HMRC publishes guidance on which expenses are taxable for employees working from home due to COVID-19
27 March 2020
HMRC has published guidance that discusses which equipment, services or supplies are taxable if employees are working from home due to the outbreak of coronavirus.
Employers can be affected by this if any of their employees are working from home due to COVID-19, either because:
- The employer’s workplace is closed
- The employee(s) is following advice to self-isolate
Employees who have been reclassified as furloughed workers will not be affected and will be eligible for the Coronavirus Job Retention Scheme.
Reference is made to the following equipment, services and supplies within the guidance:
- Mobile phones and SIM cards provided by the employer with no restriction on private use, and limited to one per employee, are non-taxable
- If an employee already pays for broadband, then no additional expenses can be claimed but where this is required to work from home and was not already available, the employer can reimburse the employee for the broadband fee, and this would be non-taxable. The broadband is provided for business purposes in this instance, so any private use should be limited
- Laptops, tablets, computers, and office supplies that are used primarily for business purposes and not significant private use are non-taxable
- If an employer reimburse expenses for office equipment that an employee has purchased, this is taxable and should be reported on employer PAYE Settlement Agreements
- For any additional expenses, such as electricity, heating or broadband, a payment or reimbursement to employees up to £4 a week (increasing to £6 per week from 6 April 2020) can be made and is non-taxable. If the claim is above that amount, the employee will need to check with the employer that they will still make the payments and keep any relevant receipts
- A salary advance or a loan to help employees in times of hardship counts as an employment-related loan. Loans provided below the value of £10,000 in a tax year are non-taxable
- For employees who need to self-isolate, but cannot do so in their own home, employers can reimburse hotel expenses and subsistence costs, but these are taxable
- For employees utilising their own vehicle for business, employers can pay approved mileage allowance payments of 45p per mile up to 10,000 miles, free of tax and National Insurance (NI) contributions. It is 25p per mile beyond the 10,000-mile point. If employers do not pay mileage allowance, employees can claim tax relief through their Personal Tax Account
The information provided states that for items which are taxable, exemptions for work related benefits must show that there is no significant private use. HMRC accepts that where:
- Employer policies about private use clearly state to employees and set out the circumstances in which private use may be made – this can include making the conditions clear in employment contracts or requesting that employees sign a statement acknowledging company policy on what is allowed
- Where an employer decides not to recover the costs of private use it can be a commercial decision, rather than a reward to employees
Significant private use is not based on the time spent on different uses, but on the employee’s duties and the requirement for them to have the equipment or services provided so they can do their job.
There is no need to keep detailed records of every instance of private use to prove a claim for exemption.
Any taxable expenses or benefits relating to coronavirus can be reported on employer PAYE Settlement Agreements, so that they can settle tax and NI contributions on expenses or benefits, even though the responsibility would usually be on the employee, or both employer and employee. This is only applicable to coronavirus related items, and the example provided states that a new desk can go onto the PAYE Settlement Agreement, but a new sofa can’t. For employers payrolling benefits in kind, they can continue to report expenses and benefits via payroll and may also continue to report expenses and benefits through P11D returns.
There is no requirement to report non-taxable expenses or benefits to HMRC.
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