Remote work tax credit: too much effort for just €61 back?

At a time of soaring energy costs, it would seem like a no-brainer that workers would look to defray some of these bills by claiming any relief they are entitled to in a world where working from home has become mainstream. However, this hasn’t been the case.

Just take a look at the numbers that have recently claimed the remote working credit. Back in 2021, the Government estimated that some 400,000 people could benefit from the credit. However, latest Revenue figures show that just 20 per cent of those eligible have claimed the relief thus far for 2022.

So, with Budget 2024 looming, is it time for a change?

Who’s claiming it?

Despite hundreds of thousands of people being entitled to the credit, figures from Revenue show that take-up has been far less than expected.

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For 2022, just 75,321 people claimed the relief – far less than the estimated 400,000 or so people who should be entitled to it.

And how much did they get back? Just €61.

Yes, despite soaring energy bills last year which put many households to the pin of their collars, Revenue figures show that the average benefit received from those who did claim the credit was just €61.

No wonder then, perhaps, that so many people simply haven’t bothered to do so.

Interestingly, Revenue says that almost 150,000 PAYE taxpayers filed a 2022 income tax return – for the first time ever – in the first quarter of 2023. While most of these did so to activate their entitlement to the rent credit, some 8,147 were chasing remote working relief.

To date, figures show that the scheme has cost the exchequer €5 million – far below the original estimate given of about €11 million a year.

More detailed figures show that those claiming it are evenly spread out across income brackets – some 11,382 people earning €30,000-€40,000, for example, claimed the credit, while 10,416 people earning €100,000-€150,000 also claimed it.

Slightly more men (53.7 per cent of total) claimed than women, while younger people were more proactive about it, with 42.9 per cent of claims coming from those aged 25-34, compared with just 4.9 per cent for those aged 55-64.

How it works

Tax relief for working from home has been available for some time but really came into its own due to the Covid-19 pandemic, which heralded a dramatic change in how we work. While workers have returned to their offices, those who can work from home are now doing so in large numbers for at least part of the week.

To facilitate this, tax relief for remote working has increased in recent years. However as the data shows, take-up figures remain much lower than expected.

“There’s a perception that it’s very complicated and very hard,” says Marian Ryan of Taxback.com.

You don’t have to wait until the end of the year to claim the credit – once you have your bills you can apply for the relief via the Revenue’s MyAccount service

Ryan thinks this perception exists because the system was previously more onerous, noting that at one point you had to get a letter from your employer on headed paper confirming the exact number of days you worked from home.

Since Covid, however, it has become easier. “Some people can get randomly selected for audit, but in general they [Revenue] are happy to take you at your word,” Ryan says.

But that’s not to say it’s not without effort either. To claim the relief, you’ll first need to work out how much you spent on home heating, electricity and broadband last year.

“You don’t necessarily have to send in all the receipts, but you do need a figure,” says Ryan.

In practice then, what this means is that you need to get all your relevant bills together for the year, and work out your totals (if you can’t find the details on this, your relevant supplier should be able to help).

But if, like Ryan, you’re a fan of frequently changing energy suppliers to get the best rates, this means a few more phone calls, or online log-ins, to work out exactly how much you paid during the relevant year. And if your broadband comes as part of a TV package, you’ll also need to work out the contribution for broadband only.

For reasons such as this – additional complications are if you’re in a house-share, for example – Ryan wonders whether people are claiming for the full amount of what they’re entitled to.

Once you have this figure, you then divide it by the days you worked from home.

So, let’s say John works from home three days a week, or 156 days a year. Take away 15 of those days for annual leave and he’s left with 141 days.

Last year, his total energy bills came to €2,200, and broadband to €500, or €2,700 in total. He multiplies this by 141 days, and divides by the days in the year, 365, to come up with €1,043. He is entitled to relief on 30 per cent of this, so €312.90.

However, this is not how much he’s going to get back – he can now claim relief based on his tax rate. If he earns €30,000 a year he will be entitled to 20 per cent back, so €62.58. But if he is on the higher rate of tax, he’ll get double that, at €125.16 a year.

You don’t have to wait until the end of the year to claim the credit – once you have your bills you can apply for the relief via the Revenue’s MyAccount service.

[ Rent Tax Credit: Why aren’t more renters claiming it? ]

Is there a better way?

So there are three issues with the credit. First, the amount people are getting back doesn’t seem to be sufficient to make enough of a dent on people’s work-from-home costs. Secondly, the method of claiming it is just too cumbersome for the scant reward on offer. And finally, is it fair that lower earners get to claim a lower rate of relief – after all energy and broadband costs are fixed for everyone?

This is borne out in figures from Revenue, which show that the average benefit received for someone earning €20,000-€30,000 was just €41, as they pay tax at the standard rate, compared with a higher rate earner. The average benefit for someone earning €60,000-€70,000, for example, was €60, or €20 more.

Some countries offer more generous schemes.

Germany, for example, offers an unvouched system of tax relief, whereby each employee receives a tax deduction of €1,200 per year in respect of employment-related expenses – regardless of the expenses they actually incur. In addition, from this year, workers will be able to claim up to €1,000 in tax relief (based on a rate of €5 a day for up to 200 days).

While employers are entitled to pay workers a working-from-home allowance of up to €3.20 a day, with no tax liability on the payment, it would seem that many employers do not offer it

So could there be an easier way to do get relief for such costs? Ryan suggests the Government should consider that offering the relief via a flat rate expense. These expenses offer tax relief for a host of different jobs, ranging from a pilot to an orchestra member to a teacher, and help defray everyday costs incurred in carrying out their roles.

While conceding that Revenue is “forever trying to get rid of them”, Ryan says this approach would be much easier as workers could simply opt for the expense that most describes their work-from-home habits – for example, there could be a rate for those who work from home one day, or three days, etc.

They would then apply for this credit in their tax return, and would get relief at their relevant rate of tax.

“Overall, I think it would be much simpler for the taxpayer, rather than having to go keep record of receipts and expenses,” she says.

Back in 2021, a report from the Department of Finance suggested a way of easing the “administrative burden” on employees would be to offer a per-diem work-from-home relief of, say, €1.50 a day. This would “would eliminate the need for employees to keep track of their electricity, heat and broadband costs over the year”.

Such an approach would cost, however; the report suggests that, based on 500,000 employees availing of it, the annual cost would be about €21 million. Moreover, it may “further contribute to the transfer of the burden of employer-related costs from the employer to the State”.

While employers are entitled to pay workers a working-from-home allowance of up to €3.20 a day, with no tax liability on the payment, it would seem that many employers do not offer it. At €64 a month/€700 a year such a payment is substantially more generous than that on offer from Revenue where it is available.