Brian Keegan: Working from home is making claiming tax credits more complicated for many

The automatic granting of a modest tax credit, say in the order of €100 to €200,  would simplify matters for workers and Revenue alike
Brian Keegan: Working from home is making claiming tax credits more complicated for many

Even after public health restrictions are lifted, many employees will continue paying the costs of providing their own working environment in the homeplace. 

Time was that the Revenue Commissioners used to run campaigns to encourage taxpayers to claim the tax allowances and reliefs properly due to them. 

In many cases there was a reluctance to contact Revenue for any reason for fear that by drawing your case to their attention, the consequences of any past mistakes could well outweigh the benefits of getting some tax back. 

It may turn out that one of the lasting consequences of the pandemic experience is a change in the general attitude of the public towards the tax authority. 

Revenue has had a key role in delivering wage and business supports through the employer wage subsidy and other schemes, and are even the handling agency for the HSE’s Covid-19 vaccination certificates.

The relationship between the average taxpayer and the Revenue has also been helped both by online and tax law changes. 

Technological change has resulted in easier access for the taxpayer to their details via the Revenue website with quicker adjustments to payroll.

In legislative terms, there are now relatively few tax reliefs available for an individual employee to claim. 

Once a person’s marital status and family situation is recorded correctly, most workers can only claim for tax relief for pension contributions or medical expenses. 

Other claims have been automated or abolished.

The prevalence however of working from home is making tax more complicated for many workers.

Even after public health restrictions are lifted, many employees will continue paying the costs of providing their own working environment in the homeplace. 

The tax rules which control what costs an employee can and cannot claim against their income tax bill are very restrictive. 

Only “wholly, exclusively and necessarily” costs are allowed. This difficult condition means, for instance, that without a special dispensation, an employee cannot claim the cost of their work uniform.

Arrangements have been in place for many years which provide for flat-rate expenses to be claimed within some industries such as healthcare and hospitality; modest fixed amounts can be claimed reflecting services costs to employees by virtue of the requirements of the workplace.

Currently workers can claim for 10% of the cost of electricity and heat, time apportioned based on the number of days working from home; a 30% allowance towards broadband also similarly applies temporarily by concession. 

In most cases the resulting tax relief will not be very large. Nevertheless, the law provides for it. It is reported that over 50,000 taxpayers have already made individual claims.

The automatic granting of a modest tax credit, say in the order of €100 to €200, by virtue of the fact that the employee works from home some or all of the time would simplify matters for workers and Revenue alike. 

Certification that the employee is working from home by the employer should be sufficient evidence for eligibility. 

This kind of simplified process would also avoid situations arising as for example in the UK where a thriving industry has been established to make bulk tax relief claims on behalf of employees for all types of expenditure, not always with foundation as far as the authorities are concerned.

Pre-pandemic, the Revenue had been looking to restrict the scope of the existing flat rate expenses regime; that was a short-sighted policy because it impacted disproportionately on the lower paid, and it was not pursued. 

The changes to everyone's economic circumstances because of the pandemic now demand that the flat rate expenses idea be extended in the case of employees working from home. 

It is a straightforward way to underline the principles of simplicity and equity in the tax system.

  • Brian Keegan is director of public policy at Chartered Accountants Ireland

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