Brady & Associates is a small firm of skilled and experienced accountants dedicated to providing intelligent and innovative accounting and tax representation


Travel Expenses

The central test of deductibility when calculating profits is whether or not the expense has been “wholly and exclusively laid out or expended for the purposes of the trade or profession”

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Despite the importance of this test, it has not often come before the Irish courts and therefore there is little guidance from Irish case law as to how this phrase should be interpreted however the following principles have been established from previous case law and are still applicable today.


  • There is no requirement that the expense is necessarily incurred, for the purpose of the trade or otherwise. The necessity is irrelevant once the expense is incurred in furtherance of the trade

  • One must look at the purpose of the expense (whether stated or subconscious) and not just its effects.

  • As a general rule, travel between home and work, even if some work is carried on at home, always carries the purpose of getting home – it facilitates living away from work. The duality of purpose renders the expense non-deductible.

  • So-called ‘itinerant’ traders are an exception to the general rule that travel between home and work is incurred by the decision to live away from work.

  • Home, for such traders, is the only place new customers can contact them, where they store their tools etc. Therefore, they go home to look for new work. In these instances, getting home is an effect and not a purpose of the journey.

  • It is not necessary to determine where a trade is carried on, or to establish a ‘base of operations’. Travel between a home office and a main ‘base of operation’ will not necessarily be deductible. One must look solely to the statutory test, the main focus of which is the purpose for which the expenditure was incurred.

  • There is a distinction between “travelling in the course of a business and travelling to get to the place where the business is carried on”

Sole Traders

In many cases, for convenience, sole traders will include all of their travel expenses in their business accounts and then ‘add-back’ a portion to remove the cost of personal usage from the computation of assessable profits. When determining the appropriate percentage add-back for an individual taxpayer regard should be had to the principles set out above.

It is important to note that Revenue will not accept deductions for travel or subsistence expenses of sole traders based on the civil service rates.


Employers often reimburse employees for expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment in accordance with the approved civil service rates. The reimbursement of employees in line with the civil services rates (in accordance with IT51 or IT54) will be accepted by Revenue as an expense incurred wholly & exclusively for the purposes of the employer’s trade.



Food & Accommodation

It is a long established principle that the cost of meals taken at the place of business are not allowable expenses for tax purposes. In addition, expenses incurred on meals consumed away from the place of business are, in general, not wholly and exclusively laid out for the purposes of the trade or profession since everyone must eat in order to live. Where such costs are not allowable they may not be apportioned to allow extra costs incurred from the necessity of eating away from home or from the place of business.

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Costs of meals may be incurred wholly and exclusively for business purposes where a business by its nature involves travelling (for example, in the case of self-employed long distance lorry drivers) or where occasional business journeys outside the normal pattern are made. A reasonable level of expenses incurred in these circumstances may be deducted from business profits.

Where a business trip necessitates one or more nights away from home, reasonable accommodation costs incurred while away from home may be deducted. The cost of meals taken in conjunction with overnight accommodation may also be deducted. Where self-employed long distance lorry drivers spend the night in their cabs rather than taking overnight accommodation, the costs incurred on their meals may be deducted.

It is important to note that only expenses actually incurred and for which receipts are available may be claimed. Receipts must be retained for production in the course of a Revenue audit of the business.


  • What is the purpose of the expense (whether stated or subconscious) and not just its effects. Humans eat to live, they do not eat to work2. Therefore expenditure incurred on food in the course of a trade or profession will nearly always have a duality of purpose in that the person has the ordinary physical human need of eating.

  • Where additional expenditure is incurred on food because the taxpayer must eat away from home, that expenditure still has a duality of purpose meaning it is not an allowable expense.

  • Hotel accommodation incurred on a business trip – where there is no personal motive in the trip – is an allowable deduction. Where a hotel bill for a business trip includes reasonable amounts for both overnight accommodation and food then these two amounts should not be disaggregated. If the accommodation is allowable then so too is the food.

  • Where a person is on a business trip and the flights would be deductible, but it is more cost efficient to stay an extra night and return on a flight the following day, rather than return immediately, then any incidental private element arising from that extra day does not stop the cost of the flights being deductible.



Residence & domicile

An individual who is resident and domiciled in Ireland is liable to Irish income tax on his/her worldwide income as it arises (earned in the case of Schedule E). This individual’s ordinary residence status does not impact on his/her exposure to Irish income tax.

