Revenue have recently announced that non-taxable advances will be allowed in certain scenarios.
This change is being implemented following feedback on the ERR release in relation to advanced not being allowed.
What this means?
Irish Revenue will introduce an optional administrative practice allowing the processing of non-taxable advances under certain conditions.
For example:
Conditions for Application | Advances are only allowed for anticipated travel & subsistence expenses and Employers must ensure appropriate controls are in place to track and reconcile all travel and subsistence advance payments. |
Reporting Advances | Advance travel or subsistence payments must be reported under Enhanced Reporting Requirements (ERR) using a new designated “Advances” subcategory. In addition, as the advance is drawn down on, this must also be reported to Revenue under ERR. |
Reasonable Estimates | It's crucial that advance payments represent a reasonable estimate of the expected claim amount and qualify for relief under section 114 TCA 1997. |
Timely Reconciliation | Employers are required to reconcile advance payments with actual claims promptly. Any excess in payment should be recouped without delay or subjected to tax if not settled. |
Notification to Revenue | While there's no requirement to notify Revenue in advance, employers must have appropriate governance and controls in place to meet the required conditions. |
No Obligation | Employers have the discretion to opt into this administrative practice. If choosing not to, standard tax rules apply, meaning any advance payments must be taxed through payroll. |
Further guidance and examples, check the Revenue Tax Duty Manual (TDM) part 38-03-33.
What do I need to do next?
Employers deciding to operate advances must report all advance travel and subsistence payments under ERR once their chosen reporting mechanism becomes available.
Revenue Manual screens:
Revenue plans to make a software change to their ROS screens to allow employers to capture and report these advance payments manually. The Revenue ROS online/file Tax and Duty Manual Part 38-03-33 upload and API are anticipated to be available within approximately two months.
PeopleXD solution:
We will be updating our software solution to accommodate the ERR reporting requirements. Until this is released, non-taxable advance payments need to be manually reported using Revenue screens.
Non-PeopleXD systems:
You will need to discuss with that vendor if they plan to incorporate any new functionality for this within their product.