Author: Erin Snyman
HMRC have introduced a temporary measure to make it easier for employees to remain productive while working at home. The exemption is applied on income tax and National Insurance Contributions (NICs) linked to the reimbursement of expenses and to the purchase of home office equipment.
Employees working from home due to either their workplace being closed or on the advice to self-isolate will be affected by this new measure.
If employees are provided with a mobile phone or SIM card (without restriction on private use) then this will be non-taxable.
If broadband internet connection is required to work from home, then this fee can be reimbursed to the employee and is non-taxable. It is important to note that private use of this must be limited. If the employee already pays for broadband, then no additional expenses can be claimed.
Any laptops, tablets, computers, and other office supplies mainly used for business purposes with limited private use will be considered non-taxable.
If home office equipment is necessary to work from home then the actual costs can be reimbursed to the employee and will be non-taxable, provided there is not significant private use.
If an employee is not reimbursed, then they are able to claim tax relief for these purchases on either their tax return or a P87. It is important to note that these purchases need to be wholly, exclusively, and necessary to perform their duties of employment.
Strict tests need to be met to claim this tax relief. These criteria can be found in the guidance on Employment Income
If employees are provided with office equipment to work from home, then there will not be a tax charge should the employee return the equipment. If transfer of ownership takes place at any time, then this will be considered an employee benefit. The tax charge will be on the market value of the equipment at the time of transfer less any amounts the employee may have contributed towards the equipment.
If employees are reimbursed for equipment purchased there is no charge on the reimbursement nor is there a charge if the employee keeps the equipment.
Non-taxable expenses and benefits do not need to be reported to HMRC, however taxable expenses and benefits related to the coronavirus can be reported on the PAYE Settlement Agreement (PSA).
Should you wish to report any taxable coronavirus expenses and or benefits then you can do so by following this link, PAYE Settlement Agreement.
Alternatively, you can contact us at SAIL for assistance.