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A person is resident in Ireland for tax purposes if he/she is present in the State for -

  1. 183 days or more in that tax year or
  2. 280 days or more in that tax year plus the previous tax year taken together, with a minimum of 30 days in each year.
  3. An individual coming to Ireland who is not a resident but who can show that he/she intends to remain in Ireland and be resident in the following year, may elect to be treated as resident for the year of arrival.

Ordinary Residence

The concept of ordinary residence is a much broader concept than that of residence. The term broadly means the place where you are habitually resident i.e. in general, a person is ordinarily resident in the country in which he/she spends most of his/her time. An individual becomes ordinarily resident in Ireland if they have been tax resident in Ireland for each of the three previous tax years.


Under common law, every person must have a domicile. A person can only have one domicile at any particular time but cannot be without a domicile There are three kinds of domicile:

  1. Domicile of origin
  2. Domicile of choice
  3. Domicile of dependence

Domicile of Origin

Each person acquires a domicile at birth which in most cases is that of his father. This original domicile is retained throughout your life unless you acquire a domicile of choice. It should be noted that you cannot simply abandon your domicile of origin, it can only be replaced by acquiring a domicile of choice.

Domicile of Choice

It is possible to displace a domicile of origin and have it replaced by a domicile of choice: however this is not an easy process. In order to change domicile, an individual needs to show that he or she:

  1. is resident in the new country; and
  2. intends to reside there permanently or for an unlimited time.

The first condition doesn’t necessarily refer to tax residence. It is more the fact that the individual has established a physical presence in the country. We look at the “quality” of the residence also. For example, if the individual owns a house in the country, which they claim is their domicile of choice, this is more persuasive than if they only rent accommodation there on an ad hoc basis during visits to the country.

The second condition will not be satisfied if an individual only intends to reside in the new country for a fixed period of time or for a particular purpose. The individual must intend to reside in the new country permanently or for an unlimited time. If there is an intention to limit the time spent in a country or if a return to the original country is intended after the happening of an event (a contingency) then, as in the Bullock case, such intention must be clearly expressed and there must be a substantial possibility that it could happen. Acquiring a domicile of choice requires “a final and deliberate intention”. In practice this means a severing of almost all connections with the country of origin and establishing a permanent relationship in the country of choice. Providing conclusive evidence of intention is generally the factor that gives rise to difficulties in court cases related to domicile.

If a domicile of choice cannot be established clearly, then the individual’s current domicile does not change.

Domicile of dependence

A child is incapable of acquiring an independent domicile until he or she reaches the age of 18. Until then, the child has a domicile of dependence that normally follows that of his or her father. There are complications if the child’s parents change their domicile, if one parent dies or if the parents live apart:

  • Until a child turns 18 years of age, their domicile of dependence will change if their father changes his domicile during that time.
  • If the child is born outside marriage, the child takes the domicile of his or her mother.
  • If the father dies, the minor child may have a new domicile dependent on the mother.
  • Where a child’s domicile of dependence is based on the domicile of choice of his or her parent, that domicile will remain the child’s domicile after attaining the age of 18 years until he or she acquires a new domicile of choice of his or her own.
  • If the parent reverts to their domicile of origin before the child reaches 18 then the child’s domicile changes to the domicile of origin of the parent.
  • The domicile of a minor at any time when their father and mother are living apart shall be that of their mother if:
    • The minor then has their home with their mother and has no home with their father; or
    • The minor has at any time taken his mother’s domicile by virtue of the above and has not since has a home with their father.
  • After the death of the mother, a minor retains the mother’s domicile where the parents had been living apart before the mother’s death.


Domicile Levy

The domicile levy will came into effect from 1 January 2010. This levy applies to individuals who are Irish domiciled and are citizens of Ireland and who have:

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  • Worldwide income exceeding €1,000,000
  • An Irish income tax liability of less than €200,000, and
  • Irish property with a valuation in excess of €5,000,000 as at 31st December in the relevant year. In estimating the value of the asset, no deduction is allowed for debts or encumbrances.

Assets that are specifically excluded from the definition of Irish property are shares in a company which exists wholly or mainly to carry out a trade or a holding company that derives most of its value from trading subsidiaries.

