Homeworking tax relief
We’re working from home
For many working from home was a rare occurrence. But on 23 March, when the country went into lockdown, many of us had to abruptly change our working arrangements.
With safety in mind, we were told we must work from home wherever possible. Some now believe this might become the new normal when lockdown is lifted.
The benefits of working from home for both the employee and the wider society can be numerous, ranging from a better work life balance to less traffic on the roads and reducing pollution. There are also tax benefits which should be considered.
Benefit in kind
Employees will be familiar with the fact that where they receive a ‘benefit in kind’ from their employer, it is usually subject to tax.
It must not be forgotten that benefits in kind include the reimbursement of expense payments. However, deductions are available for expenses incurred for business purposes or wholly, exclusively and necessary for the performance of your duties.
Special provisions for homeworkers
Employers will be aware that some expenses payments and benefits are exempt from tax. They can make tax and National Insurance contributions (NIC) free payments to employees in respect of reasonable additional costs incurred for working at home if the employee is a ‘homeworker’.
This is where the employee is by arrangement required to work at home on a regular basis.
HMRC has confirmed that where employees have to work from home due to the COVID19 outbreak, those employees will be classed as homeworkers and will be able to benefit from these rules.
Supporting additional expenses
From 6 April 2020, employers can pay £6 per week to each homeworker tax free and without the need to have proof of expenses.
The purpose of this payment is to compensate homeworkers for additional household expenses incurred due to working at home as opposed to a place of work, for example electricity and water costs (mainly from having to make your own cup of tea!).
If employers pay more than £6 per week, the employee will have to provide evidence of bills to justify the additional amount for the excess to remain tax free.
If expenses are not reimbursed by employers, homeworkers can also claim tax relief for homeworking but must support such claims with receipts if required.
The simplest way to make a claim is online through HMRC’s claim process.Find out more about the claim process
Provision of assets
Many who suddenly find themselves working from home might not have been set up to do so at first and needed additional equipment to function efficiently.
However, care should also be taken when providing additional furniture or equipment that employees may need to work at home. The usual tax rules still apply if the employer provides an asset at undervalue or lets the employee keep an asset that is no longer required, a benefit in kind arises.
Assets provided by an employer solely to be used in carrying out the individual’s employment duties such as computer equipment are exempt. This is provided there is insignificant private use of that asset. What is insignificant is open to interpretation and can be difficult to determine.
HMRC has taken the positive step of confirming when homeworker status applies during the lockdown. However, as is often the case, the tax rules are complicated and can easily cause issues if the right advice is not taken.