• Coronavirus: Working from home

    Working from home: a guide for employees working from home due to coronavirus.

     

    At a glance

     

    • Employees may be required to work from home in order to self-isolate or if their workplace has closed as a result of government measures to prevent the spread of coronavirus.
    • Additional costs incurred by such employees may or may not be reimbursed by their employer.
    • If costs are not reimbursed, tax relief may be claimed directly from HMRC.
    • Employees who work from home by choice are treated differently. They cannot claim tax relief from HMRC if their employer does not reimburse their expenses.
    • When home-working expenses are reimbursed by employers to their employees, the tax treatment will depend on the nature of the expense.
    • The general rule is that a deduction for employment expenses is allowed from earnings if the necessary conditions of s.336 ITEPA 2003 are met.

     

    Special measures: purchase of equipment COVID-19 homeworkers

     

    As announced by the Financial Secretary to the Treasury on 13 May 2020:

     

    "To support employees who are working from home and need to purchase home office equipment as a result of the coronavirus outbreak, a temporary tax exemption and National Insurance disregard will come into effect to ensure that the expense will not attract tax and NICs liabilities where reimbursed by the employer. The expenditure must meet the following two conditions to be eligible for relief:

     

    1. That equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak, and
    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 (under section 316 of ITEPA).

     

    The exemption is a temporary measure and will have effect from the day after the regulations come into force until the end of the tax year 2020/21.

     

    HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any reimbursed payments made from 16 March 2020 (the date the government recommended working from home) to the date these regulations take effect.

     

    This measure is being announced outside the normal fiscal process in order to ensure that employers and employees are able effectively to manage their working from home arrangements as soon as possible."

     

    Expenses reimbursed to employees

     

    Employees who can demonstrate that the conditions below of section 336 ITEPA 2003 have been met may claim a proportion of certain household expenses from their employer if the employer agrees.

     

    1. The employee is obliged to incur and pay the home-working expenses as a holder of the employment.
    2. The home-working expenses are incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

     

    As an alternative, HMRC allows a Home Working Allowance of £6 per week from 6 April 2020 (£4 per week up to 5 April 2020) to be paid to employees for additional household expenses incurred while working from home, tax-free.

     

    If a broadband internet connection is necessary to work from home and one was not previously available, the broadband fee can also be reimbursed to the employee and is non-taxable. If the employee already has broadband installed for private use, no claim is allowed.

     

    Some expenses reimbursed to employees are taxable. For example, hotel expenses reimbursed to employees who cannot self-isolate in their own home or expenses paid under voluntary home-working arrangements, which are not affected by COVID-19.

     

    Income Tax relief for non-reimbursed expenses

     

    If an employee is obliged by the government advice to work from home and has incurred home-working expenses that meet the conditions of section 336 ITEPA 2003 but has not been reimbursed by their employer, the employee may claim a deduction on their tax return.

     

    If the employee is not required to file a tax return for the tax year to which the home-working expenses relate, a claim for tax relief can be made to HMRC by completing and submitting Form P87.

     

    Care should be taken to ensure the conditions of section 336 have been satisfied as they are restrictive. The conditions of s.336 will not be met if the employee is working from home under a voluntary arrangement.

     

    As an alternative to claiming actual expenses, employees may claim HMRC's home working allowance.

     

    HMRC specify in their guidance that the Form P87 claim should be made:

     

    1. Online if it relates to multiple tax years and up to five different jobs.
    2. By post, if made on behalf of someone else or it relates to more than five different jobs.
    3. By phone, if a claim has already been made in a previous year and the total expenses are less than £1,000 or £2,500 if including professional fees.

     

    External links

     

    Financial Secretary to the Treasury announcement on 13 May 2020

     

    Offices and contact centres

    Guidance for people who work in or run offices, contact centres and similar indoor environments.

     

    Other people's homes

    Guidance for people working in, visiting or delivering to other people's homes.

     

    HMRC guidance on Taxable and non-taxable expenses if an employee works from home due to coronavirus.

     

    HMRC guidance on Making a Form P87 claim.

     

COVID-19: Working from home - Updated: 18 May 2020

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