What expenses are taxable if my employee works from home because of COVID-19?
You could be affected if any of your employees are working from home due to coronavirus, either because your workplace has closed or your employee is following advice to shield.
Furloughed workers who are eligible for the Coronavirus Job Retention Scheme (CJRS) are not affected.
Here are some things to consider though if you have do employees working from home:
Mobile phone and broadband
If you provide a mobile phone and SIM card with no restriction on private use, limited to one per employee, this is non-taxable.
If your employee already pays for broadband personally, then no additional expenses can be claimed.
If a broadband internet connection is needed to work from home and wasn’t available before the employee had to work at home, then the broadband fee can be reimbursed by you as the employer and is non-taxable.
In this case, the broadband is provided for mainly business and any private use should be limited.
Laptops, tablets, computers, and office supplies
If these are supplied to an employee and are mainly used for business purposes and not significant private use, these are non-taxable.
Reimbursing expenses for office equipment your employee has bought
If your employee needs to buy home office equipment to allow them to work from home, then of course, they should discuss this with you beforehand.
If you reimburse your employee for the actual costs of the purchase, then this is a non-taxable expense provided there is no significant private use.
If you don’t reimburse your employee, they can claim tax relief for their purchases on their tax return or P87, if the amount claimed is incurred wholly, exclusively and necessarily in the performance of their duties of employment.
Your employees should keep a record of their purchases though and claim for the exact amount spent.
Expenses such as electricity and heating
Payment or reimbursement to your employees of up to £6 a week is tax free for the additional household expenses incurred when your employee is working at home.
Loans from employers
A salary advance or loan to help an employee through a difficult time counts as an employment-related loan. Loans with a value of less than £10,000 in a tax year are non-taxable.
Employees using their own vehicle for work
There are fewer of us on the road at the moment but if you do have employees using their own vehicles, you can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and NIC.
If you don’t pay mileage allowance, your employee can claim tax relief through their Personal Tax Account.
What’s the tax treatment if my employee returns office equipment?
If you have supplied an employee with office equipment so they can work from home, there’s no tax charge when they return the equipment to you if there’s no transfer of ownership.
If you have transferred ownership of the equipment to an employee at any time, this will become an employee benefit. The charge will be on the market value of the equipment at the time of the transfer, less any amount the employee has paid towards the equipment.
If equipment has been reimbursed by the employer, the situation is different. The employee may have agreed to buy their own home office equipment for use whilst working at home and the employer has reimbursed the exact expense. Unless the employer has specified that they must transfer ownership to them, the equipment is owned by the employee.
There is no benefit charge on the reimbursement. There is also no benefit charge if you let your employee keep the equipment as it is clearly something that they already own!
The rules are not straightforward and the above is just a snapshot. Please get in touch if you need advice, email email@example.com
The information was correct at time of publishing but may now be out of date.