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Tuesday, 4th August 2020
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Working at home Back  
An extension of “home working” would ease traffic problems and might increase participation in the workforce by women with families. Whatever happens, it is likely to become a more widespread phenomenon. Our tax code needs updating to facilitate it.
A good thing
Travel to and from work wastes about two hours for most Dubliners each day. Being absent from the home throughout the working week is inconvenient. Someone has to let in the repairs men and meter readers. Illnesses by members of the family are rendered more traumatic if all other family members have to be out at work all day.

There are many reasons why working from home can offer a more productive and attractive work environment than working from a city centre office. The cost of a city centre office to an employer can be reduced if more of the employees work from home.

Working from home in many instances will not be the sole method of working. It may very well be combined with a number of days each week spent working in a central office.

On the face of it, working from home sounds like a good thing. It sounds like something the Government should wish to encourage. The tax system however was devised with a different work pattern in mind. It may need some changes to facilitate home working.

Conversion costs
Where an employee starts home working, costs may arise in converting part of the house into an “office”. This may not arise in all cases, and the cost will vary depending on the facilities already available in a house.

In a case in the UK an employer paid for the cost of converting an attic into an office. It was held that the costs incurred by the employer represented a benefit in kind for the employee, who was taxed accordingly.

The basic rules relating to benefits in kind are the same in both Ireland and the UK. It would seem reasonable that where the space converted (whether it be an attic, a garage, or a room) is used primarily to carry out employment duties, and where it is so used for some minimum period (say three years) that the tax system should recognise that the costs incurred by the employer are for the employer’s benefit and do not yield much private benefit to the employee. This is an area where a change in law would be desirable.

Principal private residence relief
If part of the home is used solely for employment purposes, there is a strong risk that part of the relief from capital gains tax on the disposal of the property (principal private residence relief) may be lost. The same risk does not arise where the area of the house used “to work from home” is not exclusively so used.

In other words, if the employment duties are carried out at the kitchen table after the breakfast has been removed, the issue would probably not arise. If however a garage has been converted into an office and is used solely as an office, the issue will almost certainly arise.

The problems here could easily be overcome by a small amendment to the law to provide that where the proportion of the property used for employment purposes does not exceed some specified percentage (20%?) no restriction on principal private residence relief will arise by reason of the home working use.

BIK
Working from home will almost inevitably involve the employer supplying the employee with a PC, printer, scanner etc. A mobile phone to facilitate remote access to office based computers may also be provided. All of these items have the potential for private use by the employee and his family. That raises potential benefit in kind taxation problems.

A change in law in this area is desirable, not only to facilitate home working, but to encourage the provision by employers of home based PCs for employees in order to improve Internet access and general levels of high tech skills.

It would be reasonable for the employer to agree to reimburse the employee for expenses incurred in working at home eg telephone, light, heat, and wear and tear of furnishings. Such reimbursements are strictly speaking taxable on the employee without deduction for the associated expense incurred by the employee. This is grossly unfair but unfairness is a normal feature of the taxation of employees in the area of expenses. This is an area where a Revenue statement of practice could easily clarify the rules in a satisfactory manner.

Travel costs
The question of travel costs is more difficult. It might seem odd that travel costs should arise as an issue when you are working at home! But in most jobs contact with clients is necessary. The employee may therefore have to travel from home to the customer’s premises.

It is long accepted that travel between home and your office is not a tax deductible expense, nor may it be reimbursed by an employer without incurring tax (subject to a relief for C.I.E. tickets). The same principle applies where an employee goes directly to a customer’s premises rather than to the employer’s office.

What would be reasonable here would be that a deduction should be available for the same cost that would arise to the employee had he done the journey to the customer’s premises from his employer’s office. Again, a Revenue statement of practice could clarify this.

Tax changes cannot drive the move to work at home, but they could at least facilitate it.

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