Homeworking and other expenses and coronavirus (COVID-19)

Produced by Tolley
  • (Updated for Coronavirus (COVID-19))

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Homeworking and other expenses and coronavirus (COVID-19)
  • Equipment provided in the home
  • Tax treatment of equipment when employees return to the office / usual place of work
  • Household expenses
  • Coronavirus tests and PPE
  • Paying or refunding transport costs
  • HMRC guidance

Homeworking and other expenses and coronavirus (COVID-19)

Following a sudden unprecedented move for people to work from home temporarily during the coronavirus pandemic, many employers, employees and individuals had queries around the income tax and NIC treatment in relation to costs incurred in relation to working from home.

An announcement was made on 13 May stating that a temporary exemption will be made for home office expenses reimbursed by employers. The exemption will be applied on a discretionary basis for expenses incurred from 16 March 2020. Legislation was published as SI 2020/524 and SI 2020/525 with an official commencement date of 11 June 2020. The legislation requires that, as per ITEPA 2003, s 210(2), the exemption will apply only where the equipment expenses are made available to all employees generally on similar terms. This exemption has been extended to the end of the 2021/22 tax year by SI 2021/225 and SI 2021/242.

HMRC has published guidance for employers on which expenses are taxable if an employee works from home due to coronavirus. It covers items such as mobile phones, broadband and laptops. The guidance confirms that any expenses or benefits that are related to coronavirus can be reported on the PAYE settlement agreement (PSA) if the employer wishes to settle the tax and NIC on them. It has been updated to reflect the announcement above on the temporary exemption.

In addition to expenses working from home, expenses related to coronavirus such as the provision of test and PPE have been common. Legislation, regulations and guidance have been put in place to assist with these issues.

Equipment provided in the home

Where an employer provides an employee with equipment to carry out the duties of employment, there should be no income tax, NIC or reporting requirements. This exemption applies as long as the employee:

  1. is provided with the equipment solely to enable the performance of duties

  2. has only insignificant private use of the equipment provided

ITEPA 2003, s 316

This might include, for

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