Working from home – what can be provided tax free?
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Employment Tax,
Human Capital Advisory
There has of course been a huge increase in employees working from home as a result of the Coronavirus outbreak. The employer may have closed their premises, or employees may be following advice to self-isolate.
But what are the tax implications of the various items that employers provide to employees in this situation? And can any be provided / paid tax free?
Some of the key items – and the associated conditions - are considered below. There is an important new exemption for Coronavirus-related reimbursed home office expenses.
These principles would not be relevant to employees who have been furloughed under the Coronavirus Job Retention Scheme and therefore are not working.
The principles around some other key benefits changes arising from coronavirus, as well as homeworking costs for self-employed individuals, are considered further below.
| NON-TAXABLE | TAXABLE |
Mobile phones and SIM cards (no limit on private use)
|
|
Broadband
|
Broadband
|
| New exemption Reimbursed expenses for home office equipment purchased by the employee
Existing exemption
|
Reimbursed expenses which don't meet the conditions of the new exemption
|
| Laptops, tablets, desktops etc Office supplies
|
Reimbursed expenses for IT / office equipment bought by the employee
|
Additional household expenses
|
|
Employer-provided loans
|
|
| Reimbursed accommodation / subsistence expenses for employees who are self-isolating but cannot do so in their own home | |
Employee using own vehicle for business
|
|
Trival benefits
|
Some other benefits changes arising from coronavirus
- Salary sacrifice - the government guidance on the Job Retention Scheme is that coronavirus counts as a ‘life event’ that could warrant off-cycle changes to salary sacrifice arrangements
- Child benefit – families that were not previously eligible for child benefit (due to the tapering of the benefit where the annual income of one parent is £50k+) may become eligible if their income has fallen due to coronavirus. Claims can only be retrospective for a maximum of 3 months
Self-employed homeworking costs
There needs to be a reasonable method for apportioning costs between business and private use, for example based on the number of rooms or homeworking time. Costs which can potentially be claimed on a proportionate basis are:
- Heating, electricity
- Council Tax
- Mortgage interest or rent
- Internet / phone use
Flat-rate simplified expenses can be used as an alternative to actual costs. This method is available to self-employed sole traders and business partnerships that have no companies as partners. Individuals must work 25 hours or more a month from home.
The flat rate does not include phone or internet expenses, which must be claimed based on the business proportion of actual costs.
| Hours of business homeworking per month | Flat rate per month |
|---|---|
| 25-50 | £10 |
| 51-100 | £18 |
| 101+ | £26 |
Find out more
If you have any queries on any of the above or would like to discuss how we can assist further, please contact:
Nigel Morris, Employment Tax Director - nigel.morris@mhllp.co.uk / 07718 340 634
Richard Maitland, Employment Tax Partner - richard.maitland@mhllp.co.uk / 07711 373 584
Gordon Thrower, Senior Employment Tax Manager – gordon.thrower@mhllp.co.uk / 07595 069 016
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