Recruitment companies are viewing work flexibility as a typical aspect in positions these days. It would be beneficial for them if they understand the tax impacts of this arrangement. Many companies see it as a perk, but not something they’ll offer in general. As a recruiter, you would need to know some things about the potential costs and tax implications of working flexibly.
When representing their clients, a recruiting company dealing with hybrid workers may want to consider the following costs and their potential tax impact:
Office Equipment:
In this tax year, there is no tax charge on an amount reimbursed to an employee for home office equipment purchased only to allow the employee to work from home. Please keep in mind that for the exemption to be valid, there must be no significant private usage of the equipment.
Use of Assets:
When an employer lends an employee an asset and the employee uses it for both business and personal reasons, the employee has received a taxable benefit. The benefit will need to record on a form P11D and will be subject to tax and Class 1A National Insurance.
Travel Expenses:
If the employee will occasionally visit the office or another workplace, it is necessary to determine if they are eligible for travel assistance between their home and the other workplace.
As a general rule, travel from an employee’s home to their “permanent workplace” consider “ordinary commuting” for tax purposes.
So, the employee won’t be able to get any tax relief, and any costs paid for by the employer won’t be exempt from tax or National Insurance.
There are options to consider, such as whether the other workplace is a permanent workplace as well or if there is any scope for the other workplace to regard as a “temporary workplace” (broadly, somewhere that an employee will spend less than 40% of their working time and their attendance at this workplace is self-contained).
Payment of expenses:
Household expenditures for people who work from home are likely to have grown. Employers need to decide if it makes sense for them to pay for these higher costs or if it is reasonable to assume that lower commuting costs make up for them.
Only the increase in costs incurred by the employee can reimburse.
Costs that would be the same whether you work at home cannot be included. For example, water rates and council tax.
HMRC says that if an employee was already paying for a broadband internet connection before starting to work from home, this was an existing expense and cannot reimburse tax-free. If, on the other hand, the employee does not have internet access and needs one to work from home, this would be an extra expense that the employer might pay tax-free.
The same idea will apply to the expense of renting a home landline. Only extra costs an employee has to pay for because of homework can pay for tax-free by the employer.
