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Working from home – what can be provided tax free?

Working from home – what can be provided tax free?

Tuesday, 12 May 2020

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. 

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)
  • Must be only one per employee

 
Broadband
  • Connection needed to work from home
  • Wasn’t already provided
  • Must be for business use
  • Private use limited
Broadband
  • Connection was already provided
Laptops, tablets, desktops etc
Office supplies
  • Provided by employer
  • Mainly business use
  • No significant private use - based on employee’s duties and need for them to have the items for their job, not time spent
Reimbursed expenses for IT/office equipment bought by the employee
  • Can be reported on PAYE Settlement Agreement (PSA) 
Additional household expenses
  •  Electricity, heating etc
  • Can be paid or reimbursed
  • £4 per week up to 5 April 2020
  • £6 per week from 6 April 2020

    Employees should check with the employer if they will accept claims above these amounts and should keep relevant receipts
 
Employer-provided loans
  • Salary advance/hardship loan
  • Value of less than £10,000 in a tax year
 
  Reimbursed accommodation/subsistence expenses for employees who are self-isolating but cannot do so in their own home
Employee using own vehicle for business
  • Approved mileage allowance payments
  • Up to 10,000 business miles – 45p per mile
  • After that – 25p per mile
 
Trivial benefits
  • Cost £50 or less to provide
  • Not cash or cash voucher
  • Not reward for performance
  • Not contractual

    Could be flowers if somebody is unwell or self-isolating
 

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


Need help?

If you have any questions about national insurance or any other of the Chancellor’s announcements, please don’t hesitate to speak to your usual MHA Larking Gowen contact or email us at enquiry@larking-gowen.co.uk

You can find contact details on the Our People page of our website. 

Zeke Perry

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