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Security costs Back  
The tax relief for employees and directors requiring security precautions by reason of their employments is so tightly drafted that the exclusions from its benefit appear almost immoral.
The Finance Act has made provision to ensure that where an employer incurs expense in taking security precautions with the sole object of meeting a ‘credible and serious threat to a director’s or an employee’s personal physical security, which arises wholly or mainly because of a director’s or employee’s office or employment’ the director or employee in question will not be charged to tax as if the expenses were part of his remuneration.
Robert Dowley, KPMG, tax partner

Readers might well wish to pause to consider what sort of tax system we have, when there is indeed a risk that the employee would be taxed in that fashion in the first place. Nonetheless, the measure, in so far as it goes, is to be welcomed.

In the D?il the Minister stated that the measure had been tightly drafted to ensure there would be no abuse of the measure. The drafting is indeed so tight that it does not extend to cover the tax charge that could arise on a director or employee by reason of security precautions taken by his employer specifically in respect of his spouse, or of his children. The section does say that the relief can apply to the costs of security provided in respect of the director or employee notwithstanding that there may be incidental benefits to the spouse or children or parents, but that is as far as it goes. It is quite foreseeable that security precautions might be necessary in relation to the children or separated spouse of an employee or director, who are no longer living in the same house as the director. As stated above, the relief would not extend to those costs.

The provision for use of ‘any mode of transport’ is excluded from the benefit of the relief. For example, if a company found it necessary to provide for a director with a car whose body or windscreens had special protection from explosions or bullets, that provision would not be covered by the section. It is not even clear whether the cost of adding extra protective measures to a car owned by the director or employee would be covered, although the matter is debatable.

The section offers protection from a tax liability only where the threat guarded against relates to the personal physical security of the individual. Where the threat is to his property, there is no protection against the tax charge if the employer, recognising that the threat arises totally by reason of the employment, incurs expense to guard against it, notwithstanding that it is a serious and credible threat.

This section is not of remote relevance nowadays. Employees, and the family of employees, were placed in ‘serious and credible’ danger to their ‘personal physical security’ in the recent raid in the Northern Bank. A number of prominent business persons have been kidnapped in Ireland in the past. The activities of ‘animal rights’ activists in the UK are an ever present threat to directors and employees of pharmaceutical companies.

In the State sector, members of the Criminal Asset Bureau, the Office of the Director of Public Prosecutions, and member of the Prison Service, to name but a few, may feel from time to time that they are exposed to ‘serious and credible threats’ as may be their families.

It is understandable that care is needed in the drafting of this relief to avoid abuse. But the fact that there must be a ‘serious and credible threat’ surely focuses the section adequately on the intended purpose of the section, and the restrictions eg in relation to family or in relation to mode of transport add nothing to effective anti-avoidance, while weakening the usefulness and justice of the section.

Readers may be interested in the following extract from the Committee Stage debates in the D?il on this particular provision of the Finance Bill. The quote is a comment by Ms Burton, TD, Labour Party Spokesman on Finance. ‘I hope there is provision to prevent tax avoidance. I would not be in favour of the State providing unnecessary safety features for wealthy individuals who are not engaged in State business although I do not want to see anything happen to them. However, I would make a sharp distinction between them and the people who work, often at great danger to themselves, in the Garda Siochana, the Revenue Commissioners, —…’ No doubt wealthy individuals who are not engaged in State business will be reassured that Ms Burton would not want to see ‘anything happen to them’.

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