Tax information on staff working from home

A common query we are receiving recently is surrounding staff working from home due to the current situation.

• What can the business or should the business give staff in terms of furniture costs, allowances. etc?
• What can the employee get in terms of allowances, tax breaks etc?

We have therefore set out the general position below for both the employer and employee.

Employer

• Any equipment that the employer provides to the employee, eg laptop, screen, furniture remains the property of the employer. The cost of any equipment acquired and provided to the employee is an allowable expense for which capital allowances can be claimed.
• See below the position if the employee acquires equipment and is reimbursed by the employer.
• The employer can pay the employees an allowance to reflect the employees increased costs, eg heating/lighting due to working from home. The HMRC accepted amount for this allowance was increased with effect from 6 April 2020 to £26 per month (£6 per week). Prior to 6 April 2020 the maximum allowance was £18 per month (£4 per week). The employer is not obliged to pay this allowance to the employees, and can pay an allowance of more or less than the HMRC accepted amount. Any amount of allowance paid by the employer can be claimed as an expense of the business.

Employee

• If an employee acquires equipment and is reimbursed by the employer, a tax charge would normally arise on the employee. However for the tax year 2020/21, provided the equipment is acquired for the sole purpose of enabling the employee to work from home because of the coronavirus outbreak, no tax charge will apply to the employee. This is a temporary measure for 2020/21 only.
• If the employer pays the allowance up to the HMRC agreed amount referred to above, the amount is tax free in the employee’s hands.
• If the employer does not pay the above allowance, or pays an amount less than the full £26 per month, the employee can claim tax relief on £26 per month less any amount paid as an allowance by the employer. The employee would not need to submit any bills to evidence the claim.
• If the employer paid more than the £26 per month, any excess over the £26 per month would be taxable.
• If the employee wishes to claim tax relief on more than the HMRC accepted amount, a claim can be submitted to HMRC but the employee would need to submit evidence of the increased costs.
• An employee can only claim tax relief on household bills if they are required to work from home. They cannot submit a claim to HMRC for household bills if they have agreed to work from home voluntarily or they choose to work from home.