch, dinner, coffee during the travel requirement
• Overnight accommodation – Hotel, B&B during the travel requirement

What to watch out for
• All the above are legitimate expenses and can be reimbursed by the employer where the actual receipts are provided or using the
civil service rates.
• Should the employer reimburse using any other rates higher than the civil service rates the balance will need to be treated as
salary to the employee where PAYE/PRSI and USC apply
• Travel to and from work is your employee’s own private travel. It is not a business journey. Some employers offer the option of a
TaxSaver ticket. This will only apply to employees using public transport to get to work.
• Fees and subscriptions i.e., membership of a professional organisation – must be wholly, exclusively, and necessarily in the course
of their work

How to validate an expense claim.

As leaders in business, we have a responsibility to ensure that expense claims are valid, necessary and tax compliant.

Whilst we all may employ a slightly different approach to validating expense claims within our business, the basic rules apply and should be applied consistently, we as leaders are responsible for this

Create an expense policy and include a standard expense claim form for use by all of the team – standardise this process

Expense Claim Forms should contain the name and address of the employee, the date, the reason for claim expenses and journey details – start & endpoint and the purpose of the trip.

Claims can be via vouched receipts or flat rate allowance but NOT BOTH

Flat rate allowance. Flat rates will generally be set out by the employer and will permit the expenses up to a certain amount per day. e.g., €80 overnight accommodation, €0.40c per k/m etc. The rates extended by the employer should not be higher than Civil service rates.

There must be documentation (receipt) in support of the claim not using a Flat rate and the expense must have been incurred during a work-related activity. Receipts’ must be clear and legible with; date, supplier, amount, currency, description of expense & VAT (if eligible for reclaim)

DO NOT PERMIT FLAT RATE claims and claims by a receipt for the same trip
As part of this consistency, we strongly recommend that you implement a standardised expense claim, which must be submitted to claim expenses.
This will ensure that all claims are received in the same format, cut down on administrative processing, and act as a prompt to staff to adhere to the expense policy.

Attached is a sample expense form, used by the team in Pinnaklo when submitting expenses.