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COVID-19: Employees working from home - Updated: 8 April 2021
COVID-19: Employees working from home
Working from home: a guide for employees working from home due to Coronavirus.
At a glance
Special measures: purchase of equipment COVID-19 homeworkers
As announced by the Financial Secretary to the Treasury on 13 May 2020:
"To support employees who are working from home and need to purchase home office equipment as a result of the Coronavirus outbreak, a temporary tax exemption and National Insurance disregard will come into effect to ensure that the expense will not attract tax and NICs liabilities where reimbursed by the employer. The expenditure must meet the following two conditions to be eligible for relief:
The exemption is a temporary measure and will have effect from the day after the regulations come into force until the end of the tax year 2020-21.
HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any reimbursed payments made from 16 March 2020 (the date the government recommended working from home) to the date these regulations take effect.
This measure is being announced outside the normal fiscal process in order to ensure that employers and employees are able effectively to manage their working from home arrangements as soon as possible."
Expenses reimbursed to employees
Employees who can demonstrate that the conditions below of section 336 ITEPA 2003 have been met may claim a proportion of certain household expenses from their employer if the employer agrees.
As an alternative, HMRC allows a Home Working Allowance of £6 per week from 6 April 2020 (£4 per week up to 5 April 2020) to be paid to employees for additional household expenses incurred while working from home, tax-free.
If a Broadband internet connection is necessary to work from home and one was not previously available, the broadband fee can also be reimbursed to the employee and is non-taxable. If the employee already has broadband installed for private use, no claim is allowed.
Some expenses reimbursed to employees are taxable. For example, Hotel expenses reimbursed to employees who cannot self-isolate in their own home or expenses paid under voluntary home-working arrangements, which are not affected by COVID-19.
Income Tax relief for non-reimbursed expenses
If an employee is working at home on a regular basis as a result of Coronavirus but has not been reimbursed the additional costs by their employer, the employee may claim a deduction from earnings. HMRC have confirmed that this relaxation to the s.336 rules will apply until the end of the pandemic (previously 5 April 2021) as long as the employee is not working at home by choice. There must be a discussion with the employer and if the employer decides that the employee should work from home, the deduction will be available.
In practice, most employees will have been mandated to work from home as a result of Government guidance at some point during 2020-21.
As an alternative to claiming actual expenses which can be impractical to calculate, employees may claim HMRC's home working allowance of £6 per week. When considering which actual expenses may be claimed, see Working from home (employer/ee).
HMRC specify in their guidance that the Form P87 claim should be made:
Claims will not automatically be rolled forward to 2021-22 and it is currently not HMRC's intention to extend the relaxed approach to claims to that tax year.
Financial Secretary to the Treasury announcement on 13 May 2020
HMRC guidance on Taxable and non-taxable expenses if an employee works from home due to coronavirus.
HMRC guidance on Making a Form P87 claim.
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