Temporary exemption to Income tax and NICs due on home office equipment due to COVID19 measures

29 May 2020

A temporary exemption will operate from 11 June 2020 and for the remainder of the 2020-2021 tax year

Employers may have asked employees to purchase equipment and materials to enable their home-office set up due to the Coronavirus lockdown measures, which require employees to ‘work from home where they can’.

Employers will benefit from a temporary lifting of a reporting measures for Income Tax and NICs where the following two conditions are met:

  • 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.

This current exemption does not extend to employer reimbursements for employee expenditure on home- office equipment.

As required by section 210(2) ITEPA 2003, the exemption will be conditional on the benefit of any reimbursement in respect of home-office equipment expenses being made available to all of an employer’s employees generally on similar terms.

The exemption is a temporary measure that will apply from the day after regulations come into force until, stated to be from 11 June 2020 until the end of the tax year 2020-21.

Meanwhile, HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any reimbursed payments made from 16 March 2020 until the regulations take effect, provided the relevant conditions are met.

A tax information and impact note (TIIN) has been published on Gov.uk

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.