Tax relief while working from home

Considering the tax reliefs available to those working from home because of COVID-19.

Millions of employees have been forced to work from home during the coronavirus (COVID-19) pandemic, which has meant significant changes to both working practices and home life. For many, these changes have proved to be a boon, and some employees may never return full-time to their workplaces. For others, the reopening of their place of business cannot come soon enough.

As more people turned their homes into offices, tax-related questions have arisen over the availability of reliefs, and HMRC has responded with guidance and temporary exemptions. Here, we provide answers to some frequently asked questions around expenses related to equipment, cars and travel.

Temporary exemption

The Treasury took action in response to the unprecedented situation with a temporary tax exemption that is in effect from 16 March 2020, the date the government recommended working from home, until 5 April 2021.

The exemption ensures that home office expenses do not attract tax and national insurance contribution (NIC) liabilities where reimbursed by an employer. The exemption is designed to support employees who are working from home as a result of the COVID-19 pandemic and need to purchase home office equipment.

To be eligible for relief, the expenditure must meet two conditions:

  1. The equipment must be obtained for the sole purpose of enabling an employee to work from home as a result of the COVID-19 pandemic.
  2. 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.

However, HMRC has also confirmed that a taxable benefit charge will arise if the ownership is subsequently transferred to the employee.

Homeworking expenses

In addition, HMRC has also confirmed that employees working from home because their workplace shut, or following advice to self-isolate, meet the requirements for 'regular' homeworking. This means that employees are covered by the rules regarding homeworking expenses and can claim £6 a week or £26 a month, either through an employer or by claiming tax relief themselves.

There is also the potential to claim a larger sum if necessary. However, this does involve providing analysis of costs and is more cumbersome. Employees can claim online, by phone or post, or via their self assessment tax return, if they usually file one.

Further guidance can be found here.  

Tax and travel

HMRC has updated its guidance information on paying travel and subsistence for employees travelling to temporary workplaces during the pandemic. Where an employee was furloughed when they were travelling to a temporary workplace, the period of furlough is part of the period of continuous work at that temporary workplace (for the purposes of the maximum period of 24 months). The same applies to a period of working from home.

In regard to cars, although most have clocked up little or no mileage during the lockdown, the usual rules do remain in place for furloughed employees and those working at home because of COVID-19. This means a car is still treated as 'available for private use' for tax purposes.

HMRC will accept a car is unavailable in limited circumstances, applying only where COVID-19 restrictions on movement prevent it from being returned to the employer or collected.

Business as usual

In most cases it is business as usual and the normal rules on taxable benefits still apply during the pandemic: for example, the provision of one mobile phone and SIM card per employee, with no restriction on private use. This doesn't count as a taxable benefit.

This applies to a range of equipment providing it meets three conditions:

  1. It's provided solely to enable the employee to perform the duties of the employment.
  2. Any private use is not significant.
  3. It isn't an 'excluded' benefit – such as a car.

The rules on tax relief and home working can be complex. We are happy to advise in detail on the best approach to suit your circumstances. Please contact us for more information.


Newswire

Why not register to receive our Monthly Newswire? Once a month we'll send you an email packed full of essential business news and handy tax tips to help save you money.

Sign up today »


Quick Links

Home | Contact us | Accessibility | Disclaimer | Help | Site map |

© 2024 Blue Spire Limited (Brighton). All rights reserved.

We use cookies on this website, you can find more information about cookies here.

Blue Spire Limited (Brighton) are Accountants in Brighton.

Contact Brighton Office

Tel: +44 (0)1273 739533
Fax: +44 (0)1273 732844
Email: brighton@bluespiregroup.com


Contact Chichester Office

Tel: +44 (0)1243 781234
Fax: +44 (0)1243 791770
Email: chichester@bluespiregroup.com

Brighton Address
5th Floor Intergen House, 65-67 Western Road, Hove, East Sussex BN3 2JQ

Chichester Address
Cawley Priory, South Pallant, Chichester, West Sussex PO19 1SY

Blue Spire Limited is Registered to carry out audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales C004152645. Professional indemnity insurance is provided by Royal & Sun Alliance Insurance Plc 9th Floor, One Plantation Place, 30 Fenchurch Street, London, EC3M 3BD and its territorial coverage is worldwide (excluding United States/Canada).
Blue Spire Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. FSA register https://www.fca.org.uk/register reference 566257. This guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at customers based in the UK