It's time to reform the tax rules of remote working

Nov 20, 2020

With many of us working remotely for now, it is imperative that Irish tax rules around the 'normal' place of work, as well as expenses, are re-evaluated. Colin Smith explains.

The Department of Business Enterprise and Innovation (DBEI) recently published the results of its remote working consultation held in August. While submissions to the DBEI covered a wide range of topics, nearly 200 of the 520 submissions raised tax and financial remote work-related concerns. The CCAB-I was among the submissions to outline tax problems in the context of remote working. A special interdepartmental group has been set up to take over for the DBEI to work on the Programme for Government’s promise to develop a remote working strategy.

Current measures

As outlined by the Minister on Budget Day, there are tax measures in place, to some extent, to support remote workers:

Employers can contribute up to €3.20 per day to cover the employee’s additional costs of working from home, such as electricity, heat and broadband, without triggering a charge to benefit-in-kind (BIK).

Many employers cannot afford to make such a contribution in the current economic climate. In the UK, the Government provides tax relief of £1.20 per week to lower-rate taxpayers and £2.40 per week to higher-rate taxpayers, when workers are required to work from home due to COVID-19 restrictions. The UK measure is modest, but it’s easy to claim the relief and it recognises that workers are out of pocket due to the restrictions. A similar measure should be considered by the Irish Government.

Employees not in receipt of a contribution from an employer can make a claim for tax relief directly from Revenue of 10% of the cost of electricity and heat as apportioned over the number of days worked at home over the year. Revenue recently announced that it will also allow a claim for 30% of the cost of broadband apportioned over the number of days worked at home over the year.

An employee working from home cannot claim tax relief for the purchase of work-related equipment such as computers and office furniture. However, the employer can provide such equipment to the employee and a BIK charge will not arise so long as private use is minimal.

Employees can make a claim for tax relief directly from Revenue for other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of their employment.

Revenue applies a strict interpretation on the meaning of wholly, exclusively, and necessarily based on case law: an employee can only claim a deduction where the expense is incurred entirely in the performance of their duties, the employee is required to incur the expense in the performance of their duties, and they could not have carried out their duties without incurring the expense. These are complex rules and the odds of making a successful claim are stacked against the employee in the context of working from home. Fairer and more accessible tax rules must be developed as part of an effective strategy for remote working.

‘Normal’ place of work

As set out in the CCAB-I’s submission to DBEI, an employee’s normal place of work is central to the tax treatment of travel and subsistence reimbursements to employees. Revenue holds the position that an employee’s home does not qualify as a normal place of work other than in exceptional circumstances and this brings complexity to what should be a straightforward matter.

Employees and employers have risen to the challenge of new work practices as necessitated by COVID-19, and Irish tax rules must now align with these practices by re-evaluating what is a ‘normal’ place of work for tax purposes and the rules for tax deductible expenses of employment.

Colin Smith is a Tax Partner at PwC and member of CCAB-I Tax Committee South.