As a result of Coronavirus, we are likely to see homeworking becoming an increasingly acceptable and flexible part of the employees’ work landscape, possibly to include a combination of office and home hours that make up the working week.
If, like many people, you are currently working from home, you may be entitled to a few additional tax benefits as a result of using your home as an office and the associated costs of running a place of work from your home.
The homeworking allowance was increased at the Spring Budget from £4 to £6 a week with effect from 6 April 2020. An employer can pay this, tax-free and NIC-free, to meet the additional costs an employee incurs working at home.
If you are working from home due to the Coronavirus pandemic you would be eligible for this allowance from the date you were asked to work from home or from when the government advised it (23rd March 2020).
If your employer can prove there are grounds to pay more than £6 a week, it won’t be subject to income tax and NIC – but you must be able to show why the extra amount is required to avoid these charges.
What else can you claim for?
Additional costs which can be reimbursed include the increased cost of heat, light, insurance, water and telephone or broadband, but not fixed costs such as mortgage interest, rent or water rates. Important note – the increase in costs as a result of working from home is key here. For example, if you already have a broadband line, you can’t claim for it.
Sometimes an employer might be unable to pay you for working from home. In this case there are opportunities to claim yourself as long as costs are 100% exclusively necessary for work – “wholly, exclusively and necessarily” is the phrase used by HMRC. Talk to us about this.
Is your home a workplace?
In the current circumstances it is unlikely that this would be disputed but ordinarily you need to show that your home is a workplace through:
[Taken from gov.uk]
the duties that the employee performs at home are substantive duties of the employment. “Substantive duties” are duties that an employee has to carry out and that represent all or part of the central duties of the employment
those duties cannot be performed without the use of appropriate facilities
no such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis)
at no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.
If the four conditions above are met, the employee can claim relief for household expenses including:
Heating and light for the working area
Metered cost of water used in the performance of duties
Unit costs of telephone calls
As this pandemic has continued into several months so it has become more necessary to properly equip homes with the right furniture and IT to allow workers to be comfortable and productive.
As a temporary measure for 2020/21, employers are able to reimburse employees for the purchase of home office equipment required as a result of the coronavirus outbreak without tax consequences provided that it would have been exempt if provided by the employer directly.
If the employer is unable or unwilling to reimburse equipment costs then employees will need to see if they are able to satisfy the conditions to claim tax relief through capital allowances. You will need to satisfy HMRC that they are not also being used for “significant private use”.
Home working is here to stay for the time being and whether you or your employer chooses to continue with the concept into the long-term, it’s well worth knowing exactly where you stand in terms of tax allowances.
Please keep your receipts, enjoy working in a different environment, keep in touch with colleagues and talk to us: we will be able to assess your unique position and advise you accordingly.