Many of us are having to work from home during the current coronavirus pandemic and whilst tax may be the last thing on your mind, it is important to consider the consequences for you and your employees. The provision of equipment or the payment of additional expenses to an employee, which have been made by reason of their employment, could give rise to a benefit in kind on which tax may be payable. There are however certain payments and benefits which are exempt from tax and NICs. So, what can you do for your employees?
- Employees who regularly work from home and have a ‘homeworking arrangement’ with their employer can be paid up to £6 per week tax free from 6 April 2020. This payment is to reimburse the additional household expenses incurred in carrying out the duties of the employment at home. A higher amount can be paid if supporting evidence is supplied. Costs may include heating and lighting, increased charges for internet access if this is not already incurred, insurance, business telephone calls etc.
HMRC have indicated that where an employee is working from home because their workplace has closed or the employee is following advice to self-isolate, a homeworking arrangement will exist for this period and payment can be made tax free. It is good practice to ensure that there is a written homeworking agreement in place specifying what equipment will be provided and expenses reimbursed.
- If the employer does not reimburse the costs of working from home, or if the costs are higher than the amount paid, the employee may be able to claim for tax relief on the difference. HMRC will accept a claim for relief in the following circumstances:
- The duties performed at home are substantive and represent part or all of the duties of employment;
- Those duties cannot be performed without the use of appropriate facilities;
- No such facilities are available to the employee at the employer’s premises; and
- At no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.
HMRC may accept that where an employer’s premises are closed due to the response to the coronavirus and the employee has to carry out the duties of employment at home, the above conditions are met.
- Relief for an employee purchasing equipment is not usually allowed unless it is necessary for the employee to provide the equipment. If the employer would have provided the equipment but the employee chooses to do so instead no relief can be claimed.
If the employer provides the employee with the use of an asset, provided this is given solely to carry out the duties of the employment, no tax charge should arise. Insignificant private use of the asset can be ignored. The exemption includes office equipment and other consumables. A tax charge will arise if private use of the asset is significant.
The provision of one mobile phone is exempt from tax irrespective of any private use. If a private phone is used to make business calls then these can be reimbursed but the payment of a fixed sum to the employee for use of their own phone would be taxable.
You can also reimburse various costs that your employee has incurred for office stationery such as costs of paper, stamps and other similar equipment. The reimbursement of purchasing other office equipment including furniture, computers or printers is taxable unless this is being acquired on behalf of the employer for delivery to the employee to enable them to work from home.
- If your employees have to continue to make journey’s for work purposes, then it is necessary to consider what counts as ‘business travel’. Costs incurred in relation to business travel can be reimbursed tax free or claimed by the employee for tax relief purposes. Ordinary commuting between home and your workplace do not qualify for tax relief. If HMRC accept that employees who have to work from home can treat their home as a temporary workplace, travel costs may be deductible.
Finally, don’t forget to keep in touch. The health and wellbeing of your employees will be vital during this period and keeping in regular contact with each other to keep up moral and ensure everyone remains engaged.
For advice on the tax implications of working from home or any other matters contact us at firstname.lastname@example.org