Are you working remotely full time? Are you aware of expenditure that you may be entitled to claim tax relief on?
I want to highlight how you can maximise the financial benefits of contracting and how to claim allowable expenses.
These expenses will reduce the taxable portion of your income meaning you will reduce your taxes and increase your net take-home pay. The more you claim, the more your net take-home pay increases.
The requirement for telephone and internet connection is standard when working from home.
The amount of your bills which you can claim for tax relief, however, depends on the percentage of your business use compared to personal usage.
As a general rule of thumb, the following percentages are typically accepted by Revenue as being reasonable:
If any of the above are dedicated specifically for business use, with minimal private usage, up to 100% may be claimed as tax relief.
If you need to pay for your own Zoom or similar subscription services for business communications, the cost of these can also be claimed.
As Covid-19 has resulted in many people working at home for a long period, many contractors have invested in setting up a small dedicated workspace in their home and in buying a few items to ensure they can work comfortably. We have seen contractors claiming a range of items, but typically purchasing a desk and a chair at a minimum.
You may also want or need to buy storage or filing cabinets or even a safe if required to store sensitive documents. Other items have included desk lamps, shredders and small shelving units.
Investing in a comfortable, ergonomically sound and well-equipped home office may increase productivity, comfort and wellbeing. However, all purchases should be reasonable in cost.
The volume of computer equipment purchases has increased significantly to facilitate the sudden and rapid rise of remote working.
Computer equipment which is eligible for tax relief includes most equipment which is required for you to effectively carry out the duties of your contract role. Common examples of computer and electronic equipment include desktop computers, laptops, tablets, monitors, printer and scanner.
However, there is a range of other expenses which may be relevant to you such as webcams, headphones, additional monitors for more efficient working or a ring lamp to improve lighting on a video call.
There is no upper limit to the amounts you can claim for the necessary computer equipment you require, although all purchases should be reasonable and justifiable to Revenue in cost and quantity.
For most, working from home on a continuous basis will significantly increase their home electricity and/or heating bills.
The amount which may be claimed should represent the additional cost arising due to you working from home. The two methods of calculating what costs are:
E-Worker Flat Rate Expenses
A huge number of people are now working from home, either fully or partially, and this looks set to continue for a long time to come for many. If you are one of these individuals, you can claim an amount of €3.20 for each day you are working from home. This flat rate allowance was created to provide tax relief on the cost of heating and electricity. The benefit of an E-Workers claim is that it’s very easy to calculate the relief due; simply multiply the number of days worked at home by €3.20.
If you have been working at home for a while and haven’t yet claimed these, the good news is that they can be backdated to whenever you started working from home.
If you think €3.20 is too low compared to the actual costs you are incurring, there is an alternative method which can be used. This is submitting a claim based on the costs actually incurred on your utility bill. You would only use this method if the amount you wished to claim exceeded the value of the E-Workers allowance. The challenges with this method however are that it may be more difficult to calculate if there are other individuals at home during working hours, for example, a spouse, children or housemates. If this is the case, the fact you work from home may only have a marginal effect on increasing the household electricity and heating bills above what they would otherwise be. This makes it harder to justify to Revenue in the event of an audit.
Generally, it is advisable to use the flat €3.20 per day method.
If you are a contractor and are looking for some advice on the current market, or perhaps you are ready for your next contract, please feel free to get in touch with Robyn Andrews on 016498563