The Government has released guidance and advice on what support employers can provide employees and any associated tax consequences.
Which expenses are taxable for employees working from home?
The guidance is related to staff who are working from home due to coronavirus, either because their workplace is no longer open or because they are following government advice. It does not apply to workers who have been furloughed under the Coronavirus Job Retention Scheme.
1. Employers may provide one mobile phone per employee with no restriction on private use.
2. If an employee is already paying for broadband, then no additional expense can be claimed. However, if there was no broadband internet connection installed prior, and one was needed to be installed to work from home, then the broadband fee can be reimbursed by the employer and is non-taxable. This is providing that the broadband is for business use and any private use is limited. The payment or reimbursement can total up to £6 a week (£4 a week to April 6, 2020).
3. Additional expenses such as electricity and heating are non-taxable and, like with broadband, can total up to £6 a week (£4 a week to April 6, 2020). Receipts need to be provided if a claim is above this amount.
4. Laptops, computer, tablets and office supplies are non-taxable if primarily used for business purposes and not significant private use. However, reimbursing expenses for employee purchased office equipment is taxable.
5. If an employer chooses to provide salary in advance or a loan to help an employee in a period of financial difficulty, then this considered to be an employment-related loan. Loans under the value of £10,000 in a tax year are non-taxable.
6. Should an employee be required to self-isolate and is unable to do so in their own home, employers can reimburse hotel expenses and any subsistence costs incurred. However, these expenses are taxable.
7. For any employees driving their own vehicle for work-related reasons, employers can pay Approved Mileage Allowance Payments (AMAPs) of £0.45 per mile up to 10,000 miles, £0.25 per mile after that. These are both free of tax and National Insurance contributions (NICs). If an employer does not make these payments, employees can claim tax relief through their personal tax account.
What does “significant private use” mean?
For any taxable items, employers must remember that the exemptions for work-related benefits must show that there is no significant private use.
HMRC expects employers to have a clearly defined private use policy in either employee contracts or request employees sign a statement acknowledging company policy on what use is allowed. Any decision the employer makes regarding not recovering costs of private use must be seen as a commercial decision - e.g. unnecessary administrative tasks - rather than merely as a means of rewarding employees.
There is no expectation from HMRC for employers to keep a detailed record of every example of private use. Instead, the “not significant” condition should not be considered purely on time spent on different uses, but within the context of the employee’s specific duties and the requirements for the employee to have access to the equipment or services to perform their job.
Reporting to HMRC
Any non-taxable benefit or expense should not be reported to HMRC. However, any expense incurred which is related to coronavirus can now be reported in an employer’s PAYE Settlement Agreement (PSA).
This means that employers can now settle tax and NICs on the benefit or expense, even in cases where the liability would usually lie with the employee or both the employer and employee.
Employers who are currently payrolling Benefits in Kind (PBIK) can continue to report expenses and benefits through their payroll. They may also continue to report them through P11D returns.