Allowable Expenses for Employees Working from Home
When an employee is required to work from home an employer may pay expenses incurred wholly and exclusively in the performance of the employee’s duties. In practice there are very few home costs that are incurred wholly and exclusively for work. HMRC will allow claims for additional unit costs of gas and electricity consumed while a room is being used for work, the metered cost of water used (if any) and the unit costs of business telephone calls.
As it can be very difficult to provide evidence of the cost of these expenses. HMRC allow an employer to pay a fixed rate to cover these costs, from 6th April 2020 the rate was £6 per week or £26 per month.
In the current pandemic if the employer requires employees to work from home temporarily, HMRC will allow employers to provide other equipment such as a table, chair or monitor if purchased before 5th April 2021 and all employees working from home receive the same offer. In these circumstances the equipment would remain the property of the employer and care would need to be taken to ensure no tax liability was created once the employee was required to return to their normal place of work.
It is important to note that if an employee chooses to work from home, they cannot be paid expenses tax free. It is therefore prudent to have a written agreement confirming the reimbursement of expenses.
If the employer does not pay expenses the employee cannot claim the fixed rate as an allowable deduction on their tax return. However, if the employee can identify the additional costs incurred and keep records showing this, they can claim a deduction of the costs on their tax return.
This information is correct as at 15 December 2020. It has been provided by Spicer’s Accounting Services for information purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax or accounting advisor before taking any decision.