Tax is one of the few guarantees in life and if someone told you that you could reduce your tax bill I’m sure you would jump at that opportunity. Flat rate expenses are a tax allowance available to many people in Ireland unbeknownst to themselves. A tax allowance helps to lower the amount of tax you pay, and the value of the allowance will depend on what tax band you fall into.
So what are they?
Flat rate expenses are those that cover the cost of equipment your employee needs for work. This equipment ranges from tools in the building industry to uniforms in the health industry. There are currently 182 flat rate expenses rates in operation.
The government are considering withdrawing some of these flat rate expenses in budget 2023 due to the cost to the government. If some of these are withdrawn, there is a suggestion that there will be a new transitional tax credit for those who would see a reduction or withdrawal of their existing flat rate expenses entitlement.
If your occupation is on the list of withdrawals, it would be worth looking into what you can claim sooner rather than later as flat rate expenses can be claimed four years back. This can be done under ‘Review Your Tax 2018-2021’ in PAYE services on MyAccount.
Who can apply for flat rate expenses?
Flat rate expenses are normally allocated to trade unions and the amount of the deduction is agreed between Revenue and representatives of these groups or classes of employees.
A trade union is an organisation that protects the rights and interests of its members. These members are employees in particular sectors or jobs such as teaching or nursing. All employees of the class in question can then claim the agreed deduction in their own tax credits. However, there are some occupations that are not in trade unions which can qualify for flat rate expenses. Deductions are available for professions from doctors to engineers to plumbers and even the RTÉ Symphony Orchestra. The full list of occupations expenses are available to is on revenue.ie.
In the agricultural industry there are presently three occupations that qualify for a flat rate expense, these include: Foresters employed by Coillte (€166), Fisherman in employment (€318) and grooms in the horse training industry (€294).
However, on a broader spectrum there are a lot of children of farmers working in the hospitality industry and a lot of these qualify for a flat rate expense deduction on their tax return. These professions can range from shop assistants, waiters, waitresses, hotel porters to people employed in the bar trade. These will be submitting a tax return yearly so should make the most of flat rate expenses while they are available to them.
How do flat rate expenses work?
Flat rate expenses can be claimed by completing an income tax return. You will find your income tax return form in PAYE services in MyAccount.
A flat rate expense sounds like money you receive, however it is actually a tax allowance against income you have already received. It is a deduction on tax already incurred and could result in a tax refund if you have all your income tax already paid. The flat rate expense for each occupation can vary massively, the lowest rate available being for kitchen porters of €21 and the highest being for hospital consultants of €695. An example of the possible tax saving if you were a groom in the horse racing industry: Flat rate expenses available is €294, if you are in the high tax bracket of 40% you would have a tax saving of €118 or if you were in the lower tax bracket of 20% you would have a tax saving of €59.
What are the steps involved in claiming flat rate expenses?
If you are an employee, flat rate expenses can be claimed through the revenue website MyAccount or ROS if you are self-employed and eligible to claim flat rate expenses. If you are self-employed you will include your flat rate expense claim on your Form11.
If you are an employee and don’t submit a Form11 you will find your income tax return form in PAYE services on MyAccount. Within MyAccount you will find the tab ‘Tax Credits & Reliefs’ there is a heading for flat rate expenses, and you can add the tax credit to your return based on your occupation.
It is always worthwhile to speak to a professional accountant on these if you are having difficulty in confirming your eligibility for the flat rate expenses or if your accountant submits your tax return it is worth discussing flat rate expenses with them to ensure you are maximising your tax reliefs. A simple phone call could save you a few hundred euro and especially if you haven’t claimed in a few years!