HM Insights

Coronavirus – Working From Home : tax allowances and reliefs

With current restrictions on free movement many employees have now found themselves in the position of working from home something which under normal circumstances they would not be expected to do. In recognition of the fact that many are now facing additional costs in order to meet their contractual obligations, we are looking today at what allowances and or reliefs are available, and answer some frequently asked questions around taxable benefits in relation to the provision of business equipment.

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What does homeworking mean?

Homeworking arrangements should be outlined in a formal agreement between the employer and employee (ideally in writing) under which the employee works at home regularly as part of their job, not just informally at weekends or evenings. In the current circumstances, HMRC have confirmed that they accept that employees working from home because their employers have closed, or because they are following advice to self-isolate, will meet these requirements. So what help is available for bills?

Working from home Allowance

The working from home allowance provides for payment or reimbursement of up to £6 a week from 6 April 2020 (previously £4). This allowance can be paid by employers to their employees without the deduction of tax or NIC. The aim of the allowance is to cover the additional household expenses incurred while working from home and HMRC have confirmed that currently they will allow this claim without the need for evidence. Employers are not limited to the £6 limit and they can pay more than that subject to the provision of evidence for the additional costs. It should be noted that only the increase in costs incurred can be reimbursed, not the total costs.

Working from home Relief

As an alternative to the above arrangement where both employees and employers are currently under significant administrative burdens, it may be possible for employees to claim relief rather than the allowance itself.
Relief may be available where an employer is unwilling or unable to pay the homeworking allowance or reimburse the employee for the increase in their costs as noted above. Relief is available under ITEPA 2003 s316A which dictates that expenses must be incurred wholly, exclusively and necessarily for the employees work. HMRC will accept these conditions are met, if the employees home is a workplace, and to show that is the case the employee must meet four criteria, usually the most difficult of which is to show that there is no place for them to work at their employers premises and that the employee wasn't able to choose between working from home or in the office at any time during the given period.

It is likely that HMRC will accept that an employee's choice of workplace has been removed given the current circumstances, although this is as yet unconfirmed, so each case will still potentially be looked at on its own merits.
Relief can be claimed for actual costs, or at the rate of £6 per week or £26 per month (for 2020/21), to cover expenditure on household expenses for their working area for heat & light, any metered water costs used in the performance of their duties, and unit costs of business telephone calls. If the fixed rate is claimed they may claim relief for business calls in addition.

Frequently asked questions ...

Can I claim for broadband, landline rental?

If an employee is already paying for a connection before working from home this will be treated as an existing expense and cannot be reimbursed tax free.

My employer has provided a mobile phone will I be taxed on this?

If an employee has been provided with a mobile phone without a restriction on private use, provided this is limited to one per employee it will not be taxable.

My employer has supplied a laptop/tablet/computer/office supplies?

As long as these items are used primarily for business purposes and any private use is insignificant/incidental, they are non-taxable.

I have purchased a laptop to allow me to work from home, can I be reimbursed?

If an employer reimburses expenses for office equipment that an employee has purchased, this is taxable.

My employer has given me a salary advance as my family are struggling financially, is this taxable?

A salary advance or a loan to assist employees in times of hardship are treated as an employment-related loan and provided they amount to less than £10,000 in a tax year they are non-taxable.

Get in touch

If you require assistance in relation to anything mentioned in this article, please get in touch with a member of our team.

Useful links

CORONAVIRUS LEGAL ADVICE

PERSONAL TAXATION ADVICE