COVID-19 Expenses When Working From Home

31 March 2020

Following the UK Government’s 3-week lockdown across the UK and the earlier measures introduced to try and address the COVID-19 pandemic, millions of individuals are now faced with the requirement to work from home. The stricter measures imposed and spending your “9 to 5” at home may lead to employees finding themselves out of pocket from electricity and gas bill increases, to expenditure on stationary. However, there are tax reliefs available on the increased expenditure for employees and ways in which employers can assist their employees who are required to work from home.  

Employers 

Should employers wish to assist their employees with their home working expenses, there are two methods in which they can do so. 

  1. Employers can pay £4 a week to their employees (increasing to £6 from 6 April 2020) to contribute towards the additional home working expenses, this will have no tax, NI or additional record keeping implications.
  2. Employers may also reimburse employees for additional costs they incur as a result of working from home, such as heating and lighting costs, additional insurance, metered water and telephone or internet access charges. Any costs the employer reimburses the employee must relate to the work area of the employee’s home. Costs that remain the same, regardless of whether the employee works from home or not, such as mortgage interest and council tax, cannot be reimbursed without tax and NI implications.  

Additionally, the employer cannot reimburse any costs the employee has incurred to be able to work from home, such as expenditure on furniture or office equipment without charge to tax and NI. However, the employer can provide these items directly to the employee provided the sole purpose is to enable the employee to perform the duties of their employment and that private use is insignificant. 

 

Employees 

It may well be given the current economic uncertainty as a result of the COVID-19 crisis that the employer is not able to pay the £4 weekly or reimburse any additional costs an employee has incurred to be able to work from home. If that is the case then employees can claim tax relief for the £4 a week or on costs incurred. To be able to do this, the employee must demonstrate their home is a workplace and it is not optional that they work there. 

Due to the Government lockdown and restrictions on who can travel to work, it is likely HMRC will accept that it not optional for the majority of individuals to be working from home and the test of proving your home is a workplace, which is normally very difficult to be met, will be achieved.  

The rules on what you can claim are similar to the above, and employees cannot claim for anything that is used for both private and business use; the expense must be solely for work purposes. This does not cover the cost of business calls, for which an additional claim can be made based on actual costs. 

For employees to claim tax relief for the expenses incurred, this can be done either through their Self-assessment tax return, or completing a form P87 online. 

 

If you are unsure about what Government support package is available to your business, we are here to help. We have created a simple toolkit that cuts through the noise and makes you aware of exactly what help is available to you. It takes a few minutes to fill out and you can find it on our COVID-19 Information hub

For more information in relation to expenses when working from home, please contact Charlotte Edwards or your usual AAB contact. 

To find out more about Charlotte and the Employment Taxes team, click here

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