Shares in foreign corporate entities may also come within the definition of Irish property if the shares derive the greater part of their value from Irish situated assets, namely land or buildings in the State.

An individual subject to this levy will be entitled to a credit against this levy for Irish income tax already paid in Ireland in the relevant year.

The levy applies irrespective of the individual’s tax residence status and it will be payable on a self assessment basis.



Remittance Basis of Taxation

Non-Irish domiciled individuals who are Irish tax resident for a year of assessment are liable to Irish income tax on Irish source income and on foreign income to the extent that the funds are remitted to Ireland. This is known as the Remittance Basis of Taxation.

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This means that remuneration derived from a non-Irish employment to the extent that duties of the employment are performed outside of Ireland and non-Irish investment income and gains may potentially fall outside of the Irish charge to tax.

Our team of experts can assist you in maximising the reliefs currently available under Irish tax legislation.



High Earners Restriction

Finance Bill 2010 amended the restriction of reliefs for High Earners for 2010 and subsequent tax years in order to achieve a 30% effective rate of income tax for those subject to the full restriction. This represents a 10% rise in the effective rate which currently applies.

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The entry level threshold for the restriction will now occur at adjusted income levels of €125,000 and the full restriction will apply at €400,000. Previously, only those individuals with incomes in excess of €500,000 were fully impacted by the restriction. Individuals earning between €250,000 and €500,000 were partially affected.

The restriction will apply to an individual for a tax year whose “adjusted income” is equal to or greater than the “threshold amount” and the aggregate of the specified reliefs used by the individual in the tax year is greater than the threshold amount.

If the individual’s adjusted income is less than the threshold amount or the amount of the specified reliefs being claimed is less than the threshold amount, the restriction will not apply. The calculations of applicable restrictions and tax liabilities for those affected are complex and detailed.



Close Company Surcharge

Most Irish resident companies are what are called 'close' companies. A Close Company is a company that is controlled by five or fewer participators or is controlled by any number of participators who are directors.

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The Close Company provisions set out in the Taxes Consolidation Act 1997 have four main implications for a company and its participators/directors.

  • Certain benefits-in-kind and expense payments to participators or associates will be treated as distributions.
  • Interest in excess of a specified rate paid to directors or their associates will be treated as distributions.
  • Loans to participators or their associates must be made under deduction of tax and, if the loan is forgiven, the grossed-up amount is treated as income in the hands of the recipient.
  • A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Close "service" companies (e.g. Solicitors, Accountants, Doctors, Journalists, and Quantity Surveyors) are also liable to a surcharge of 15% on one-half of their undistributed trading income.

Background to the Close Company Surcharge

Historically, Irish income tax rates were higher than Irish corporation tax and capital gains tax rates. It was therefore advantageous for individuals to accumulate income in a company where it was taxed at a lower rate. The individuals could then extract the money from the company tax efficiently, e.g. by way of capital rather than income or by way of interest free loan. The individuals would pay capital gains tax on any capital receipt – often little or no tax would actually be due because of the availability of losses or indexation relief.

Close company surcharge was then introduced:

  • To act as a disincentive to passive (non-trading) income being generated and kept in close companies, and
  • To make it more difficult for shareholders of close companies to extract funds from the company tax efficiently.

By the mid 1990’s the gap between the standard corporation tax rate and the top income tax rate had narrowed considerably – the close company legislation then became more of an administrative headache than an anti-avoidance measure. However, now the gap between income tax (40% income tax, plus PRSI, and the USC) and corporation tax (12.5% or 25%) is as wide as it is, a greater focus by Revenue can be expected on the anti-avoidance aspects of the legislation.



Taxation & company directors

In general, a director is a ‘chargeable person’ for income tax purposes and is obliged to submit an income tax return each year, notwithstanding the fact that all of his/her income may have been taxed at source under the PAYE system. In addition they must comply with the self-assessment regime and may have a requirement to make payments on account to meet their preliminary tax requirements. Where these requirements are not met by the due date, the director is exposed to statutory interest which is calculated at a rate of approximately 8% per annum.

