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Tax Exemptions For Home-Office Equipment

Tax Exemptions For Home-Office Equipment

 

While COVID-19 has had many impacts, one of the most common changes involves employees being forced to work from home. As reported by the Office for National Statistics, in April 2020, 46.6% of employed persons did some work at home, of which 86.0% did so as a result of the coronavirus pandemic.

In particular, HMRC have introduced a temporary Income Tax and Class 1 National Insurance contribution exemption for home-office equipment expenses incurred by Employees and reimbursed by Employers, such as:

  • Mobile phone and SIM cards without a restriction on private use, limited to one per employee.
  • Where a broadband internet connection is needed to work from home and one was not already available, the broadband fee can be reimbursed by the employer. (Private use must be limited and if the employee already pays for broadband, no additional expense can be claimed.)
  • Laptops, tablets, computers, and office supplies used mainly for business purposes and without significant private use.

To qualify for the exemption, the home-office equipment must have been purchased for the ‘sole purpose of enabling the employee to work from home as a result of coronavirus’ and ‘the provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer’.

It is best practice for employers to ensure that there is a written homeworking agreement in place detailing:

  • the homeworking arrangements;
  • the equipment and supplies to be provided by the employer; and
  • any expenses that will be met.

The objective of this exemption is to ensure that employees receive full reimbursement free from tax and Class 1 National Insurance contributions. It is currently in effect from 11 June 2020 until the end of the tax year to 5 April 2021.

For more detailed information on the tax treatment of employee home-working expenses, we recommend this article by the ATT: https://www.att.org.uk/home-sweet-home-%E2%80%93-tax-relief-home-working

 

New HMRC online portal introduced for home-working tax relief claims

In addition to the above, with the massive rise in home-workers, HMRC have recently clarified that employees forced to work from home because their workplace has closed, or they are following advice to self-isolate, are indeed covered by home-working expenses rules.
On 1 October 2020, HMRC launched a simple online portal which allows workers to claim tax relief for working at home. This comes after employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home from 6 April 2020.
If you are an employee who has not received the working from home expense payment directly from your employer, you can apply to receive the tax relief from HMRC via the new online portal.
Access to the new portal can be found at: https://www.gov.uk/tax-relief-for-employees/working-at-home

 

Claiming tax relief on other job expenses

This is also a good opportunity to highlight other potential tax reliefs available for expenses not reimbursed by employers, such as:

  • Uniforms, work clothing and tools;
  • Vehicles used for work;
  • Professional fees and subscriptions;
  • Travel and overnight expenses; and
  • Buying other equipment.

 

Flat rate expenses for uniforms, work clothing and tools are available to those working in certain occupations and industries. You can check the list of industries and occupations flat rate expenses apply to at https://www.gov.uk/guidance/job-expenses-for-uniforms-work-clothing-and-tools.

Claims can also be backdated for up to four years. This means employees have until 5 April 2021 to make a claim before the 2016/2017 tax year expires. You can check your eligibility via https://www.gov.uk/tax-relief-for-employees and make a claim online via your personal tax account*.
It is important to note that employees should review any job expense claims each year and provide updated figures to HMRC as applicable.

As your agents, we cannot file the online form on your behalf, but we’re happy to answer any questions you have.

* Claims for tax relief on job expenses above £2,500 must be made by completing a self-assessment tax return.

 

MATCH is working hard to keep on top of all the latest news and government support so, as always, feel free to get in touch if you have any queries and we’ll be happy to help.

 

MATCH Accounting Limited