Irish Revenue has published an updated Tax and Duty Manual 05-02-13 which covers the tax treatment of expenses and benefits for certain e-workers, writes Thalia O'Toole, Head of Global Mobility at KPMG in Ireland.
The updates include the following:
There is no change to the general definition of an e-worker for the purposes of income tax relief. It remains an individual who works partially or fully from home and who uses technology daily to log-in to an employer’s computer system and remotely exchange data and ideas, develop or deliver products and services.
For income tax relief to apply the following conditions must normally be met;
Substantive duties or periods does not include where an employee has chosen to work at home or that the activities performed are of an administrative or ancillary nature.
During COVID-19, where working from home has occurred solely because employers and employees are following Irish Government guidelines, those employees will also be considered eligible employees for the purposes of tax relief during this period.
The guidance confirms Revenue’s view that irrespective of how many or how few days are spent by an e-worker in the office, the normal place of work for income tax purposes remains the employer’s place of business.
This means that travel from home to the office is never business travel and employers should not include this mileage when calculating any reduction in company car benefit in kind for payroll purposes. Further, where the employer reimburses mileage claims for private car usage or other travel costs in travelling from home to the office or covers the costs of accommodation or subsistence while attending the place of business, these costs are considered personal and fully taxable as earnings through the PAYE system.
Where business travel starts or ends at home, the distance which constitutes business travel must be calculated based upon the “lesser of” rule. This is the lesser of:
For example, the employers place of business is in Naas, Co. Kildare while an e-worker lives in Cork. A key client of the employee is based in Citywest, Dublin. Business travel for the purposes of tax relief will be limited to the distance from the office in Naas to the client’s premises in Citywest. A record of the distance should be obtained from Google maps to support the expense claim or benefit in kind reduction.
A distinction is made between employer provided benefits and those that an employee incurs personally.
The table below sets out the differences in tax treatment on costs incurred on equipment and furniture to enable an employee to work from home safely:
Examples of Office Equipment/Furniture |
Purchased and Owned by Employer |
Purchased and Owned by Employee |
|
Not taxed as a benefit in kind once private use is incidental to business use.
On leaving employment, employee should return the equipment to the employer or pay market value at that time to avoid a benefit in kind arising on exit. |
Costs incurred from net pay with no tax relief available from Irish Revenue for the employee.
Where the employer reimburses employee costs, these are treated as earnings for PAYE/PRSI purposes at time of payment. |
There is no change to the previous guidance which allows an employer to pay a tax-free per diem of up to €3.20 for each remote working day. This per diem is designed to cover all incremental utility costs incurred during the homeworking period including light, heat and broadband.
The per diem can only be paid tax free provided no travel and subsistence costs are reimbursed for the same day. This means that an employee working from home but who incurs qualifying travel or subsistence expenses while travelling to a client’s premises on a given day which are then reimbursed should either not receive the per diem for that day or the employer should treat the per diem paid for that day as taxable earnings for payroll purposes.
Where the employer does not pay a per diem, the employee may make a claim to Irish Revenue for a percentage of the actual daily costs incurred on foot of supporting evidence. Only amounts incurred personally can be claimed. Therefore, where costs are shared only that portion of the expense incurred by the individual may be claimed, a claim may be made by the individual who incurred the remaining portion where they are also considered an e-worker.
% of Light & Heat Costs claimable by an e-Worker from Irish Revenue from 2020 |
% of Broadband Costs claimable by an e-Worker from Irish Revenue from 2020 |
10% of cost of electricity and heat apportioned based on the number of days worked from home over the year.
|
30%* of the cost of broadband apportioned based on the number of days worked from home over the year. |
*The tax relief available for broadband will apply for the duration of the pandemic.
To calculate the available light, heat and broadband costs, before applying the relevant percentage, the following formula should be used:
Relevant costs of the e-worker x Home Working Days / 365
An example of how to calculate the value of the pre-tax deduction is set out below:
|
|
Light & Heat Claim |
Broadband Claim |
Home Working Days |
A |
150 |
150 |
Total Household Costs in 2020 |
B |
€3,000 |
€500 |
Total Costs borne by e-Worker |
C |
€1,500 |
€500 |
Total Days in Year |
D |
365 |
365 |
Available for relief [C*A/D] |
E |
€616 |
€205 |
Relevant % |
F |
10% |
30% |
Pre-Tax Deduction Claim [E*F] |
G |
€61 |
€61 |
In order to claim tax relief, the employee should file an income tax return using the MyAccount facility on the Revenue website and make a claim under ‘Tax Credits and Reliefs’ section of the tax return. The value of the pre-tax deduction calculated should be inputted into the “Amount Claimed’ section of ‘Remote Working (e-Working) Expenses’ on that page. Evidence of the value of costs and the number of home working days will need to be kept by the employee for six years from the end of the tax year to which the claim relates.
For more on how the tax implications of remote working could affect you or your employees, get in touch with Thalia O'Toole, Head of Global Mobility Services, or one of the People Services team.