Whilst the Coronavirus pandemic prompted a sharp rise in the number of employees working from home, tax relief for homeworking has been available since 2003.

The relief, or homeworking allowance as it is sometimes otherwise referred to, is meant to cover the additional costs associated with working from your home – i.e., heating, lighting, and water.

The Government made a number of Coronavirus-specific concessions to the usual rules, during the first lockdown in 2020, which enabled employees who had been told to work from home by their employer, or who were doing so as a result of the guidance on self-isolation, to make claims.

Employer reimbursement vs. Employee claims tax relief

Employees may obtain this relief by way of employer reimbursement or by claiming the amount themselves, from HM Revenue & Customs (HMRC).

An employer can choose to make a tax-free, fixed weekly (£6/week for weekly paid employees) or monthly (£26/month for monthly paid employees) payment, to cover ‘reasonable’ additional costs associated with homeworking.

Employers need not justify these amounts, and employees are not required to keep records in this instance.

If the fixed amounts are not appropriate, larger tax-free amounts can be paid by the employer by way of either a ‘scale-rate’ payment or by reimbursing actual costs incurred by the employee, subject to provision of evidence.

Alternatively, where reimbursement is not offered by the employer, the employee would need to submit a claim to HMRC for the fixed weekly or monthly amount to be deducted from their taxable income. Any claims made by an employee must meet the necessary conditions.

Tax relief will only ever be granted on costs incurred wholly, exclusively, and necessarilyfor the employee’s work, and a home would only be considered to be a workplace where:

  • The employee performs substantive duties from their home – i.e., those that form all or part of the central duties of their employment. 
  • The duties of their employment require the use of facilities that are not available at the employer’s premises, or it is unreasonable to expect them to travel to the employers premises each day as a result of where they are living.
  • At no time before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.

Be aware of ‘time-limited easement’ and eligibility

As aforementioned, the Government relaxed the rules for 2020-21 and 2021-22 to grant eligibility to any employee working from home regularly, for all or part of their time due to Coronavirus, so long as this was not by choice.

In other words, working from home needs to have been ‘mandated’ at one time or another, by the employer.

Thanks to a temporary microservice launched by HMRC, employees were able to claim relief for a full tax year, even if they had only worked from home for one day in that tax year, as a result of the pandemic.

Since Coronavirus restrictions have now been lifted our understanding is that the rules surrounding eligibility have returned to those in place pre-pandemic.

Whilst the microservice will remain in place for 2022-23, it is likely that many people who claimed for the previous two tax years will not be eligible to claim for the tax year commencing 6 April 2022 – for example, those now considered to be hybrid workers.

The Government’s ‘time-limited easement’, which is what allows an employee to claim relief for a full tax year even if they only meet the necessary pre-pandemic tests for part of the tax year, will end on 5 April 2023.

How can George Hay help?

If you are an employer, it may be worth taking time to reconsider whether your employees remain eligible to be reimbursed now that Coronavirus-specific concessions no longer apply and, indeed, whether their contracts substantiate the requirement for them to work from home to support payments received or claims made.

If you need advice on this or any other tax or accounting-related query, contact us today.

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