The Covid 19 situation has sent many workers home to their laptop in the spare room. This article looks at the tax implications of working from home and the tax free support which employers can provide to facilitate this. As we approach the time for filing P11D’s to report taxable benefits it is worth looking at the rules which apply.
As a starting point there is a presumption that if an employer provides an employee with use of a company asset, or any form of payment, or reimbursement of expenses, this will be taxable income or benefit in kind unless there is a specific exemption. It is these exemptions that we will explore in more detail.
Computers, desks and equipment
There is a general exemption for any equipment, furniture and equipment which an employer provides to be used mainly for the employee to perform the duties of their employment. E.g. if an employer provides a desk, PC and printer at an employees home so that they can carry on working whilst the self isolating, this should not give rise to a taxable benefit. Of course an employee may also use the PC to browse the web for personal reasons. Provided the personal use is not significant then the benefit remains tax free.
Employer supplied mobile phones are tax free in any case. One company mobile per person can be provided tax free including any private call.
Telephones & broadband
The position with landlines depends on the circumstances. If the employer installs their own landline at an employee’s home specifically for business use, there is no taxable benefit on the employee unless there is significant private use. Where the employee uses his own phone line to make business calls he can be reimbursed the cost of the calls but not the rent of the line.
The broadband connection can also be tax free under the same rules. i.e. if it is attached to the employer’s line and is primarily for business use it is tax free but if it is on the employees line it is not.
The employer can reimburse an employee reasonable additional household expenses which arise from home working. This may be additional electricity for lighting and heating for example.
A flat rate of £6 per week (£4 before 6.4.2020) may be paid without question. Larger amounts would need to be justified to show how the additional cost was incurred by reason of the home working. This therefore excludes standing costs such as mortgage, rent, council tax, etc. which are not increased as a result of home working.
If the employee’s normal workplace is closed they will not have any ordinary commuting costs. All travel for work from home is then business travel and can be reimbursed at 45 pence per mile, up to 10,000 miles and 25ppm thereafter.
Employers can provide loans to employees of up to £10,000 interest free without incurring a benefit charge. If the loan is in excess of this the benefit will be the amount of interest saved using the official rate of interest.
These exemptions are ineffective where they are paid under a salary sacrifice arrangement. E.g. the employee opts for a tax free benefit in exchange for a reduced salary. In those cases the benefit is taxable on the amount of the salary sacrificed.