Expenses and Benefits: Homeworking

We would have all had higher electricity and gas expenses as a result of Covid-19 compelling many of us to work from home. To help us, the government has established a £6 weekly working from home allowance, totalling £312 each year.

Multiple people working from home at the same residence are eligible for this benefit. Each person would have to file a claim on their own.

Employers have been financing the price of office equipment - monitors, keyboards, and certified desk chairs, to mention a few - to enable workers to work efficiently from home. Employers have also been giving payments to help employees offset the higher household expenses incurred as a result of working from home.

HOW MUCH YOU CAN CLAIM:

You can either claim tax relief on:

• £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) - you will not need to keep evidence of your extra costs

• the exact amount of extra costs you’ve incurred above the weekly amount - you’ll need evidence such as receipts, bills or contracts

You'll be eligible for tax relief based on your tax rate. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 per week, you will receive £1.20 per week (20% of £6) in tax relief.

HOUSEHOLD EXPENSES:

"Household expenses" refers to expenses related to the home's day-to-day operations. Heating, lighting, water, and internet are all common household expenses. It's important to remember that the exemption only applies to costs associated with working from home; if the cost is the same whether or not the employee works from home, it's not covered.

Additional household expenses:

If both of the following apply, you do not have to disclose or pay tax if you cover the cost of additional household expenditures for an employee who works from home:

·       They are working from home as agreed with you, and they do so on a regular basis.

·       The amount you pay them does not exceed their additional household expenses; and the amount you pay them does not exceed the existing weekly limit.

EXEMPTION FOR EXPENSES:

Payments made to employees to cover the additional household expenses incurred as a result of working from home are exempt from tax and NI under section 316A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), which means such payments can be made with no tax or NI consequences. The employee must be working from home under a homeworking agreement in order for the exemption to apply.

If you provide equipment, services and supplies to an employee who works from home, you do not have to report or pay tax if either:

·       they’re only used for business purposes

·       any non-work use (‘private use’) is insignificant

Laptops, tablets, and computers are all included. You can decide how much personal use is permitted, but you must make this obvious to staff.

On mobile phones and SIM cards, there is no need to pay tax or limit private use. There is a limit of one per employee.

Equipment you provide during COVID :  You may have provided office equipment to employees so they could work from home. As long as they return the equipment to you, you won't have to pay any taxes.

 EQUIPMENT:

In most situations, you can claim tax reduction on the entire cost of significant equipment, such as a computer, that you need to accomplish your job. This is because it qualifies for an annual investment allowance, which is a sort of capital allowance.

You can't claim capital allowances for work-related automobiles, motorbikes, or bicycles, but you might be able to claim business mileage and fuel costs.

Only if you meet the following criteria can you claim tax relief for equipment expenses:

·       You'll need it to get the task done.

·       You use the equipment for work and there is no considerable personal use – this includes utilising the equipment in accordance with your company's policies.

Make an appointment with Cheylesmore Chartered Accountants to learn more about how working from home may benefit both the employer and the employee.