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Case for home-working tax breaks ‘not strong’

A group that examines taxation options for the budget has said that the financial case for introducing enhanced tax supports for remote working is “not a strong one”.

The Department of Finance’s Tax Strategy Group says that, since employees and employers already appear to support the shift towards remote working, it is not clear that the State needs to step in to incentivise the practice.

It acknowledges, however, that it may still be appropriate to change the current tax arrangements in the context of a broader Government policy to encourage working from home.

Revenue scheme

Its paper estimates that there are around 875,000 workers currently working remotely in Ireland. It also cites figures from the National Remote Working Survey earlier this year, which indicate that 95% of those who had worked from home during the pandemic wanted to continue to do so in some form.

The group points out that there is currently no designated tax credit available to employees for remote working.

There is, however, a Revenue administrative practice in place, whereby the employer can choose to contribute of €3.20 per day, tax free, to employees for the costs incurred in working from home.

Alternatively, the employee can make a claim directly to Revenue at the end of the year for such costs. In this case, however, the employee is entitled to a tax deduction, and not a round sum of €3.20 per day.

Provisional Revenue data indicate that, for the tax year 2020, almost 70,000 such employee claims have been submitted, amounting to approximately €9 million.

Equity concerns

The group says that any enhanced system could raise concerns about equity, as not every worker had the ability to work remotely.

“It would appear that potential for working from home was more prevalent among higher income cohorts, than those on lower wages,” the paper adds.

On options for the future, the group says that the current Revenue arrangements could be formalised by putting forward legislative amendments, providing certainty for employers and workers.

Another option put forward is a working-from-home tax relief – of around €1.50 for each day the employee works from home – to be claimed on a self-assessment basis.

Extra €50 credit

The group says that this would reduce the administrative burden on employees to track their costs. Such a measure would still raise equity issues, the paper warns.

The document says that a bespoke tax credit for remote working could also be introduced quickly, but adds that this also raises issues of inefficiency and inequity.

The group suggests that consideration could be given to an increase of €50 in the tax credit for all PAYE and self-employed workers.

“While this measure does not have a specific policy aim, it would take account of the equity issues noted above, and give a benefit to all workers,” the paper says.