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Archive Topic - For Reference OnlyTax Saving Tips for Employers, Employees & DirectorsWe are all aware that the Irish Tax System contains very few tax saving opportunities for those in PAYE employment and for their employers. However, there are a number of allowances and reliefs which employers and employees can use to reduce the tax burden on employment. These reliefs generally apply to both employees and company directors, although specific professional advice should be obtained in each case to verify this. Pension ContributionsSubsistence AllowancesMotor
Expenses
Bus
& Train Passes
Childcare Services
Company
Cars - Benefit-in-Kind Company Vans - Benefit-in-Kind Employee Pension ContributionsContributions made by an employee to a Revenue-approved pension scheme operated by their employer are deductible from the employee's taxable income. For employees, the amount deductible cannot exceed a set percentage of their total pay. This limit does not apply to company directors. An employer can avail of full tax relief (against income tax or corporation tax) against the cost of setting up an approved Pension Scheme and also for all contributions made to such a scheme. Back to TopSubsistence AllowancesEmployers
can pay tax-free Subsistence Allowances to staff, in certain
circumstances, if they temporarily work away from their normal
location of employment:
For
an employee or company director earning a salary of €
This
does not cover time spent
It is necessary to comply with guidelines issued by the Revenue Commissioners in order to avail of this relief. These are set out in the Revenue leaflet IT54 - Employees’ Subsistence Allowances Back to TopMotor
Expenses
Employers
may reimburse their staff tax-free for Motor Expenses incurred in
the course of their work. These
motor expenses must have been incurred “wholly, exclusively and
necessarily” in performing the duties of the employment. They do
not cover the cost of travelling to and from home to work. This
relief does not extend to travel via company cars or vans. The
Revenue Commissioners have specified the following maximum scale of
motor expenses to apply with effect from 1 January 2002..
These
may be applied without specific Revenue approval, subject to certain
conditions. However, it is essential to strictly follow the guidelines of the Revenue Commissioners in this area. This are set out in their Revenue Leaflet IT51 “Employees Motoring Expenses” Back to TopBus
& Train Passes
Where an employer provides a free bus or
train pass to an
employee, the employee is exempt from income tax on the benefit.
This only applies to annual or monthly passes for a scheduled and
licensed passenger transport service.
Back to TopChildcare
Services
Where
an employer provides a free or subsidised childcare services to
employees, is exempt from income tax on the benefit, subject to
certain conditions. The
main condition is that the employee must be responsible for both
financing and managing the childcare service, either on their own or
in conjunction with other employers. Back to TopCompany Cars - Benefit-in-KindWhere
an employee is provided with a car by their employer, they are taxed
on the “Benefit-in-Kind”
(BIK) value of the car. This
equals 30%
of the original market value of the car, subject to the following
reliefs:
Where the employee pays the cost of insurance, repairs and servicing, road tax and private fuel costs, this percentage is reduced to 18.5% There
is partial relief is the employee pays some but not all of these
costs.
There
is some tax relief for all levels of business mileage over 15,000
miles a year. The extent of the relief depends on the exact business
mileage for the year. The
following are some examples of the relief available at particular
mileage totals
Example John
has the use of a company car, a 1997 Toyota which originally cost
€ 20,000, but which is now valued at € 8,000. His
business mileage is 35,000 miles each year. His employer pays all
costs relating to the car. His
benefit in kind is calculated as follows:
If
John pays tax @ the 42% rate, his income tax bill on the BIK
will be € 630 Back to TopCompany Vans - Benefit-in-KindWhere
an employee has the private use of a company Van, the “Benefit-in-Kind”
(BIK) calculation is as follows:
For
example, Joan uses a company van both for personal purposes and for
her employer’s business. The
cost of the van is € 15,000 Her
total mileage each year in the van is 25,000 miles, of which 5,000
miles is for personal use. Her Benefit in Kind on the van is
Back to Top
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