Gintax answers Sunday Independent readers’ questions on tax.
Article published on 23 January 2022
Q I’ve been working remotely in an ad-hoc home office since the pandemic hit in March 2020. I’ve just learned that this homeworking is going to be a largely permanent arrangement going forward. So I’m planning to convert the room into a proper office – with soundproofing, shelves, built-in office desk and so on. I’m also planning to upgrade my computer. My boss won’t cover the cost of these upgrades so I’ll be bearing the cost myself. Can I get any tax relief for the cost of my home office upgrade?
Des, Co Cork
A The nature of an employment arrangement is usually such that all relevant costs are incurred directly by the employer. As a result, a claim for additional tax relief for expenses against salary is very limited. The upside here is that the individual’s employment tax matters should be relatively simple.
Prior to the pandemic, working from home was relatively rare and Irish Revenue had provided a guidance note on this – covering allowable (limited) tax deductible expenses where formal arrangements were in place.
In March 2020, this was broadened to all persons required to work from home. This approach will now be put on a legislative basis by Finance Act 2021.
However, the relevant deduction available is still limited to 30pc of the cost of vouched expenses for heat, electricity and broadband – relating to days spent working from home. There is no specific facility for an employee to claim tax relief for other home working costs and so to determine the position, we must look to general tax principles.
In contrast with self-employment profits, for expenditure to be deductible as an expense against salary, it will need to be incurred “wholly, exclusively and necessarily” in the performance of employment duties. This is a notoriously high bar and Irish Revenue note that it must be considered whether the employment duties could be performed without incurring the expense. The expense should not arise because of the personal circumstances or preference of the taxpayer. For the expense to be allowable, it must be incurred in the actual performance of the duties of the office or employment or as a direct consequence of those duties.
In principle, the costs outlined above would not qualify as a deductible expense as they should be regarded as capital costs, being long-term enduring assets. The cost of such assets are usually incurred by the business and tax (capital) allowances can be available in such instances – with relief for the cost spread over the course of eight years.
While much less common, tax law also allows an employee to claim capital allowances. Various conditions must be satisfied including a requirement that the assets be wholly and exclusively used for the proposes of the employment.
Generally, this would not be satisfied if there is some element of personal use. However, if the assets are used solely for your employment duties, you may have entitlement to capital allowances for the qualifying expenditure. Irish Revenue do not provide specific commentary on this matter and its guidance on working from home( that is, it’s e-working and tax manual) merely confirms that an expense deduction would not be available for such costs, without addressing the capital allowances aspect.
As a general point, it is usually more tax-efficient for the employer to incur the direct costs of home working such as equipment, office furniture and so on. Unfortunately, this was not an option in your case.
