With a large majority of the workforce now working from home, we have set out below some of the typical expenses they might be incurring and the tax treatment of these.
Mobile phones
Each employee can be provided with one mobile phone and this is not taxable regardless of the amount of private use providing the contract for the phone is in the name of the employer.
Broadband
If the employee does not have a broadband connection already and requires one to carry out their employment duties from home, this can be reimbursed and will not be taxable. Private use should be limited.
If, however, the employee already has broadband at home, no element of this can be reimbursed without creating a benefit in kind charge (but see general expenses below).
IT and office equipment
Laptops, computers, tablets and office furniture provided by the employer are not taxable on the employee as long as they are mainly used for business purposes.
HMRC has also recently revised their guidance such that where an employee pays directly for office equipment such as a desk, printer etc. and the employer reimburses either the employee or the supplier, this will also be treated as non-taxable providing that there is no significant personal use. Previously such reimbursed purchases would have been taxable but could have been included on a PAYE Settlement Agreement, so that the employer could have settled the tax liability on the employee’s behalf. This change will only apply where the office equipment has been purchased for the “sole purpose of enabling the employee to work from home as a result of conronavirus” and where if it had been provided directly by the employer would have been tax exempt.
General expenses
Expenses to cover costs such as heating, light and broadband costs can be reimbursed at a flat rate of £4 per week (or £18 per month) and increasing to £6 per week (£26 per month) from 6 April 2020. No receipts are required for this claim and it will not be taxable.
If claims are made above this amount, receipts should be provided by the employee and retained by the employer.
Temporary accommodation
If an employee is required to self-isolate but cannot do so in their own home, hotel and subsistence costs can be reimbursed but will be taxable.
Loans
Employers can provide their employees with a tax-free loan of up to £10,000.
Expenses not reimbursed
Employees may still be able to make a claim for expenses incurred by them to enable home working even if they are not reimbursed by their employer. To be able to claim a deduction the employee must be under an obligation to incur the cost and pay for it personally as part of their employment and it must be incurred wholly, exclusively and necessarily for the purposes of their employment.
If the expenses are below £2,500 a form can be filed with HMRC to claim relief against earnings. If, however, the expenses are above this amount a tax return will need to be filed under self-assessment.
For more information on the tax treatment of expenses and benefits, click here.