Category: Employment & Payroll

Employees working from home may be able to claim tax relief for certain home-related bills they pay that are related to your work. 

Employers may reimburse employees for the additional household expenses incurred through regularly working at home. The relief covers expenses such as business telephone calls or heating and lighting costs for the room in which you are working. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount. 

If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will get tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week, they will get £1.20 per week in tax relief (20% of £6). Employees can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years. 

These tax reliefs are available to anyone who has been asked to work from home on a regular basis, either for all or part of the week including working from home because of coronavirus.

The deadline for submitting the 2020-21 forms P11D, P11D(b) and P9D is 6 July 2021. Employees must also be provided with a copy of the information relating to them on these forms by the same date.

P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled.

Where no benefits were provided during 2020-21 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties for late filing of returns.

Employers pay Class 1A National Insurance contributions on most benefits. If you provided taxable benefits to staff or directors your business is likely to have a Class 1A employers’ NIC liability. The deadline for paying class 1A NICs is 22 July 2021 (or 19 July if paying by cheque).

In addition, any tax or National Insurance due for 2020-21 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2021 (19 October 2021 for payments by cheque).

A taxable benefit charge can apply when employees return office equipment they used to work from home. There was a significant rise in the provision of office equipment to employees working from home due to the COVID-19 pandemic. Qualifying home office equipment is that deemed necessary for an employee to work from home and can, for example, include a laptop, mobile phone, office desk and chair and other necessary computer accessories such as webcams.

Taxable benefit charges are as follows:

• If you supplied your employees with office equipment so they could work from home, and you did not transfer ownership, there is no tax charge when they return the equipment to you.
• If you transfer the ownership of home office equipment to an employee at any stage of their employment, a benefit charge generally arises on the market value of the equipment at the time of the transfer, less any amount made good by the employee.
• If your employee has agreed to purchase home office equipment for use whilst working at home due to COVID-19 and you reimburse the exact expense, unless you have specified that your employee must transfer ownership to you, the ownership of the equipment rests with your employee. There is no benefit charge on the reimbursement.
• There is also no benefit charge if you allow your employee to keep the equipment as it is something that they already own.

These days due to COVI19 most of the employees are working from home. These employees may be able to claim tax relief for any additional costs due to working from home.

No tax relief will be due if employers reimburse employees for the additional household expenses incurred.

What is covered:

The tax relief covers expenses such as business telephone calls or heating and lighting costs. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment purchased. For example, a laptop, chair or mobile phone.

Have a look at our Corporation tax page, we are able to advise on which reliefs a business could claim.

Since 6 April 2020, employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will qualify for tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week they would receive £1.20 per week in tax relief (20% of £6).

Employees can claim more than HMRC’s fixed amounts but may need to provide evidence to HMRC of the amount claimed.

This is important to note, that if an employee is working at home voluntarily, they cannot claim tax relief.

However, these tax reliefs are available to anyone who has been asked to work from home due to the COVID-19 outbreak.

If you are looking to know more this new and related laws; feel free to book a free consultation.

The employees are required to buy equipment to use as part of their employment may be able to claim tax relief based on the cost of the equipment acquired. In most cases you can claim tax relief on the full cost of this type of equipment as it usually qualifies for a type of the Capital Allowance called annual investment allowance. Any tax relief would be reduced if the employer provides a contribution towards buying the item.

The way to claim tax relief depends on the amount you’re claiming. HMRC provides the following information on making a claim:

Claims up to £2,500

You should make your claim:

• using a Self-Assessment tax return if you already fill one in
• online or by printing and posting form P87 if you don’t already fill in a tax return 
• by phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions)

Claims over £2,500

• You can only claim using a Self-Assessment tax return. You will need to register if you don’t already complete a return.

There are different rules for employees who use their own uniforms, work clothing, and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job (for example, scissors or an electric drill), or cleaning, repairing or replacing the specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a ‘flat rate deduction’. However, an employee cannot claim relief on the initial cost of buying small tools or clothing for the work.

‘Tax relief’ means that you either:

• payless tax to take account of the money you’ve spent on specific things, like business expenses if you’re self-employed
• get tax back or get it repaid in another way, like into a personal pension

https://www.gov.uk/tax-rel-for-employees/working-at-home

Tax Relief For Working From Home

If you have not yet received compensation from your employer you can still claim tax relief for some expenses that result from Working from home. HMRC will usually allow you to claim tax relief if you use your own money for things that you must buy for your job and you only use these items for work. You must make a claim within 4 years of the end of the tax year that you spent the money.

For example, if you use your own uniforms, work clothing, and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job as an employee (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a ‘flat rate deduction’. However, you cannot make a claim for relief for the initial cost of buying small tools or work clothing.

You may also be able to claim tax relief for using your own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business-related mileage.

Note, that if you have agreed with your employer to work at home voluntarily, or you choose to work at home, you cannot claim tax relief on the bills you have to pay. https://www.gov.uk/tax-relie-for-employees/work-at-home

The new £2 billion Kickstart scheme that was announced as part of the Summer Economic update by the Chancellor, Rishi Sunak was officially launched by the government on 2 September 2020. The scheme is intended to create hundreds of thousands of high-quality 6-month work placements aimed at those aged 16 to 24.

It is hoped the scheme will help young people into work and spur Britain’s economic revival. The scheme will cover the wages (plus associated costs) of new jobs created for any 16 to 24-year-olds – who are at risk of long-term unemployment and claiming Universal Credit – for a six month work placement.

The government will fully fund each “Kickstart” job by paying 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week. Employers will be able to top up this wage and offer kickstarters’ training and support to find a permanent job. The government will also help by paying employers £1,500 to set up support and training for people on a Kickstart scheme placement. Any employers, regardless of size, can apply for funding. However, there are conditions that must be met including that the job placements created with Kickstart funding must be new jobs.

Young people will be referred into the new roles through their Jobcentre Plus work coach with the first Kickstarts expected to begin at the start of November. The scheme, which will be delivered by the Department for Work and Pensions will initially be open until December 2021, with the option of being extended.