As UK office workers approach six months of working from home with no clear plan on a return to the office for many, businesses should be alerting their employees of working from home tax allowances.
HMRC provides two tax relief schemes for office workers who primarily work from home (WFH), though there are exceptions and exclusions to be mindful of.
The first is working from home tax relief for bills. For the 2020-2021 tax year, employees can claim up to £6 a week or £26 month in tax relief for working from home. This can either be paid by the employer or claimed back through HMRC. One requirement, however, is that the employee must be required to work from home by their employer and not volunteer.
Quentin Holt, senior tax manager at PwC says voluntary working from home arrangements prevents employees from claiming relief for bills from HMRC.
“If the office opens up on a voluntary basis, and you agree to come in two or three days a week, that becomes a formal homeworking arrangement, where the employer can then only pay that relief,” he says.
“If people have been forced to work from home due to coronavirus, they are eligible to claim. We are constantly updating our guidance as the government guidance changes,” said an HMRC spokesperson in an email.
Under this scheme, employees do not need to keep receipts of their expenses.
Matthew Hunnybun, head of people services at KPMG says that as long as a company requires an employee to work from home they would qualify for this benefit.
“Once the employer’s premises are able to open again, we would expect that only those employees who have a formal home working arrangement in place with their employer will be able to claim the working from home allowance and then, only in respect of the days that they are actually required to work from home by their employer.”
It is important to note this is not a £6/week (£26/month) tax rebate, but a claim of £6 and what workers will receive will depend on their income tax bracket.
Relief for home office equipment
The second scheme is tax relief on equipment purchased for a home office. HMRC has currently relaxed its rules on this until April 5, 2021. Under the more relaxed regime, the employer can also reimburse home equipment costs without additional tax/NIC charged to the reimbursement.
Unlike the previous scheme, the worker does not need to primarily work from home to qualify, though they must keep a receipt of the items they wish to claim.
If the employer does not reimburse the cost, ambiguity arises on what can be claimed.
“If for example you work on your kitchen table and you buy a new kitchen table, that would not qualify because the table would be used for meals and etc,” says Holt. “If you bought a desk and put it in your in your bedroom or your living room and use that during the day and then occasionally in the evening you maybe sat there doing some other work, that would be okay.”
“If there are a limited amount of uses of that desk outside of work, that would still qualify.”
Hunnybun takes a more a stringent view.
“In order to meet the conditions for relief, the expense cannot merely put the employee in a position to perform their employment duties but must be incurred in the performance of their duties.
“For example, HMRC’s view is that a computer monitor purchased by an employee in preparation for performing their employment duties and is not an allowable expense, whereas printer ink or paper is used in the performance of the duties and would be allowable.”
An HMRC spokesperson wrote in an email: “Customers claiming for other equipment must meet the condition that it is being used exclusively for working at home.”
Self-filing
If the employer does not reimburse for either of these claims, the employee must submit their own claim with HMRC. This is done by completing the P87 form if your income tax is under PAYE or a self-assessment form if you’re not.
Holt says this process may be putting off some potential claimants. “In the past, people may not go through the bother of filling out the P87 form on HMRC’s website for the small amount they would get,” he says.
“But for the current tax year, where you might get a good few months of relief and you might also be able to claim a desk that you’ve bought. I think it would be beneficial for taxpayers to be aware of it and to make claims.”
Hunnybun says that many of their larger clients have already articulated these allowances to their employees.
“Advising eligible employees of the working from home allowance is likely to be welcomed by employees. Employers will, however, want to strike the right balance between providing sufficient information to eligible employees to allow them to make a claim and being drawn into giving advice on individuals’ personal tax positions.”
HMRC said that they have not seen a significant increase in the number of homeworking claimants. They also reported that they are updating their systems to make this process easier and hopes to have it in place by the end of September.
They added, “customers [currently] have the option to request a paper form (online or by contacting HMRC), the process for claiming is relatively simple and straightforward. Customers will have to register for a Personal Tax Account and then it is simply a few questions you have to answer. It is a one-off form and you won’t have to cancel it or do it again unless the position changes in the next tax year”