Temporary tax and NI exemption for home office expenses extended
04 March 2021
HMRC has published a policy paper relating to the extension of the temporary tax and National Insurance (NI) contributions exemption applicable to the cost of home office equipment when an employer reimburses a member of staff, who is working at home because of coronavirus, for those items.
This exemption was scheduled to end on 5 April 2021, but will now be extended until the following year, and will end on 5 April 2022 in recognition of the continued impacts of COVID-19.
Home office equipment is any of the equipment required by an employee to enable them to work from home. Frequently used examples include laptops and desks.
What the exemption means is that members of staff will receive the full reimbursement amounts and will not see the figure reduced by tax and NI. Similarly, employers will not be required to report any reimbursed expenses of this nature.
In order for the cost of the reimbursement to be exempt from tax and NI, then the expenditure must meet the following two conditions:
- Equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak
- The provision of the equipment would have been exempt from income tax under section 316 of ITEPA if it had been provided directly to the employee by or on behalf of the employer
Section 316 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) provides a tax exemption where an employer provides home office equipment directly and retains ownership of that equipment, and the employee’s private use is not significant.
The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.