Homeworking rules and expenses
Special rules for home-working employees
To obtain tax relief for working at home as an employee, it will normally be necessary for your contract of employment to require you to work from home. Where working at home is optional, it is very unlikely that HMRC will accept a deduction for expenses.
There are special rules for employees who work from home. These cover the following areas:
- Reimbursement by employers for additional household expenses (s316A ITEPA 2003)
- Provision of office equipment by employers (s316 ITEPA 2003
- Provision of computers for private use by employers (s320 ITEPA 2003)
- Travel for necessary attendance (s338 ITEPA 2003)
We shall look at these in turn, pointing out what you might claim and what restrictions there are. As before, we need to consider reimbursed expenses and non-reimbursed expenses separately.
Reimbursed household expenses
Which costs are included?
Employers may reimburse employees for the additional household expenses incurred through regularly working at home. The relief (given by ITEPA 2003 s.316A) covers, for example, heating and lighting costs, additional insurance, metered water, telephone or internet access charges. Where working at home leads to a liability for business rates, this can be included.
Costs must relate to the work area of the home. Costs that are the same, whether or not you work at home, cannot be included. Specifically this includes mortgage interest, rent, council tax and water rates.
Also excluded are costs that put you, as an employee, in a position to work at home. This would be expenses such as building alterations, furniture or office equipment. However, the employer can provide office equipment and office furniture to the employee as described below.
How much can the employer pay?
HMRC will accept reimbursements up to £4 per week without the need for supporting paperwork. If reimbursements are to be a higher level, these must be justified and detailed records kept by the employee, or they must be specially agreed with HMRC. (See http://www.hmrc.gov.uk/manuals/eimanual/EIM32815.htm).
Points to note
- The tax relief is for reimbursement of expenses. If expenses are incurred, but not reimbursed, they need to pass the stricter test outlined in the first section above and may not qualify (s.336 ITEPA 2003).
- No relief is given for occasional working at home or for informal arrangements. This excludes, for example, work done at home in the evenings or at weekends.
- To qualify, employees need some sort of home working agreement where they regularly work at home. Reimbursement by the employer is not taxable even if homeworking is by choice – see http://www.hmrc.gov.uk/manuals/eimanual/EIM32830.htm
There is more information on the HMRC website at http://www.hmrc.gov.uk/manuals/eimanual/eim32760.htm.
Office equipment provided for homeworkers
Employers can provide the necessary office furniture, equipment and internet connections for a homeworker, without there being a liability for the employee so long as
- the sole purpose is to enable the employee to perform the duties
- private use is insignificant
This relief is given by s316 ITEPA 2003.
There is further guidance on this issue on the HMRC website at http://www.hmrc.gov.uk/manuals/eimanual/EIM21611.htm