Guidelines – Tax and Home-Based Working
e-Workers will incur certain expenditure in the performance of their duties from home, such as additional heating and electricity costs.
If the employer agrees to reimburse home based employees for this expenditure – and the employer does not have to do so – see information on the eWork Contract page – Revenue allows an employer to make payments up to €3.20 per home working day to employees who satisfy their conditions for the relief, without deducting PAYE, PRSI, or USC.
Amounts in excess of €3.20 paid by the employer should be subjected to tax.
Records of payments made must be retained by the employer for the purpose of any potential future Revenue compliance intervention.
If the employer does not make payment towards the e-workers’ expenses the employee is not entitled to claim a round sum of €3.20 per day. However, employees retain their statutory right to claim a deduction under Section 114 of the Taxes Consolidation Act (TCA) 1997 in respect of actual vouched expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment, and that test is strictly applied.
Where an employee decides to make such a claim, any reimbursement of expenses by the employer, should be deducted from such a claim.
The Conditions for Relief, as defined by the Revenue Commissioners, are as follow:
- There is a formal agreement in place between the employer and the employee under which the employee is required to work from home;
- An employee is required to perform substantive duties of the employment at home; and
- An employee is required to work for substantial periods at home.
The Revenue Commissioners offer the following example to illustrate what they consider to be eligible home-based working:
Jack works for Horizon Limited. He is the company’s IT officer for the north Dublin area. The company would be happy for Jack to work from its offices in south Dublin, but Jack prefers to travel from his home in north Dublin to clients’ premises and return directly to his home.
Jack spends time in the evenings preparing reports on the daily visits. J
Jack is not an e-worker and his employer is not entitled to pay the
€3.20 per day tax free. In addition, Jack has no entitlement to make a claim for any costs incurred while working at home as the costs would not be incurred wholly, exclusively and necessarily in the performance of the duties of the employment.
Horizon Limited employs a team of 15 people. The company operates from a small office which has only room for the director and a secretary. There is no room for the team who are recruited on the basis that they will work from home.
The employer is entitled to pay each employee €3.20 per day to cover additional costs incurred in working from home. If the employer does not make this payment, the employee may be entitled to make a claim under section 114 TCA 1997 in respect of vouched expenses incurred wholly, exclusively and necessarily in the performance of the duties of the employment.
Mick is a travelling salesman. He leaves his home to visit clients and, on the days where the clients are located close to Mick’s home, he may return home early to carry out some work such as inputting invoices on his laptop.
The main duty of Mick’s employment is that of a salesperson and the substantive duties of his employment are carried out at the clients’ premises. The fact that he carries out ancillary work at home does not make him an e-worker.
Where the Government recommends that employers allow employees to work from home to support national public health objectives, as in the case of Covid-19, the employer may pay the employee up to €3.20 per day to cover the additional costs of working from home. If the employer does not make this payment, the employee may be entitled to make a claim under section 114 TCA 1997 in respect of vouched
expenses incurred wholly, exclusively and necessarily in the performance of the duties of the employment.
Sample Working Calculation for Claim by Employee
The example below outlines the approach for employees claiming relief for allowable e-working expenses, i.e. expenses that are incurred wholly, exclusively and necessarily in the performance of the duties of their employment.
Eve works 180 days in total during the year, and 90 of these days are from home.
The annual amount paid on allowable utility bills (heating and electricity) is €1,750. The portion of utility bills that applies to e-working days is:
The allowable utility bills come to €4.80 per day.
Eve works from home 90 days per annum to the total allowable expenses come to €432.00 (i.e.€4.80 x 90 days)
This €432 must then then be apportioned between use for employment purposes and private use.
Revenue are willing to accept that the average proportion of the house attributable to a home office is 10%. Therefore, in this example the amount of e-working expenses that would be “allowable deductions incurred in employment” is €432 x 10% = €43.00.
This €43.00 is the e-work related expense due.
Retention of Records
As a claim may be selected for future examination, all documentation relating to a claim should be retained for a period of six years from the end of the tax year to which the claim relates.
Claiming e-Working Expenses
e-Working expenses can be claimed by completing an Income Tax return. The e-worker can complete this form on the Revenue website as follows:
- sign into myAccount;
- click on ‘Review your tax’ link in PAYE Services;
- select the Income Tax return for the relevant tax year;
- in the ‘Claim for Tax Credits, allowances and Reliefs’ page select ‘Allowable
- Deductions incurred in Employment’ and insert the amount of expense at the “Amount” section.
I will be happy to hear from you if I can help in any way with your e-work related queries. Please click here to contact me by email.