Remote workers feel the pinch with inadequate tax relief system

Plan to set up 400 remote-working hubs in rural areas, but employees need more tax incentives
Remote workers feel the pinch with inadequate tax relief system

Last month’s publication of the Government’s latest rural development initiative has been broadly welcomed, particularly by those for whom the Covid-19 emergency has done away with long hours in morning and evening traffic.

The plan envisages 400 remote-working hubs nationwide, to enable more people to live and work in rural communities.

It aims to move 20% of those working in the public sector to remote working this year, with further annual increases over the next five years.

Legislation will provide employees with the right to request remote working.

Also, as part of Budget 2022, the coalition has committed to reviewing the tax arrangements for remote working for both employers and employees.

This measure hasn’t been welcomed in all quarters.

Marian Ryan, consumer tax manager with Taxback.com, says that the current working from home tax allowances and rebates were to have been reviewed in this year’s budget.

“As it stands, you can claim 30% of broadband costs for days worked at home, together with other vouched expenses, where they are ‘wholly, exclusively and necessarily’ part of your work,” Ms Ryan says.

“Also, you can only claim for these expenses if your employer does not already make a payment towards them. 

These allowances will remain in place for the duration of the Covid-19 pandemic.

“According to the announcement, any tax incentives for 2022 are unlikely to be announced until October, well after all previously city-based employees will have to decide whether they’re coming back to live in Dublin.”

Many employees have incurred extra expenses as a result of remote working. 
Many employees have incurred extra expenses as a result of remote working. 

The existing tax incentives are hardly worth writing home about.

If you go to the bother of collecting your receipts and claiming them, you will net somewhere between €20 and €60 a year, depending on salary and other factors.

“We know that some workers are feeling the pinch financially, as a result of the extra expenses incurred working from home,” says Ms Ryan.

“In a survey we conducted half way through 2020, 86% of people working from home believed that remote working will remain a dominant feature of their working arrangements, to some degree, into late 2021, while 89% said their household expenses have, and will, increase as a result.

“So, anything the Revenue or government can do to give a little back to these workers has to be welcomed,” Ms Ryan says.

Flat-rate expenses

An earlier survey by the company found that only 5% of employers of Ireland’s remote workforce are paying the tax-free expense of €3.20 per day. 

This allowance covers any additional costs that arise as a result of working from home. It’s tax-free, which means employers don’t have to deduct PAYE, PRSI, or USC from that amount. But it isn’t a legal obligation to pay it.

The solution, Ms Ryan says, is the introduction of a new, flat-rate expense category for remote workers.

Flat-rate expenses — or FREs — represent an allowance for costs incurred in performing your employment duties, costs that are directly related to the nature of that employment. 

Typically, if you encounter a legitimate expense relating to work, you retain the receipt and claim at the appropriate time. FREs were introduced to streamline this process and grant unvouched, flat-rate allowances to a long list of employees who encounter these expenses every day.

Agreed deduction

The amount of the deduction is agreed between Revenue and representatives of groups or classes of employees, usually trade-union officials. 

All employees of the class or group in question can then claim the agreed deduction in their own tax credits.

So, for example, electricians can claim €153 per year, head waiters can claim €127, and fishermen can claim €318. The list is long and quirky. 

Cosmetologists, who must supply and launder their own uniforms, get €160 per annum, Church of Ireland clergymen get €127, and bookbinders (hand) get €109, while bookbinders (other) get only €97. 

It’s also pretty antiquated. Female cardiac technicians get €212, while males with the same job are entitled to only €107.

“This type of relief is already embedded in our tax system,” says Ms Ryan, “so its roll-out could be relatively straight forward.

Essentially, it would mean that people would wind up with significantly more money in their pockets. 

"Our estimates suggest the difference could be anywhere from €100 to €200 or more.

“Introducing a flat-rate expense equivalent to this €3.20/day payment would really give a welcome capital injection to an employee’s finances and would take the pressure off employers.”

As it stands, however, these allowances — even if increased substantially — are unlikely to be claimed. 

Why? Because as many as two-thirds of taxpayers in Ireland don’t claim the tax reliefs and refunds they’re already owed.

Entitlements

This was one of the primary findings of another Taxback.com survey. 

The research, which polled 3,200 taxpayers, found that the biggest reason for not submitting a claim was that people didn’t think they’d be entitled to anything (29%), while 20% said they thought the process would be too complicated and/or time-consuming.

Almost half of all respondents to the survey said they feared that by submitting a claim, they might discover that they owe Revenue money, rather than the other way round.

Ms Ryan says that the number of cases in which this happens is “minute”. 

And if there is ever a case where a person ends up owning money, this is usually offset by the refund that they’re due.

“If you pay for a GP visit just once in the year, you will be owed a tax refund,” Ms Ryan says. 

It’s really a case that people simply aren’t aware of their entitlements.

"There are so many different tax reliefs out there, it’s often the case that people can avail of refunds on transactions or services that they would never expect.

“These can range from more common tax expenses, such as medical and doctors’ fees, or tuition fees, right through to flat-rate expenses, relief on IVF treatments, the home-carer tax credit, and overpaid USC.”

The survey found that in the last five years, there’s been a jump in the number of people saying that they want to ‘pay their fair share in taxes’.

“While there’s no way of knowing for sure what accounts for this movement,” says Ms Ryan,

"Perhaps what we have all experienced over the course of the last 12 months might have a role to play — the payment of wage supports from exchequer funds has kept people and households afloat, when they might otherwise have been in dire financial straits, so perhaps more people now acknowledge the importance of taxes.”

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