Check which expenses are taxable if your employee works from home due to coronavirus

The HMRC guidance has been recently updated to reflect the fact that employees can no longer be furloughed using the Coronavirus Job Retention Scheme. The scheme ended on 30 September 2021.

If any of your employees are working from home due to coronavirus (COVID-19), either because your workplace has closed, or they are following advice to self-isolate, then HMRC accepts there are non-taxable types of equipment, services or supply.

For example - if you provide a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable. 

Broadband - if your employee already pays for broadband, then no additional expenses can be claimed. If a broadband internet connection is needed to work from home and one was not already available, then the broadband fee can be reimbursed by you and is non-taxable. In this case, the broadband is provided for business and any private use must be limited.

Laptops, tablets, computers, and office supplies - if these are mainly used for business purposes and not significant private use, these are non-taxable.

Reimbursing expenses for office equipment your employee has bought - if your employee needs to buy home office equipment to allow them to work from home, they will need to discuss this with you in advance. If you reimburse your employee the actual costs of the purchase, then this is non-taxable provided there is no significant private use.

Employers can continue to pay their employees £6 a week to cover the additional expenses of working from home and the amount would be free of tax and national insurance. This is to cover the additional costs of electricity, heating and water whilst working from home. It has been confirmed that the amount may be paid regardless of the number of days that employees work from home.

HMRC guidance can be seen here: Check which expenses are taxable if your employee works from home due to coronavirus (COVID-19) - GOV.UK (https://www.gov.uk/guidance/check-which-expenses-are-taxable-if-your-employee-works-from-home-due-to-coronavirus-covid-19)

If you need to discuss employee expenses or loans or are looking to develop a more resilient employee expense policy for the future please talk to us and we will be delighted to assist you. 

7th May 2021 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• New scheme to give people in problem debt breathing space launched
• Beware Bogus HMRC Phishing Scams
• The end of the landline?
• Employees can continue to claim tax relief if working from home

If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.

I hope you have a good weekend.

Stay safe and well.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100

Employees can continue to claim tax relief if working from home

Employees can be paid £6 a week tax free Home Working Allowance whilst working from home. The amounts are free from income tax and Class 1 national insurance contributions (‘EEs and ‘ERs). The normal rule to take advantage of this exemption is that the employee is required by their employer to work from home from time to time and is normally not available where the employee works from home as a matter of choice.

£6 a week tax free for a higher rate taxpayer is equivalent to £538 gross pay (after 40% income tax and 2% employee NICs). The employer would also save 13.8% NICs.

This rule was temporarily relaxed due to the COVID-19 pandemic for 2020/21. HMRC have advised that as long as an employee has been required to work from home at some point during 2020/21 as a result of the COVID19 pandemic they will accept a claim for home-working for the whole 2020/21 tax year. This has now been extended to 2021/22 up until the end of the pandemic.

Where the employer does not pay the allowance, the employee may make a claim for a deduction of £6 a week from their earnings and this has also been extended to 2021/22. That would result in a tax refund of £124.80 for a higher rate taxpayer.

The quickest way to make a claim is to use the HMRC online claims service which requires the employee to set up a Government Gateway account. Alternatively, employees should use HMRC form P87 to make their claim.

See: Claim tax relief for your job expenses - GOV.UK (www.gov.uk)

Weekly Update 29th May 2020

Below I have summarised all the main tax related updates we’ve seen this week. 

• Chancellor extends self-employment income support scheme
• Major changes to the furlough scheme
• North Somerset Council Discretionary Grants Fund Now Open (closes the 8th June)
• ow to Claim back Statutory Sick Pay due to coronavirus (COVID-19)
• Temporary Coronavirus Tax Exemption for Homeworker Expenses
• How to register as a self-employed subcontractor in the construction industry

As always if you need any support or advice please don’t hesitate to contact me.

I hope you have a great weekend! 

Temporary Coronavirus Tax Exemption for Homeworker Expenses

The government has introduced a temporary tax exemption and National Insurance disregard to ensure that home office equipment purchased by employees as a result of the coronavirus outbreak, will not attract tax and NICs liabilities where reimbursed by the employer. This temporary change applies for 2019/20 from 16 March 2020, and for the 2020/21 tax year.

To be eligible for the exemption the expenditure must meet the following two conditions:

- The equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and

- The provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer.

Mobile phones and internet connections

If an employer provides a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.

If an employee already pays for broadband, then no additional expenses can be claimed. However, if a broadband internet connection is needed to work from home and one was not already available, the broadband fee can be reimbursed by the employer and is non-taxable. In this case, the broadband is provided for business and any private use must be limited.

Laptops, tablets, computers, and office supplies

If items are purchased and mainly used for business purposes with incidental private use, these will be non-taxable.

Where the employer does not reimburse the employee for purchased items, the employee can claim tax relief for the expenditure on their tax return (or form P87) as long as the amount claimed is incurred 'wholly, exclusively and necessarily in the performance of their duties of employment'. Employees will need to keep records of their purchase and claim for the exact amount.

Additional household costs of working from home

Payment or reimbursement to employees of up to £6 a week from 6 April 2020 is non-taxable for additional household expenses incurred when an employee is required to work from home.

If an employer wishes to pay more than the guideline rate of £6 per week tax-free, then it is recommended that the employer should agree a scale rate in advance with HMRC. Failing that, records will need to be kept of the actual additional costs incurred by each employee.

Temporary accommodation

If an employee needs to self-isolate but cannot do so in their own home, the employer may reimburse hotel expenses and subsistence costs but such expenses will be taxable.

Weekly Update - 9th April 2020

Weekly Update - 9th April 2020

Below I have summarised all the main tax updates we’ve seen this week from HMRC:

• HMRC release details of how to claim 80% of Furloughed pay

• Important changes to Capital Gains Tax

• Coronavirus and the High Income Child Benefit Charge

• Claim working from home allowance during the coronavirus

As always if you need any support or advice please don’t hesitate to contact me.

Wishing you a Happy Easter and have a good bank holiday weekend.

Claim working from home allowance during the coronavirus

HMRC have announced that it will increase the maximum flat rate tax deduction available where employees incur additional household costs where they work at home under homeworking arrangements, from £4 per week to £6 per week. This will take effect from April 2020.

If your employer requires you to work at home, you can make a claim, this is particularly relevant in the current environment due to the coronavirus. 

Broadly, no tax liability arises where employers make payments to employees for reasonable additional household expenses, which the employee incurs in carrying out duties of the employment at home under 'homeworking arrangements'.

'Homeworking arrangements' are arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home. There is no requirement for any part of the employee's home to be used exclusively for the purposes of the employment - in fact, if any part of the home is used exclusively for work, problems could arise on the future sale of the house as part of the capital gains tax exemption on private residences may be lost.

HMRC have stated that they will accept that homeworking arrangements exist where:

- there are arrangements between the employer and the employee; and
- the employee works at home regularly under those arrangements.

October 2019 Tax Tips & News

Welcome...

To October's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Section.

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

Please contact us for advice in your own specific circumstances. We're here to help!

October 2019

· HMRC publish Agent Update: Brexit Special
· Delay in implementation of domestic reverse charge VAT for construction services
· HMRC win IR35 case
· Tax-free expenses for home-workers
· October questions and answers
· October key tax dates

July 2017 Tax Tips & News

Welcome... To July's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman. If you need further assistance just let us know or you can send us a question for our Question and Answer Section. We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year. Please contact us for advice on your own specific circumstances. We're here to help! July 2017 · Working from home · VAT: zero-rating of adapted motor vehicles · Rent a room scheme · New state pension and contracted-out NICs · July questions and answers · July key tax dates