Coronavirus: which expenses are taxable if an employee works from home

HMRC has published guidance on which expenses are taxable if an employee works from home due to coronavirus (COVID-19).

HMRC’s new Guidance can be found here. It looks at what equipment, services or supplies are taxable if employees are working from home due to coronavirus (COVID-19). Note that, this guidance does not apply to furloughed workers who are eligible for the Coronavirus Job Retention Scheme.

Mobile phones and SIM cards (no restriction on private use)

If an employer provides a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.

Broadband

If an employee already pays for broadband, then no additional expenses can be claimed.

If a broadband internet connection is needed to work from home and one was not already available, then the broadband fee can be reimbursed by the employer and is non-taxable. In this case, the broadband is provided for business and any private use must be limited.

Laptops, tablets, computers, and office supplies

If these are mainly used for business purposes and there is not significant private use, these are non-taxable.

Significant private use
For items which are taxable, exemptions for work related benefits must show that there is no significant private use.
HMRC accepts that where:

The employer’s policy about private use is clearly stated to their employee and sets out the circumstances in which private use may be made (this may include making the conditions clear in employment contracts or asking employees to sign a statement acknowledging company policy on what use is allowed and any disciplinary consequences if the policy is not followed), any decision of the employer not to recover the costs of private use is a commercial decision, rather than rewarding their employee.

Significant private use should not be based on the time spent on different uses. It should be based on the employee’s duties and the need for them to have the equipment or services provided so they can do their job.

It’s not necessary to keep detailed records of every instance of private use to prove a claim for exemption.

Reimbursing expenses for office equipment an employee has bought

This is taxable and should be reported on the employer’s PAYE Settlement Agreement.

This means the employer can settle tax and National Insurance contributions on any expenses or benefits, even though the responsibility would usually be on the employee, or on both the employer and the employee.

However, note that this applies to coronavirus related items only, for example, a new desk can go onto the PAYE Settlement Agreement, but a new sofa cannot.

If the employer is currently payrolling benefits in kind, they may continue to report expenses and benefits through their payroll. They may also continue to report expenses and benefits through P11D returns.

Additional expenses like electricity, heating or broadband

Payment or reimbursement to employees of up to £4 a week (£6 a week from 6 April 2020) is non-taxable for the additional household expenses incurred when an employee is working from home.

If the claim is above this amount, then the employee will need to:

• check with the employer beforehand to see if they will make these payments; and
• keep receipts

Employer provided loans

A salary advance or loan to help an employee at a time of hardship counts as an employment-related loan.

Loans provided with a value less than £10,000 in a tax year are non-taxable.

Further information on loans.

Temporary accommodation

If an employee needs to self-isolate but cannot do so in their own home, and the employer can reimburse hotel expenses and subsistence costs, these are taxable.

Further information on accommodation expenses.

Employees using their own vehicle for business

The employer can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.

If the employer does not pay mileage allowance, the employee can claim tax relief through their Personal Tax Account.

Further information on approved mileage allowance payments.

Non-taxable expenses or benefits should not be reported to HMRC. Further information on non-taxable expenses or benefits for employees.

The Chartered Institute of Taxation (CIOT) has also produced its own guide which can be found here.

If you would like additional help in determining what expenses you can claim whilst working from home, please contact us and we can refer to you to an accountant who can assist.

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Source: Techlink