Tax Relief for employees working from home

HM Revenue & Customs (HMRC) is not known for its generosity when it comes to employee benefits and expenses. We have set out below some modest “tax breaks” for employees working from home.

EMPLOYEE HOMEWORKING ARRANGEMENTS (INCLUDING WHERE EMPLOYEE OFFERS TO DO SO)

For; Directors and employees who (for instance) spend time out of the office and find they often have to catch up at home, and employees with more structured arrangements to work from home

Where the employer arranges with the employee to undertake at least some duties from home, then the employer can pay a ‘reasonable’ amount towards additional household expenses, such as heat and lighting.

HMRC has a recommended guideline rate of £4 per week or £18 per month payable free of PAYE tax and National Insurance Contributions, without the need for receipts.

More can be paid with evidence that higher costs are incurred – for instance, if the employer offers to pay for broadband to be installed at the employee’s home.

“Arrangements” have to be more than just occasionally taking work home: there has to be an agreement that the employee will do something on a regular/frequent basis. But employees do not need to be “on call”.

OFFICE EQUIPMENT FOR EMPLOYEE USE

For; Directors and employees whose work at home warrants the provision of office equipment and similar

Did you know that there is potentially a tax charge merely for the use of office equipment – even in the office? But computers, desks, stationery, etc., can still be provided at an employee’s home tax-free, if provided and used ‘solely’ for the employment and private use is insignificant. The cost of extending, or converting a bedroom is not covered, nor the provision of a car, yacht or helicopter…

WHERE THE EMPLOYEE MUST WORK FROM HOME

For; Directors and employees who have to carry out substantive (“core”) employment duties at home

In some cases there are no business premises available to employees; the office may be too far away, or there may be insufficient room for all employees – a mobile sales force, for example.

The employer can pay for the additional costs of working from home. Where there is no, or only part-reimbursement, the employee can instead make his own tax claim (unlike with homeworking arrangements above).

Up to £4 a week can be paid (or claimed) without receipts – more is claimable with receipts for:

  • The additional cost of gas and electricity consumed while a room is being used for work
  • Business telephone calls
  • As rules for “ordinary commuting” may not apply, there may be more scope to claim for travelling costs.

GET IN TOUCH If you think these reliefs could benefit you or call 0161 249 5040