HMRC has agreed to accept that COVID-19 means that many employees will now be working from home. The HRMC’s acceptance of this means that staff can claim - as a tax-deductible expense - the total cost of the ‘additional’ household expenses incurred due to working from home. Such a deduction is net of any reimbursement to the employee by his or her employer for such additional household expenses.
Making a Work From Home Expense Claim
The claim for working at home expenses can be made on an employee’s self-assessment tax return, after the end of this tax year - when the total of the expenses will be known. If an employee does not file a tax return to HMRC, they can make the claim to HMRC by telephone, completing and filing to HMRC a form P87, or by letter to HMRC.
The employee can make a claim to HMRC before the end of this tax year, estimating the working at home expenses amount. If an employee does this then if the actual total working at home expenses are different to the estimated amount, the at home worker will need to contact the HMRC to correct the submitted amount.
HMRC has also announced that the cost of equipment bought for working at home, less any amount reimbursed by an employer, is also tax deductible and can be used by the employee for non-business activities.
HMRC has recently clarified that where the cost of the equipment used by the employee working from home is reimbursed to the employee by the employer the equipment can be retained by the employee without a personal tax charge i.e. a tax free gift.
The employer may wish to retain ownership of the equipment by the employee working at home as to do so will mean that equipment’s VAT can be recovered and also the employer retains flexibility as to the business use of the equipment post-COVID-19.
There is no doubt that working through this COVID-19 pandemic has caused significant stress and strains to employees. Pre COVID-19 the employer paying for the cost of counselling and therapy – considered to be a medical treatment for their employees would have given a taxable benefit to the recipient employee.
As from 6 April, 2020 the employer’s cost from counselling/therapy medical treatments is therefore exempt from Income Tax and NIC.
The condition to obtain the tax exempt employee counselling/therapy medical treatment benefit is that the employer’s offer to pay for the counselling/therapy medical treatment must be open to all employees – including directors.
Work at Home Tax Services
We at HaesCooper can help to ensure that your COVID-19 ‘hit’ business has the appropriate business records to ensure that HMRC will be satisfied with your claim for SEISS or the employee furlough scheme. To learn about how we can help, contact us.