Since the beginning of the Covid-19 pandemic, the majority of a business’ workforce have been forced to work from home. This has caused significant disruption to working patterns, with businesses deploying more flexible working arrangements in order to comply with lockdown restrictions.
Now that restrictions are slowly coming to an end, there is still large number of employees who would like these arrangements to continue after the pandemic, due to the benefits with childcare arrangements and work life balance, not to mention the lack of a commute into the office.
This will cause a new challenge for employers and the below article aims to address the tax consequences of remote working.
Tax Relief on Homeworking Expenses
Employers are currently able to make a tax-free payment of £6 per week to employees to cover additional household expenses as a result of working from home under a home working arrangement. However, this is usually only available if you are obliged to work from home, and are not working from home by choice. HMRC have relaxed these requirements during the coronavirus pandemic, so that relief is available where an employee works from home under any circumstances.
If the employer does not make these payments, then an employee is able to personally claim tax relief in the same circumstances as where an employer payment would be non-taxable. This can be done through HMRC’s online service.
This is done by claiming tax relief either on an individual’s self-assessment tax return, online or over the phone, for the additional expenses that have been incurred due to working from home.
Legislation was also introduced last year that confirmed there is no tax charge on reimbursements to an employee in respect of obtaining home office equipment for the purpose of enabling an employee to work from home during the pandemic.
This has recently been extended to the current 2021/22 tax year, however there should be no significant private use of any of the equipment and the reimbursement must have been available to all employees on similar terms.
Travelling Expenses Relief
The rule for this relief to be available is that any travel from an employee’s home to their ‘permanent workplace is classed as an ‘ordinary commute’. An ordinary commute does not qualify for travel expenses.
However, due to many employees wanting to continue to work from home this may blur the lines of where an employee’s ‘permanent workplace’ is. An employee may be able to claim travel expenses on anything outside of an ‘ordinary commute’ therefore employers need to consider the effects of employees working from home on a more permanent basis.
Travel expenses are generally allowable where an employee has started their working day at home and then has to travel for a meeting. For example, if an individual has a meeting at 11am, but they started work at 9am, then the travel costs to this meeting would be allowable.
However, if the meeting in the scenario above was at 9am and the working day had not yet started for an individual, then travel expenses would not be allowable as this would be classed as part of an individual’s ordinary commute.
Overseas Remote Working
The pandemic has also seen an increase in employees travelling abroad to second homes or long-term holiday rentals and continuing their employment from an overseas country. There are significant tax consequences to consider here not only for the employer, but also for the employee depending on the number of days that they spend out of the UK.
It is recommended that any employee that is considering working overseas, even for a temporary period, should seek advice both in the UK and the overseas country. Even though an employee’s duties may be ‘linked’ to their UK employment, there could still be tax consequences in the overseas country.
Shorts would be happy to assist in working with employers to identify any tax reliefs for both your employees and for the business itself, and enable the business to move forward during these difficult times.