With the Government recommending that people work from home where possible, many businesses will have had employees working from home for the first time in recent weeks.
Amidst the logistics and practicalities of setting employees up to work from home, it could be easy to overlook the implications of increased home working for your business’ tax bill.
To help you navigate the various tax considerations, we have put together a short guide to the points you need to be aware of.
For most office-based employees, the obvious piece of equipment they will need to be able to work from home is a computer.
However, equipment will not necessarily be limited to computer equipment and can also include stationery and consumables such as printer ink.
HM Revenue & Customs provides exemptions in respect of items and equipment provided to employees to enable them to carry out their jobs.
Provisions covered by the exemption include stationery, office furniture, office and workshop supplies, as well as computer equipment. The exemption may also extend to the provision of home telephone lines but only in circumstances where there is a clear business case for this.
Two further conditions need to be met for the exemptions to apply:
- The provision must not be used significantly for private purposes by the employee or a member of the employee’s family; and
- The provision must be provided solely for the employee to be able to carry out their duties and must not belong to one of the following excluded categories:
– Vehicles, boats and aircraft;
– Any construction, extension or alteration of the employee’s living accommodation, such as the installation of a loft conversion office space or a garden office.
Clearly, there is a potential for employees to incur additional costs, such as heating and lighting.
The employer can reimburse these costs tax-free where there is a ‘homeworking arrangement’ between an employer and an employee and the employee must work at home under the terms of these arrangements.
A notable exception here is costs that are unaffected by whether or not an employee is working from home or not, like mortgage repayments or rental payments.
Similarly, the cost of existing broadband connections cannot be reimbursed tax-free, although new connections can be, where the employee does not already have a broadband connection.
Tax relief for employees working from home
In circumstances where the employer does not meet the additional costs of an employee working from home – such as heating, water and electricity – but requires the employee to work from home, it may be possible for the employee to claim tax relief in respect of these costs.
Expenses for both personal and business use are not eligible for tax relief.
Employees can use HMRC’s online tool to determine whether particular expenses would be eligible for tax relief. The tool can be viewed here.
Here to Help
The best way of ensuring that you can make the most of the various tax reliefs available is to ensure that there is a written agreement in place between you and the employee that can be provided as evidence to HMRC.