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With millions of UK workers having to work from home during the coronavirus (COVID-19) lockdown, many have had to purchase equipment and furniture to ensure they can perform their job successfully. Here, we consider how employees can claim the homeworking allowance, and analyse the temporary tax exemption for home office expenses.

Claiming the homeworking allowance

HMRC acknowledges that employees working from home as a result of the COVID-19 pandemic meet the requirements to be able to claim the homeworking allowance. From 6 April 2020, up to £6 a week or £26 a month can be claimed. Employees are only permitted to claim for items needed for work: business telephone calls or the extra cost of gas and electricity, for example. Things that are used both privately and for business cannot be claimed for, however. This includes rent and broadband access.

A larger sum can be claimed if necessary, but this involves providing analysis of costs and is more time-consuming.

Exemption for home office equipment

From 16 March 2020, the date the government recommended that employees should work from home where possible, a tax exemption for COVID-19-related reimbursed home office expenses took effect.

Where home office expenses are reimbursed by an employer, the exemption ensures that such expenses are not subject to tax and national insurance contribution (NIC) liabilities.

To be eligible for relief, the expenditure must meet two conditions:

  • The equipment must be obtained for the sole purpose of enabling an employee to work from home as a result of the COVID-19 pandemic.
  • The provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer.

The exemption is designed to support employees who are working from home as a consequence of the COVID-19 pandemic and need to purchase equipment to enable them to do their job. The exemption has effect until 5 April 2021.   

Claiming for travel during the pandemic

HMRC recently updated its guidance for claiming for travel and subsistence expenses during the COVID-19 pandemic. Where an employee was furloughed when they were travelling to a temporary workplace, the period of furlough is part of the period of continuous work at that temporary workplace (for the purposes of the maximum period of 24 months). The same applies to a period of working from home.

In regard to cars, although most have clocked up little or no mileage during the lockdown, the usual rules remain in place for furloughed employees and those working at home because of COVID-19. This means a car is still treated as 'available for private use' for tax purposes. HMRC will accept a car is unavailable in limited circumstances, applying only where COVID-19 restrictions on movement prevent it from being returned to the employer or collected.

Looking ahead

In most circumstances, it’s business as usual. The normal rules on taxable benefits apply during the pandemic. The provision of one mobile phone and SIM card per employee with no restriction on private use is an example. This doesn't count as a taxable benefit.

The rules apply to a range of equipment providing it meets three conditions:

  1. It's provided solely to enable the employee to perform the duties of the employment.
  2. Any private use is not significant.
  3. It isn't an 'excluded' benefit – such as a car.

As the UK moves out of lockdown, accountants and businesses will see a return to ‘normal’. As ever, we will keep you up to date on the latest developments.