WFH has brought a raft of new tax implications that many of us find tricky to decipher — but it can work in your favour
AT first it was a novelty. Working from home during the first lockdown last year was something different and the situation was helped enormously by the good weather that April.
And there was an expectation that we would be back in the office in jig time.
But since then, repeated waves of Covid mean months of working from a spare room, a kitchen table or the bed have become a trial.
The daily grind of commuting has been replaced with the boredom and lack of social interaction of staring at a laptop all day, with the loneliness of it all only replaced by the odd phone call and Zoom link-ups.
The cold winter means the heating has been on constantly, with broadband having to be upgraded to cope with heavier demand, new computer equipment needed and more intense use of electricity, and more spent on food.
For some the savings on the likes of commuting are being wiped out by the extra cost of operating a home and office combo, under the same roof that was previously just a home.
So, does working from your kitchen change the way you are taxed?
What can you claim for? What about heating and light?
Is there anything that your employer needs to pay for in your home now? What about computers and laptops and work-station equipment?
Firstly, what defines an e-worker or remote worker?
In short, if you work at home on a full or part-time basis and you either log on to a work computer remotely, or you develop ideas, products or services remotely, then you are classed as an e-worker for tax purposes.
You will also need to have a formal agreement between you and your employer/business partner that allows you to work remotely, according to the consumer tax manager at Taxback.com Marian Ryan.
She says you will not be considered an e-worker if you bring work home outside of normal working hours.
Ms Ryan says your employer must provide any of the following where necessary to an e-working employee for business use: a computer or laptop, a printer, a scanner, software to allow you to work from home, a telephone, mobile and broadband services, and office furniture.
The lucky ones are getting the tax-free payment of €3.20 a working day from their employer.
This can be paid without the employer deducting any Pay As You Earn (PAYE) income tax, Pay Related Social Insurance (PRSI) or Universal Social Contributions (USC).
This payment could be worth €736 a year, on the basis of a five-day week with four weeks’ holiday and time off for bank holidays.
However, paying this €3.20 a day is at the discretion of the employer.
The payment is intended to cover expenses such as heating and electricity costs.
Ms Ryan said: “If your additional costs are higher than €3.20 per day, your employer can choose to pay these, or not. Note that any amount higher than €3.20 per day paid by your employer will be taxed.”
She said there is no obligation on the employer to make this payment and, given the impact of the pandemic, many employers are not in a financial position to provide their employees with this relief.
So, if your employer does not pay this benefit, are you entitled to anything?
The answer is yes. You can claim the e-worker’s relief through Revenue.
Allowable costs include 10pc of your electricity and heat bills incurred (apportioned based on the number of days worked at home over the year) and 30pc of the broadband costs.
This has to be apportioned based on the number of days worked at home over the year.
The amounts you can claim are not huge, so some will wonder if it is worth the bother. On the other hand, it can be argued that it is your money and it would be foolish to forgo it.
How can I claim?
Workers must supply a letter from their employer and collect all relevant utility bills.
To calculate your relevant electricity and heat costs, you multiply your allowable utility bills by the number of e-working days.
You then divide by 365, and multiply by 10pc (0.1), Ms Ryan explained.
To calculate your broadband e-working cost, you multiply your bill by the number of e-working days.
Then you divide by 365, and multiply by 30pc (0.3).
If the cost is shared between two or more people, it can be apportioned based on the amount each paid.
Principal Private Residence Relief and working from home
There has been some concern among Ireland’s new remote working workforce that because they now have what might be considered a “home office”, they would no longer be eligible for the Principal Private Residence tax relief if they were to sell their home at any point in the future.
A PPR is a house or apartment which you own and occupy as your only or main residence.
You will be exempt from Capital Gains Tax if you dispose of a property that for the entire period of ownership you lived in it as your main residence, used all the property as your home.
Ms Ryan says working from home will not impact on homeowners’ ability to claim the Principal Private Residence tax relief.
“If you are an e-worker and claiming e-worker relief it doesn’t affect your PPR in relation to Capital Gains Tax,” she said.
As few employers are paying the €3.20 a day due to the fact they are financially stretched, employees working from home would be wise to claim other tax reliefs that are available to them.
These are not huge amounts, but still worth claiming. And the process to claim is not difficult.
Medical expenses relief
If you have paid for eligible health expenses, like GP visits and prescriptions, you are entitled to claim relief at 20pc for the costs.
Nursing Home Relief
Anyone paying nursing home fees is eligible to claim relief at their marginal rate of tax.
A person can claim up to 40pc on nursing home or homecare costs, up to a maximum of €75,000.
If you are paying for tuition fees for a full or part-time third-level course, whether it be for yourself or for your child, then you may be entitled to tax relief on the cost.
Each claim is subject to a single disregard amount of €3,000 or €1,500 each tax year.
Flat-rate expense relief
These are a type of tax relief for PAYE workers in specific trades and professions where a person can reduce the amount of taxable income they have each year on the cost of certain expenses.
The amount that can be claimed depends on the job because the rates are set by Revenue each year for various classes of employee.
This has been increased from €1,000 to €1,250 (€1,500 for electric bikes). Taxpayers may now avail of the exemption once in any four-year period (previously a five-year period).
Home carer tax credit
This can be claimed by parents caring for their own children. The value of the credit for 2020 is €1,600.
It can be claimed either if the spouse is at home full time, or if the spouse works part time and earns less than €10,400 in 2020.