Many people who can, are now working from home in many roles across Ireland to help reduce the spread of Covid-19. While this will reduce expenses such as commuting it will result in an increase of daily household costs such as heating and electricity due to performing work duties at home.
Revenue have for many years recognised the increased cost of e-working and have allowed the following as options for employees:
The options available to help with these increased costs to employees:
1. Employer contribution
Employers can contribute to help cover the additional costs of working remotely up to €3.20 per day to the employee, without the deduction of tax, USC or PRSI. This tax free amount is payable for each day the employee works remotely. It’s important to know, employers are under no obligation to make this payment.
2. Tax Relief
If your employer is not paying the daily rate of €3.20, you are entitled to claim tax relief for these expenses direct from the Revenue. Employees are not entitled to claim the round sum of €3.20 per day. Instead, you can claim a deduction under section 114 of the Taxes Consolidation Act (TCA) 1997 for expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment.
Please note, where an employee decides to make a claim, any reimbursement of expenses (€3.20 per day) by the employer should be deducted from the claim.
Calculating working from home expenses:
Below is an example provided by Revenue, that outlines what you should do to calculate your tax relief claim.
Sarah works 180 days in total during the year, and 90 of these days are from home. The annual amount paid on allowable utility bills (heating and electricity) is €1,750.
1. If Sarah’s employer paid the daily rate of €3.20, Sarah could receive €288 (90 days X €3.20).
2. Claiming expenses through Revenue is calculated as follows:
Allowable utility bills x No. of days working from home / 365 days
€1,750 X (90 / 365) = €432
€432 will then be divided between use for employment purposes and private use.
Revenue are willing to accept that the average proportion of the expenses working from home is 10%.
So in Sarah’s example, the amount of expenses that would be “allowable deductions incurred in employment” is:
€432 X 10% = €43.00 (this is the expense amount due).
If Sarah has received any payment from her employer, this will be deducted from the €43.00
Assuming Sarah pays tax at 40% this will result in a tax refund of €17.20 for the year.