Q&A: What is happening with flat-rate expenses and how you could lose out?

Dáil told tens of thousands of workers face ‘nasty shock’ in their pay packets in January

Revenue is currently carrying out a review of the flat rate expenses scheme which could hit workers from January.

Revenue is currently carrying out a review of the flat rate expenses scheme which could hit workers from January.

 

The Dáil heard on Wednesday that tens of thousands of workers could face a “nasty shock” in their pay packets from January following a review by the Revenue Commissioners of flat-rate expenses. Here, we explain what exactly is going on.

What are flat-rate expenses?
Flat-rate expenses are those that cover the cost of equipment you need for work. More than 150 categories of employee, many of them working in the services and health sectors, automatically receive the deduction to reflect costs incurred to do their job.

This includes things like the cleaning of uniforms and purchase of tools. You must incur these costs in the course of your duties, and the costs must be directly related to the nature of your employment.

Who can apply for them?
Flat-rate expenses are available to a wide range of professions. You can find details on the flat-rate expenses list, which can be found here.

Okay, I’m eligible. How can I make a claim?
Flat-rate expenses can be claimed by completing a Form 12. You can find this form in PAYE Services in the myAccount of Revenue’s website, which is here.

You then follow these steps:

  • Click on “Review your tax” link in PAYE Services
  • Select the Form 12 for the relevant tax year
  • In the “Tax Credits & Reliefs” page, select “Flat rate expenses” and add it as a tax credit.

How much can I expect to get?
The relief is granted at your rate of income tax, so higher-paid earners receive a greater benefit, at 40 per cent of the relief on offer compared to 20 per cent for a lower-income worker.

For example, a shopkeeper on the standard rate of tax will benefit from 20 per cent of €121, or €24.20 a year/€0.46 a week, while a doctor on a higher rate will get 40 per cent of €695 or €278 a year/€5.35 a week. You can also backdate your claim for the last four years, so there is the potential for a significant windfall for some.

There is a breakdown of the deductions on the flat-rate expenses list mentioned above.

Great. But what’s this I hear about “a review” of the system?
A Revenue “review”, otherwise known as a clampdown, on the scheme caused much confusion and outrage last year. After some political pressure the issue was parked. It had been hoped that it might be quietly swept under the carpet never to be heard about again, but unfortunately that appears not to be the case.

Am I going to lose out?
The truth is, we don’t exactly know yet. Revenue’s review is ongoing and they said on Thursday they won’t be announcing what is happening until it is complete, which will be close to the end of the year.

However, we do have some idea given what was signalled last year. Sectors facing the chop were: agricultural advisers; cardiac technicians; journalists; professional valuers in the valuation office; freelance actors in employment; and shop assistants.

The reliefs on offer for these job titles range from €121 for a shop assistant, to €750 for an actor.

Chartered Accountants Ireland said the sectors outlined above would see the automatic entitlement removed for more than 80,000 workers. But Revenue has said it is looking at every sector eligible for the relief, so the number affected could be more than 600,000.

When is all of this going to come into effect?
The effective date for the implementation of any changes arising from the review is January 1st, 2020.

Is there anything I can do about this?
In the absence of the flat-rate expense regime, employees would have to claim for any work-related expenses themselves, providing receipts, under the Taxes Consolidation Act.

These will be subject to case-by-case examination, and Chartered Accountants Ireland believes many workers “simply will not bother with the administrative red tape required to recover deductions to which they were properly entitled”.