Working from Home

Work from home

With the lockdown leading to a surge in homeworking,  employees incurring additional costs may be looking to their employers for a reimbursement. To avoid any unintended tax liability for employees, it is important that employers are aware of the rules, before making any reimbursement.

 

Where employees work from home, HMRC permit a flat rate payment to be made, which is tax deductible by the employer, but does not give rise to a taxable benefit in the hands of the employee. The rate was £4 per week until 5 April 2020, increasing to £6 per week from 6 April 2020.

 

An employer is able to reimburse more than the flat rate provided there is evidence to support any additional costs incurred. Additional costs are only eligible for reimbursement if they have increased as a result of homeworking. This covers the increase in actual costs, for items such as heat, light, insurance, water, telephone or broadband, but not fixed costs such as mortgage interest, rent or rates.

 

If an employer has provided additional equipment to enable homeworking, no taxable benefit arises where there is insignificant private use of the equipment. As a concession, during the lockdown, where employees have purchased equipment themselves to enable working from home, employers are able to reimburse these costs without any taxable benefit arising.

 

It is recommended that any payments to employees are supported by a formal expense claim with accompanying receipts where relevant.

 

Lentells are able to provide support in all aspects of employee benefits, please contact us for further information.