Revenue will defer cuts to employee flat rate expenses to 2022

Nov 16, 2020

Revenue recently announced it will defer the implementation of the findings of its review of the flat rate expenses regime to 1 January 2022.  Revenue’s decision follows representations from Minister Donohoe that now is not a good time to cut flat rate expenses given the upheaval to the labour market brought about by COVID-19.  Director of Advocacy and Voice for Chartered Accountants Ireland, Brian Keegan, has publicly raised concerns on plans to cut employee flat rate expenses since Revenue first put forward the idea in 2018 as covered in the Irish Examiner, the Irish Times and the Irish Independent to name but a few of the media outlets which have brought public awareness to this issue.

In 2019 Revenue’s review of the flat rate expenses indicated that the basis for some of the existing allowances was no longer valid. Revenue deferred the implementation of its findings pending the outcome of a policy review by the Tax Strategy Group.

On 29 October 2020, the Minister for Finance wrote to Revenue Chairman, Niall Cody, noting that 'while the TSG did not reach specific conclusions on the [income tax] paper, the Group observed that, having regard to the huge disruption in the labour market brought about by COVID-19, the question of the appropriate timing of the introduction of any policy changes relating to the flat rate expenses regime was one that would require careful consideration.

In his reply to the Minister on Monday (9/11/2020), Mr Cody said that: ‘Revenue would have no objection to a further deferral of the implementation of the findings of the FRE (flat rate expense) regime to 1 January 2022, pending decisions by [the Minister] and [his] Department on the policy options put forward by the TSG on various matters relating to employment expenses and the enactment of legislative changes in that area, if any.

See Revenue’s most recent press release on this issue.  The Tax Strategy Group Income Tax paper 2021 sets out various options to replace flat rate expenses.