Working from home is now the new norm for most professional contractors. For contractors new to working from home, this article will highlight items of expenditure you may be entitled to claim tax relief on.
Our goal is to help make it simple and easy for you to manage and maximise the financial benefits of contracting. Claiming allowable expenses is a key aspect of this.
Expenses reduce the taxable portion of your income, thus reducing your taxes and increasing your net take home pay. The more expenses that you claim, the more your net take home pay increases.
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Computer Equipment
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 are 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 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.
Office Furniture
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. Investing in a lazyboy with a built-in fridge may be questioned by Revenue.
Telephone and Broadband
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:
- Mobile telephone bills and phone handset – 50%
- Home telephone bills – 50%
- Home broadband bills – 50%
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.
Electricity and Heating Costs
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:
1. 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.
2. Claim a Portion of Bills
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 is 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.
Need More Support?
Our team of tax and expense experts are on hand to help ensure you claim all the expenses you are entitled to.
If you have any queries on the above, please do not hesitate to get in touch with us on hello@fenero.ie or 01-6877400.
Take care and stay safe from all the team at Fenero.
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