The BT Blog #10

Photo: Extra.ie

Guest Post by Marian Ryan, Consumer Tax Manager at Taxback.com

If, like many of us around the country, you have started working from home last year, you will no doubt be familiar with the extra costs that go hand in hand with remote working. Utility expenses such as electricity, heating, and broadband can all creep up with more time spent in the home office.

Here are some tips to help you recoup some of the costs associated with remote working…

A study we conducted in 2020 at Taxback.com found that 89% of remote workers surveyed said their household expenses had increased as a result of working from home. With working from home set to remain a dominant feature of working arrangements into 2021, it’s important that all workers are aware of any reliefs they might be entitled to which could put money in their pockets.

e-Worker Relief – Who can apply?

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 onto 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.

Your employer can make a voluntary payment to you of €3.20 per workday without deducting any PAYE, PRSI or USC. This payment is intended to cover expenses such as heating and electricity costs. 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.

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 10% of your electricity and heat bills incurred (apportioned based on the number of days worked at home over the year) and 30% of the broadband costs (apportioned based on the number of days worked at home over the year).

How can I claim?

Workers must supply a letter from their employer and collect all relevant utility bills. You can calculate your electricity and e-working costs as follows:

To calculate your relevant electricity and heat costs:

• Multiply your allowable utility bills by the number of e-working days
• Divide by 365
• Multiply by 10% (0.1)

To calculate your broadband e-working cost:

• Multiply your bill by the number of e-working days
• Divide by 365
• Multiply by 30% (0.3)

If the cost is shared between two or more people, it can be apportioned based on the amount each paid.

Increase your refund

In truth, this relief isn’t going to set your world on fire in terms of money in your pocket – the average worker will get between €20 – €60 back. But it’s still better in your pocket than with Revenue. And while you’re getting your affairs in order to claim it might prompt you to look at other tax reliefs you might be entitled to – these could really increase the refund you receive from Revenue.

Some of the main one’s taxpayers can claim for include:

1. Medical Expense Relief – Taxback.com stats show that only approximately 4 in 10 Irish people claim tax relief on the cost of their medical expenses. If you have paid for eligible health expenses you will be entitled to claim relief on them at your standard rate of tax – 20%. Day to day medical expenses such as doctor’s visits and prescription fees are often overlooked but can equate to a substantial amount over the course of a year.
2. Flat Rate Expense Relief – these are a type of tax relief for PAYE workers in specific trades and professions, whereby 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. A full list of jobs and associated reliefs can be found online at Revenue.ie. Over 180 different occupations are entitled to flat rate expenses of varying amounts between €21 to €2,476 per year with an average of €247 per year. Workers should note however, that flat rate expenses are not automatically deducted from pay so you have to be proactive and claim them yourself.
3. Stay and Spend 20% tax relief per person up to a value of €125 per individual or €250 per jointly assessed couple. This applies until April 2021 and can include meals in local restaurants.
4. Increased income tax relief for the Help-to-Buy Scheme – €30,000 (up from €20,000), or 10% (up from 5%) of the purchase price. Buyers can now max out on this grant on homes of €300,000 in value, rather than the previous amount of €400,000.
5. Cycle to Work Scheme – 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), so those who bought a new bike in 2016 or before can upgrade again now.
6. E-Worker relief – if a person works from home, they can apply for some tax relief on the cost of utilities and other expenditures that might be incurred over their working year. An employer can make a voluntary payment to an employee of €3.20 per workday without deducting any PAYE, PRSI or USC. This payment is intended to cover expenses such as heating and electricity costs. There is no obligation on the employer to make this payment and many employers are not in a financial position to provide their employees with this relief.  If you are an e-worker and your employer does not pay you the tax-free amount of €3.20 per day you can claim e-worker tax relief instead. Revenue will allow 10% of your utility expenses as an e-working expense, with the exception of broadband bills, of which 30% is allowable.
7. Home Carer Tax Credit can be claimed by any housewife/househusband 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 (if they earn between €7,200 and €10,400 will get a portion of the tax credit)
8. If you are paying for tuition fees for a full or part-time third level course, be it for yourself or for your child, then you may well be entitled to tax relief on the cost.