If you're wary of keeping the heat or lights on for extended periods when working from home for fear of ever-rising energy bills, you may be pleased to find out that you will shortly be able to claim tax relief on such expenses almost immediately.
Yes, Revenue is responding to our desire for instant gratification with its new real-time credit system. It is already allowing people claim money back on their health expenses and, from the end of next March, will allow taxpayers claim much-needed relief on their gas and electricity bills.
The move to real-time reporting means that you will no longer have to wait until the end of the year to claim back money on a host of expenses; now you will benefit in your next pay cheque.
The downside, however, is that claiming on a real-time basis will bring an added administrative burden as you will have to upload receipts to the Revenue’s tracking system.
So what should you know about claiming your money back from Revenue and how fast does the new system work?
Real-time taxes
Earlier this year, Revenue launched a facility to allow taxpayers claim their tax credits in "real time" – ie at the time you incur the expense. So, rather than wait until year end to claim back on your GP visit or dental work, you can now claim back any tax owed straight away via myAccount.
So far, it’s possible to claim for both nursing home and health expenses, including dental. However, Revenue will broaden its coverage in the new year. A spokeswoman for the tax agency says that, from the end of the first quarter of 2022, taxpayers will be able to use the new system to claim back expenses incurred in working from home.
This means that each time you incur a relevant home working expense, such as a broadband, gas or electricity bill, you will be able to upload a claim, which means you will pay less tax in your next pay cheque.
Not only that, but the spokeswoman adds that it will also consider what other tax credits may be suitable to claim in real time, and will add these where appropriate.
The move to real-time relief is likely to be welcomed by many. After all, why would you want to wait a year to get money back as was previously the case?
"We would support any measure that simplifies the tax system and the development of online facilities which make it easy for taxpayers to claim their credits,"agrees Norah Collender, professional tax leader with Chartered Accountants Ireland.
However, the move does mean one significant step-change from Revenue. To make a claim for these credits in real time, the taxpayer is required to upload a readable image of their receipt(s) to the receipts tracker.
This requirement to produce receipts is in the Finance Bill currently before the Dáil, which is due to be enacted by year end. With respect to proposed changes for remote working, it states that claimants need to provide "a copy of the statement issued by the service provider in respect of the service provided" when applying for tax relief.
Up until now, there was no requirement to offer evidence of expenses incurred although taxpayers did have to keep relevant receipts on file for six years in case Revenue sought to verify these.
The reasoning for this change is not clear.
According to the Revenue spokeswoman, receipts are required as the amount claimed increases the taxpayer’s current year tax credits for which they will see a benefit in their next pay cheque. Previously, a refund was offered.
Collender suggests it may be an effort to crack down on fraudulent claims. In the UK, for example, she notes that the tax authorities have had issues with large-scale invalid PAYE sector tax claims “so perhaps building in the upfront production of receipts reduces the risk to the Irish exchequer”.
However, it does create a burden for taxpayers – for often modest relief.
How to claim
In the past, the Revenue operated an app for uploading receipts but this no longer works. Instead, to claim money back now on medical and nursing home expenses (and work from home from next year), you need to log into the MyAccount section of the Revenue’s website.
If you haven't signed up yet for this service, which allows PAYE taxpayers to manage their taxes, you can do so here.
You will need to provide details of the date the expense was paid and the amount paid by you, as well as the PPS number of the nursing home resident for whom you’re paying fees, where appropriate.
As with the usual way of claiming expenses, you will have to indicate whether or not you’ve received a partial reimbursement from a third party, such as health insurance, and how much.
And of course you will need to have your receipts to hand to upload.
The Revenue will help you keep track of the progress of your claim, with the status displayed in the View Receipts screen of myAccount. Alternatively, you can view it via the Manage Your Tax section of myAccount.
When your claim has been processed, an amended tax credit certificate for the current year will be made available to you. You will receive an email notification to confirm this.
You can view this tax credit certificate in the MyDocuments section in myAccount. The certificate will show the details of all tax credits you are entitled to, including any credits claimed in real time, while your employer will also be notified.
Your “refund” will then be processed in your next pay cheque, which means you will pay less tax, and therefore get to keep more of your earnings, that month.
The lack of a refund in the post/into your bank account does, however, mean that you “won’t get the feel good factor”, says Collender. Indeed depending on how much you claim, you may even miss the refund altogether.
Work from home
So far, the remote working tax relief may have had more success than the ill-fated Stay and Spend scheme, but it’s far from a roaring success. Despite the vast number of people who worked from home in 2020, just 82,000 had applied for the tax relief as of the end of October, according to Revenue.
Contrast this with the 212,000 who applied for relief on medical expenses in that same year.
The low level of claims is likely a function of the low level of relief on offer.
While this will improve – taxpayers will be able to claim 30 per cent back on their electricity and heating bills, as well as broadband, from January – it may not be enough to cause a surge in claims.
Once real-time relief kicks in for example, you will be able to upload your monthly electricity bill immediately – let’s say for €200, for a two-month period. Assuming the taxpayer worked at home for 36 of these 60 or so days over the period and based on a 30 per cent relief, this works out at just €7.20 less tax to be paid in the next pay cheque for a standard rate payer, and double that for someone paying tax at 40 per cent.
Some may query whether it’s worth the effort then. “It would be very difficult to believe that it [uploading receipts] would increase take-up,” says Collender.
Self-employed
If you’re self-employed, you will still have to wait until you file your tax return, typically a Form 11, to get money back (well not back, more a reduction in your tax bill).
As Collender notes, providing up front relief in the self assessed system would be “unmanageable”. Moreover, there is unlikely to be an appetite to trade the uploading of receipts for faster tax backs.
Collender says requiring the self-employed to upload the myriad of expenses they are entitled to would be "unwieldy", noting that her group has made a submission to the Minister of Finance Paschal Donohoe as part of the Consultative Committee of Accountancy Bodies Ireland, on this very issue, fearing that the introduction of receipts for PAYE workers could lead to "creep in the system".
“It would be a huge extra resource requirement on behalf of the taxpayer and their accountant,” she says, adding that the consultative committee wants the Finance Bill amended to reflect the fact that self-assessed taxpayers are not obliged to automatically submit supporting evidence of a claim with tax returns.
Of course this will give rise to a two-tier system, whereby PAYE workers may feel they have a greater compliance burden than those in the self-assessed system. However, Collender sees it as a “legitimate distinction” and adds that a PAYE taxpayer has “minimal expenses” to claim back compared with a self-employed person.
