HMRC has relaxed rules that usually restrict reimbursement for spending on office equipment for the rest of 2020/21.
This should help employees avoid receiving a tax bill relating to working from home during the coronavirus lockdown.
Since the lockdown restrictions were imposed in the UK on 23 March 2020, home-working has effectively become the norm for millions of workers.
Many employees are expected to continue working from home for the foreseeable future and may require additional equipment.
Employers can reimburse workers for purchases of items like monitors, keyboards, desks and chairs to create an office-like space at home.
In normal circumstances, unintended tax consequences may arise where employers compensate workers for the purchases of these items.
Fortunately, the Government has clarified this will not be the case with effect from 16 March 2020 to 5 April 2021.
Jesse Norman, financial secretary to the Treasury, said "a temporary tax exemption and national insurance disregard will come into effect".
The Association of Taxation Technicians (ATT) welcomed the move to help employees avoid being hit with a tax bill as a result of home-working.
Jeremy Coker, president of the ATT, said:
"In the current circumstances, some employees may have purchased equipment at their own cost to home-work as effectively as possible.
"Employers may even advise this and offer to reimburse their workers for the costs afterwards.
"Reimbursing the cost of office equipment would, under existing rules, be taxable and result in a tax bill for the employee.
"This is clearly unwelcome, and the announcement of a temporary exemption from income tax and national insurance is fair and welcome."
Other household expenses
Regularly working from home traditionally had to be formally approved by your employer and written into your employment contract.
In such cases, specific rules can provide tax relief for additional expenses you incur while working at home. This can include, for example:
- heating and lighting costs
- additional gas or electricity
- metered water use
- telephone calls
- internet access.
Incurred costs must relate specifically to a room being used to work in a home, such as an office or study, and they must be additional costs.
Fixed costs - mortgage interest, rent, council tax, water rates - whether you work at home or not, are not eligible for the relief.
Similarly, spending on office equipment or furniture is also excluded from being reimbursed without you paying a tax and national insurance charge.
However, these can be provided by your employer directly - without tax implications - provided the sole purpose of the equipment is to enable you to perform your work and private use is insignificant.
With businesses forced to embrace remote working and staff becoming increasingly used to working from home, the coronavirus crisis could permanently shift working patterns in the UK.
Many employees of firms who told them to work from home are probably starting to question why they had to go into the office in the first place, especially with the technology already in place.
There are advantages for businesses, too, assuming employees have proven they can trust them to work without direct supervision during the COVID-19 crisis.
For example, as an employer, do you really need to be tied into a lengthy contract to occupy an expensive bricks-and-mortar office space when the lockdown restrictions are eventually lifted?
At the very least, if only a portion of your workforce is on site on any given day, you may be able to downsize into a smaller office, saving on rent and operating costs.
Contact us about coronavirus-related support.