For many employers, the decision to reopen an office or call centre in the midst of the COVID-19 pandemic is not an easy one. Staff may have vulnerable family members or fear catching the virus in the workplace. In turn you may have worries about making the workplace COVID-19 proof and associated liabilities if you cannot.
We have prepared a guide for employers to what equipment and cash assistance can be provided to employees without triggering an income tax or National Insurance for the company or the employee.
Mobile phones and SIM cards (no restriction on private use)
You can provide a mobile phone and SIM card without a restriction on private use, limited to one per employee. This is non-taxable.
If your employee already pays for broadband, then no additional expenses can be claimed.
If a broadband internet connection is needed to work from home and one was not already available, then the broadband fee can be reimbursed by you and is non-taxable.
In this case, the broadband is provided for business and any private use must be limited.
Laptops, tablets, computers, and office supplies
If these 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, they will need to discuss this with you in advance and secure your agreement in written form. An email should suffice.
If you reimburse your employee the actual costs of the purchase, then this is non-taxable provided there is no significant private use.
If you do not reimburse your employee, then they can claim tax relief for these purchases on their tax return or P87 as long as the amount claimed is incurred wholly, exclusively and necessarily in the performance of their duties of employment.
Your employees will need to keep records of their purchase and claim for the exact amount and you need to advise them of this requirement.
Additional expenses like electricity, heating or broadband
Payment or reimbursement to your employees of up to £6 a week is non-taxable and not subject to National Insurance for the additional household expenses incurred when your employee is working from home.
If the claim is above this amount, then your employee will need to:
- check with you beforehand to see if you will make these payments
- keep receipts
If you think that such a payment is inappropriate, because, for example, your employees are saving on commuting costs, then they have the option to claim this allowance themselves.
In order to claim the allowance, the employee must show that their home is a workplace. HMRC will accept that a home is a workplace where:
- The employee performs substantive duties at home. Substantive duties are the tasks that employees must carry out which form all or part of the central duties of their employment.
- The duties require the use of appropriate facilities and such facilities are not available to the employee on the employer’s premises. (Or the employee lives so far away from the premises it is unreasonable to expect them to travel there on a daily basis.)
- 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.
On 27 March 2020, the Financial Secretary to the Treasury suggested in a written parliamentary answer that HMRC might take a more lenient view on tax relief for homeworking expenses for those employees who do not meet the strict definition of home as workplace and whose employers will not make any contribution to their costs.
If your employee normally files a self-assessment form, s/he can claim on it. The majority of your employees will simply need to fill in a P87 form. This can be done through an online P87 form through a Government Gateway account or by filling out a postal P87 form. Should an employee make a claim for the current tax year, what HMRC will probably do is put it in their PAYE code and their PAYE code will go up a little bit for the extra deduction.
If an employee is incurring significant extra costs by working from home, in excess of the £6 per week flat rate allowance, s/he can also claim these actual expenses back. S/he would have to identify the actual expense and retain documentation to support this. The reclaim can be made in the same way as mentioned in the above paragraph.
SRC-Time are one of the South East’s leading accountancy firms in advising the self-employed and partnerships in all aspects of their tax affairs and we are able to assist in any issue raised above.
Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at email@example.com or speak with an account manager to get any process started.