What is e-working?
E-working (also known as working from home or remote working) is where you work from home on a full or part time basis. Obviously COVID-19 has had a huge impact on the way people in Ireland are working so Budget 2021 took this into account by introducing new e-working tax credits for employees. These tax credits only apply to e-working situations and not where an employee brings home work to complete on evenings and weekends in their normal course of business.
- working at home either on a full-time or part-time basis
- working some of the time at home and the remainder in the office
- logging onto the employer’s computer system remotely
- sending and receiving email, data or files remotely
- developing ideas, products and services remotely
To qualify as an e-worker, there must be a formal agreement in place between the employer and employee where the employee is required to work from home for substantial periods and perform substantive duties at home.
E-working tax rules
You may incur extra costs as a result of working from home including electricity, heating or broadband costs. Other expenses which are exclusively for the purposes of your work are also allowable.
An employer can pay you an allowance of €3.20 per day without applying any income tax, PRSI or USC. Anything over €3.20 per day will be taxable. There is no obligation on the employer to make a payment in relation to these costs.
If your employer does not pay you a daily allowance, you can claim tax relief at the end of the year. This will mean you can get a refund of tax you already paid.
** It is important to note that the employee cannot claim a flat rate fee of €3.20 per day if the employer does not pay an allowance **
Your refund of tax is based on:
- How many days you worked from home
- The cost of the expenses
- Revenue’s agreed rate for calculating the cost of running a home office
Revenue have agreed a rate of 10% for heating and utility bills. This means you can claim 10% of your total electricity and heating bills (on the days you were working from home) against your taxes. You can also claim 30% of your broadband bills, again, you can only claim for the days that you worked from home. This is in place for the duration of the COVID-19 pandemic. To claim these expenses, the employee must have incurred the cost and must retain proof.
Items such as laptops, office equipment and office furniture are not allowable deductions for employees. If an employer provides such equipment for home use by the employee, it shall not be subject to a BIK where private use of the equipment is incidental.
Example of expenses calculation
Here is a worked example from the Revenue e-working and tax manual. There are other good examples contained here also.
Eve works 180 days in total during the year, and 90 of these days are from home. The annual amount of expenses incurred by Eve on allowable utility bills is €1,750 on electricity and heat and €430 on broadband. These amounts should be apportioned based on the number of days working from home over the year, and then a further apportionment for business use.
Electricity & Heat
(1,750 X 90) / 365 = €432
Revenue calculated cost of utility bills is 10% = €43
(430 X 90) /365 = €106
Revenue calculated costs of broadband is 30% = €32
Total amount of expenses to be claimed by Eve = €75. This would result in a €30 refund if she pays tax at the 40% rate.
Making a claim
E-Working expenses can be claimed by completing an Income Tax return. An individual can complete this form on the Revenue website as follows:
- Sign into myAccount
- Click on ‘Review your tax’ link in PAYE Service
- Select the Income Tax return for 2020
- Click ‘Your Job’
- select ‘Remote Working (e-Working) Expenses’ in the ‘Tax Credits and Reliefs’ page and insert the amount of expense at ‘Amount Claimed’