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There are some exceptions to this general rule; for example unpaid directors and non-proprietary directors are usually excluded from the obligation to file an annual income tax return. In simple terms “proprietary director” means a director of a company who is the beneficial owner of or is able either directly or indirectly, to control more than 15% of the ordinary share capital of the company. Late surcharge provisions apply if the director’s income tax return is not submitted by the due date. The surcharge will be either 5% or 10% of the director’s income tax liability for that year before taking account of PAYE deducted from his salary by the company. This may result in a significant monetary penalty for the director even though no income tax may have been payable on filing the return for that period.


Despite salaries being taxed through the payroll systems, proprietary directors and their spouses who work in the company are not granted the PAYE Tax Credit. The exclusion of the PAYE credit is also extended to their children unless they work full-time in the company. Care also needs to be exercised by proprietary directors when completing their annual income tax returns as proprietary directors may only claim a credit for the PAYE deducted from their salaries if all the company’s payroll taxes for that year of assessment have been paid. This may be of concern particularly for the director of a company in financial difficulty, as Revenue will raise an assessment on the director effectively disregarding any PAYE that they may have suffered at source via the payroll if it is unpaid by the company.

Earned Income Tax Credit

From 2016, the self-employed and working proprietary directors and their working spouses/civil partners will be entitled to an income tax credit against income tax on their earned income. It provides for a maximum tax credit of €950 (€550 for 2016) (computed by reference to the standard rate of income tax) in respect of an individual’s earned income. Prior to the introduction of the earned income tax credit, proprietary directors did not qualify for the PAYE tax credit that is available to PAYE employees.


Until the publication of the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013 there were no legislative provisions to deal with the insurability of company directors. Following the introduction of this legislation, a director who has a 50% shareholding in the company will be treated as insurable under Class S for PRSI purposes. The classification of proprietary directors who own or control less than 50% of the shareholding of the company will continue to be determined on a case by case basis, taking into consideration the Code of Practice for Determining the Employment or Self-employment Status of Individuals. Where an individual is classified under Class A, PRSI is payable on their earnings by the employee (4%) and their employer (up to 10.75%). Class A provides them with entitlement to the full range of social insurance benefits including short term benefits in respect of illness, unemployment and maternity as well as long term benefits such as Widow/Widower’s or Surviving Civil Partner’s Pension and State Pension. Where an individual is classified under Class S, PRSI is payable on their earnings (4%) with no employer element leading to a direct saving for the company of 10.75% on directors’ salaries. Class S provides a director with an entitlement to certain short-term benefits (i.e. maternity benefit) as well as long term benefits such as Widow/Widower's or Surviving Civil Partner’s Pension and State Pension.

Transactions with the company

In addition to company law issues around the acquiring from or disposing of assets to a company, there are tax implications that need to be considered before entering such transactions. Within the owner managed sector in Ireland, in many cases the company shareholders are also directors of the company. (i) Disposal/acquisition of assets Tax law imposes market value when computing any tax associated with the movement of assets between director/shareholder and their company with any uplift between the values and consideration passing being subject to income tax, PRSI and USC. Where a capital loss arises on a transaction between the company and a director, the use of such a loss is restricted and can only be used against a future gain with the same party. Equally, transactions involving shares in the company may result in an income tax exposure even if they ostensibly appear to be capital in nature. (ii) Borrowing/Lending Where a director borrows money from a close company and the debt is outstanding at year end, the company is required to make a payment to Revenue equal to the amount of the debt outstanding regrossed at the standard rate of tax, which is currently 20%. Upon repayment of the loan by the director, the tax may be reclaimed from Revenue. For example; Tom, a company director borrows €10,000 from his company on 28 December 2012 and does not repay the loan until 28 December 2013. The company will be required to include as part of any corporate tax liability for 31/12/2012 an additional amount of €2,500 (€10,000 regrossed at 20%). Following repayment of the loan by Tom in December 2013, the company can seek a repayment of the €2,500 paid as part of the tax liability paid in respect of 2012. In addition, Tom will be liable to benefit in kind on the loan amount for the period outstanding. In the event that the company waives this debt, the amount of the waiver will be assessed as income on the director. The gross sum is treated as part of his total income and a credit is available for the deemed income tax deducted. The income tax paid by the company is no longer recoverable and the write off is not deductible for corporation tax purposes. Where a director lends money to his company and charges an interest rate on the loan, the receipt of such income is chargeable to income tax. At a corporate level, the interest paid to the director will only qualify for a tax deduction up to the lower of 13% of either the loan amount or the company’s issued capital.