A 'totally inequitable' tax system for those working from home

Opinion: the current tax regime is both inequitable and inadequate for employees who may be working from home long into the future

A year on, we can reflect with more certainty on the way the country has changed since the pandemic began. One of the immediate changes was the increase in working from home for many workers. This change has brought increased focus on the tax treatment of expenses related to working from home. 

An employee will incur electricity, heating and broadband cost for working from home, as well as a loss of space in the home. The tax treatment of expenses of working from home depends upon whether or not the employer specifically reimburses cost related to working from home or not.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

From RTÉ Radio 1's Today with Claire Byrne, Norah Collender of Chartered Accountants Ireland and employment law solicitor Richard Grogan give advice on tax and workin from home

If an employer does not reimburse these expenses, a claim can be made to the Revenue Commissioners for the expenses incurred working from home. To avail of this, the employee must keep their electricity, heating and broadband bills for the year and 10% of electricity and heating, and 30% of broadband bills will be allowed.

However, the allowable expense is further restricted to the number of days working from home out of 365 days of the year. The tax relief is then given at the rate of tax (20% or 40%) that the employee pays tax at. Ultimately, this means that the tax relief is minimal.

On the other hand, if an employer makes a contribution to the employee for the cost of working from home, the employer can pay €3.20 for each day the employee works from home free of income tax, PRSI and Universal Social Charge.

This is totally inequitable. I see no reason why employees who are required to pay for their own expenses of working from home with no contribution from their employer are not afforded full income tax, PRSI and Universal Social Charge relief at a rate of €3.20 per day.

Recent reports suggest that the government are considering tax measures to promote remote working. It is easy to understand the attraction of working from home with lower carbon emissions, less congested cities and improved work-life balance for time-pressured parents.

But there certainly are drawbacks too. Working from home may not be suitable for employees in shared accommodation or for employees with family who use all of the available space in the home for usual home life. I would expect a sizable portion of the workforce fall within these categories. Even where a person can work from home, it may not be their preference. Working from home can be a lonely experience, lacking human interaction.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

From RTÉ Radio 1's Today With Claire Byrne, financial planner Eoin McGee and ICTU Social Policy Officer Laura Bambrick on the cost of working from home

The Government need to be particularly careful in their tax policy related to remote working. Tax measures can provide assistance to taxpayers in relation to some expense they incur or they can be used to provide an incentive to taxpayers to behave in a certain way.

One of the measures Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar is reported to be pushing for is the introduction of 100% accelerated capital allowances for equipment used for remote working. Accelerated capital allowances will give the employer business a full deduction for the cost of equipment for home use in the year it is purchased. This is in contrast to the existing capital allowances regime whereby a deduction of one eighth is given each year for eight years. This type of measure can incentivise businesses to have their employees work from home as they will get a greater tax deduction when equipment is used remotely.

Indeed, many employers have surely noticed the potential savings from staff working from home already. Fewer staff working on the employer's premises means less office space may be required. In a country where rental space is expensive, this is a significant incentive.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

From RTÉ Radio 1's Morning Ireland, Cian McCormack gets reaction to a new Government plan to give workers the right to request to work from home

Tax incentives for employers to have staff work from home may not be the most prudent course of action here. The risk is that the job market will be split between those who can work from home and those who cannot in some sectors. Unfortunately, it is likely to be younger people living in unsuitable accommodation who are most likely to be excluded from jobs requiring working from home.

The Government would be better advised to bring equity to the current tax relief available to employees working from home. Not only is the current regime inequitable, but it is also inadequate for employees who may find themselves working from home long into the future.

The Government would be better advised to bring equity to the current tax relief available to employees working from home

Should businesses be able to reduce their office space because they have a large number of staff working from home, the cost of office accommodation is being effectively transferred from the employer to the employee. Employees are losing space in their home for work space that would be traditionally provided by an employer. The Tánaiste and his cabinet colleagues would do well to dwell on that before pushing for any drastic changes to the current regime.

The views expressed here are those of the author and do not represent or reflect the views of RTÉ