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COVID19: Reimburse employees, tax-free, for costs incurred by working from home

If your employees are working from home at the moment, they may be saving money by not commuting or buying lunches, however, they are likely to be incurring costs, such as from increased household bills. Employers can reimburse these expenses, tax free, within prescribed guidelines. Read on to learn more. 

Additional household expenses 

The tax system allows employers to reimburse employees for reasonable additional household expenses incurred as a direct result of working from home. Expenses must be connected with the day-to-day running of the employee’s home and for the exemption to apply, the employee must be working at home under ‘homeworking arrangements’: an agreement that formalises the homeworking days and times, or specifies arrangements during the current lockdown.   

The employer can either meet the actual additional costs, such as for heating their office space during working hours, or can pay a flat rate of £6 per week, tax free, to cover the additional costs. As it is likely to be difficult and time consuming to identify actual costs, it is far simpler to take advantage of the flat rate allowance.    

An employer can not reimburse fixed costs that would be incurred regardless of whether the employee works at home or not, such as rent or mortgage interest or any expenses that allow the employee to work from home, such as buying a desk or chair. 

Equipment and supplies 

An employer can provide ‘accommodation, supplies or services’ used by the employee as long as it is necessary to allow the employee to work from home. The employer can claim tax relief on these costs. This covers items such as a computer, printer, stationery, desk and chair, as long as private use of these items is negligible.  There is no relief for this capital expenditure if it’s purchased by the employee.   

KEY TAKEAWAY 

Employees may be reimbursed, tax free, for any additional household expenses incurred from working from home.   

  • There must be a clear homeworking agreement between the employer and employee 
  • Expenses are only covered if they are incurred wholly and exclusively for the purpose of work 
  • Payments can either be the exact amount spent or a flat £6 per week   
  • The employer can provide a desk, chair, computer and stationery and claim tax relief on this expenditure. 
  • There may be tax implications for the employer and employee for any additional expenditure  

Read more by clicking here:

Your accountants should be able to help you with the above.

HB Accountants are accountants for business. We are here to help you support your team, within the tax framework and are happy to offer specific guidance. Please contact Amy with any questions or to request support. We’re working hard to help you make the right decisions. 

Visit our COVID19 Business Hub for more information

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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above

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