E-Worker Expenses Relief
Should you claim flat rate expense from Employer, or vouched expenses through Revenue?
Covid 19 has brought a lot of changes into our lives and one of those changes relates to our work/employment. A lot of workers will now have to work from home. Most likely those workers have never worked from home before and are unaware that there are some expenses they can claim. E-workers will incur certain expenditure in the performance of their duties at home, such as additional heating, electricity and broadband costs.
Option 1: Claim Flat Rate Expense from Employer
Revenue allows an employer to make payments of up to €3.20 per day to employees Tax Free – without deducting PAYE, PRSI, or USC. Amounts in excess of €3.20 paid by the employer would be subjected to tax. No additional claims need to be made to Revenue, unless the employee believes that €3.20 doesn’t cover his/her e-working related expenses in full.
Please note: This is optional for your employer – they do not have to pay you the €3.20 for each day worked from home.
Example 1: you are a full time employee working Monday to Friday 9am-5pm . Your employer has told you that for the next 4 weeks (starting 23rd of March) you will have to work from home because of Covid 19. Your employer has also told you that he/she will pay you €3.20 a day to cover your heating, electricity and internet expenses. This means you will get €16.00 tax free every week you will be working from home. In total €64.00 tax free.
This amount will be received through payroll, as a tax free amount.
Option 2: Claim vouched expenses from Revenue through Tax Return
However, if your employer doesn’t pay you €3.20 daily allowance, you can still claim for some expenses incurred in the course of working from home directly from the Revenue at the end of tax year. Revenue have recently issued an amended document confirming that where an employer does not pay €3.20 per day to an e-worker, the employee is not entitled to automatically claim a round sum of €3.20 per day. However, under section 114 of TCA 1997 employees can make a claim at the end of tax year directly to Revenue in respect of actual vouched expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment. The employee must keep copies of bills/receipts for expenses claimed for a period of 6 years.
What can you claim?
This is intended to cover a portion of your heating, electricity and broadband costs.
So how much can you claim then?
The average annual electricity bill in Ireland is €1,035; the average annual gas bill in Ireland is €805 and the average annual broadband cost is €384. So the total average annual expenses is €2,224.
Expenses should be apportioned between private use and employment use. To claim e-workers tax relief directly from Revenue, you will need to calculate how much of those annual expenses can be allocated to your e-working. Revenue has calculated that the average proportion of the house attributable to a home office is 10% and this is the maximum allowable.
You are a full time employee working Monday to Friday 9am-5pm . Your employer has told you that for the next 4 weeks (starting 23rd of March) you will have to work from home because of Covid 19. Your employer has also told you that he/she will not pay you a daily allowance of €3.20, but you can make a claim to Revenue at the end of the tax year yourself.
You can calculate your e-working expenses as follows:
Annual bill €2,224
Days worked from home 20
€2,224 x 20 / 365 = €121.86
10% of the above = €12.18
So €12.18 is the maximum tax relief you can claim directly from Revenue for e-working 20 days. Just keep in mind, this expense (€12.18) will be treated by Revenue as income deduction – it means you will get this relief at your marginal tax rate of 20% or 40% and real benefit to you will be worth only €2.44 or €4.87 for 20 days e-working. This is only €0.12 or €0.24 per day compared to €3.20 daily allowance if payable by employer!!!
As you can see from the 2 examples above it is much more beneficial to get those expenses covered by your employer. For a 20 day e-working your employer can pay you €64 tax free but you will only be able to claim €12.18 at your marginal tax rate directly from the Revenue. Talk to your employer!!!
Costs of equipment
Your employer may also provide you with equipment to carry out your work from home. Equipment can include:
Don’t worry, this is not Benefit-in-Kind if you only use this equipment to carry out your work and private use is minimal or incidental.
Best wishes to all our fellow work from homers!