A Revenue Commissioners review of employees' entitlement to claim flat-rate expenses could effectively cancel out the benefit of Budget 2019 for thousands of workers, the Chartered Accountants Ireland has warned.
"Many PAYE workers could lose some of the cash benefit of the tax cuts announced in the October budget because of a change in Revenue administration policy," said the accountancy body's director of public policy and taxation Brian Keegan.
More than 150 categories of employee, many of them working in the services and health sectors, automatically receive a modest tax deduction to reflect costs incurred to do their job, such as the cleaning of uniforms and purchase of tools. However, the Revenue has been reviewing the system on the basis that it may be out of date.
Chartered Accountants Ireland said the initial results of this review indicated that automatic entitlement would be removed for more than 80,000 workers.
Workers may still be able to make expenses claims in the future, but these will be subject to case-by-case examination, and the accountancy body believes many workers “simply will not bother with the administrative red tape required to recover deductions to which they were properly entitled”.
The trade union Mandate recently condemned the Revenue's move, giving the example of retail assistants who have until now been entitled to an unvouched income disregard allowance of €121 a year to cover the purchase and maintenance of uniforms.
For workers earning more than €16,500 a year, this has resulted in an annual net benefit of either €24 or €48, depending on the highest rate of tax they pay.
Mandate said earlier this month that the withdrawal of the automatic entitlement “means a lot” to lower-paid workers and that it would continue to lobby for the retention of the allowance beyond 2018.
Chartered Accountants Ireland said the expenses changes were coming on top of concerns that employees will not immediately benefit from reforms promised under a project to modernise the PAYE system.
“The single biggest source of money for the exchequer is PAYE income tax,” said Dr Keegan.
“This Revenue project targets the tax affairs of those who support the country most, but have the least control over the amounts they have to pay. No one should claim any amount to which they are not entitled, but this change in administrative practice is ill-timed and difficult for employers and employees alike.”