Home sweet home…
Following the outburst of COVID-19 in early 2020, working from home became the norm for millions of people and as a result, the Government implemented temporary changes to homeworking reliefs for 2020/21 and 2021/22.
The allowances came to an end on 5 April 2022 and for 2022/23 we’ve returned to these pre-pandemic regulations. However, the challenge faced by many employers and employees now is how these rules should be implemented in the light of working patterns changing and hybrid working.
Let’s start with which employees are eligible
To be eligible, its vital the employee must be carrying out the duties of their employment under the homeworking arrangements. According to HMRC guidance, they will accept an employee who is working at home regularly or follow a pattern for two days of every week. So, if an employee is working two days a week from home, HMRC will still consider this to be regular even if the employee varies the days which they work at home each week.
Informal working at home does not count as homeworking. An example of this includes taking your work home in the evenings. It’s also good practice to have this in writing!
No liability to income tax arises where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs whilst working from home. There is no wholly, exclusively and necessarily test in this case.
The annual limit for such payments is £208 (£4 per week). Amounts more than this figure can also be paid free of tax, provided the employer has reached prior agreement with HMRC, or he can provide supporting evidence that the payment is in respect of additional household expenses incurred by the employee.
Furthermore, HMRC have clarified that unreimbursed homeworking expenses are only valid as a deduction where the employee’s situation fulfils all of the following conditions:
- The main duties of the employment are carried out at home; those duties require specific facilities.
- Either the facilities are not available at the employer’s premises, or the nature of the duties require the employee to live so far from the premises that it is unreasonable for him to travel there; and at no time before or after the contract is written, is the employee able to choose between working at the employer’s premises and elsewhere.
In addition, HMRC have stated that no deduction can be claimed for council tax, rent, water rates, mortgage payments or insurance premiums.
However, a £4 per week deduction may be claimed where it is impossible to calculate the value of homeworking costs (which can include light and heat, and telephone), and a further amount will be allowed where evidence is retained.
If you feel you qualify for an amount more than £4 per week, talk to our team of experts today if you’d like us to agree an amount over and above the limit with HMRC.