Working from Home

In response to COVID-19 many employees have had to adjust to working from home. As a result, we are receiving a lot of queries as to whether there are any tax reliefs available for the costs incurred in working from home.

Household Expenses Paid/Reimbursed by Employer

HMRC have agreed that employees working from home due to employers closing offices or employees self-isolating during the COVID-19 outbreak will meet the criteria for relief.

There are two main ways in which these payments can be paid or reimbursed by the employer:

1. The most common method is where the employer pays or reimburses the employees £6 per week/£26 per month for the additional costs. There is no need for the employer to justify the expenditure and employees do not need to keep records.

Or

2. The employer can reimburse the actual additional costs incurred by the employee. The employee would need to keep detailed records showing the increased costs incurred during the home working and the employer would have to justify the expenditure. Examples of allowable costs include:

• Additional heating and lighting costs
• Additional insurance
• Metered water
• Telephone or internet access charges

Household Expenses Not Paid/Reimbursed by Employer

If an employer chooses not to pay or reimburse the additional homeworking costs, then HMRC has made a concession for 2020/2021 that in order to ease the administration it will accept claims for homeworking expenses at the £6 per week/£26 per month rate.

HMRC have a tool which will help decide if you are eligible for relief at https://www.gov.uk/tax-relief-for-employees/working-at-home. Relief can be claimed via the Tax Return for individuals within self-assessment, otherwise relief can be claimed online (using a personal tax account), by telephone or by post using form P87.

Broadband

Where an employee was already paying for a broadband connection prior to starting to work from home this is an existing expense which cannot be reimbursed tax free. If, however the employee does not have broadband and needs a connection for work this would qualify as an additional expense which the employer can reimburse tax free.

Purchase of Office Equipment

Where an employer has purchased office equipment to allow the employee to work at home then as long as there is no significant private use of the equipment this will be tax-free with no benefit in kind charge levied.

Where the employee has purchased the office equipment and the employer has reimbursed the expense, usually this would have led to a tax charge on the employee and a National Insurance charge on the employer and employee.  However, from 16 March 2020 to 5 April 2021 HMRC have relaxed these rules and, as long as the provision of equipment was discussed in advance, then this again will be non-taxable assuming there is no significant private use of the equipment by the employee.

If the employee has purchased office equipment and the employer does not reimburse the cost of this, then tax relief may be available by submitting a Form P87. However, it should be noted that for relief to be given the purchase would have to be incurred wholly, exclusively and necessarily in the performance of duties. It is notoriously hard to get relief here as, for example, if an employee purchased a second computer monitor to use at home, it makes their duties easier to undertake but may not be deemed necessary if they could have performed these duties with a single monitor.

Telephone Calls

If an employee is using their personal mobile or home telephone to make business calls relief may be available in addition to the £6 per week mentioned above. The relief for business calls however is only available if these calls can be itemised and billed separately. Calls and data included within your monthly plan are deemed by HMRC to be getting paid whether used or not, so no additional relief is available.

Stationery and postage costs

If during the course of working from home an employee is required to purchase items of stationery such as paper, ink, envelopes and stamps then these costs should be reimbursed by the employer.  However, if these are not reimbursed, then again the employee can make a claim to HMRC on form P87 to receive the tax relief.

Trivial gifts to employees

Finally, during the current pandemic, employers may wish to consider boosting staff morale by making use of the trivial gifts rules.  Details can be found in our earlier blog:-

https://jsca.co.uk/christmas-gifts-of-up-to-50-to-employees/

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Farzad Nazifi on Unsplash