The coronavirus crisis is resulting in enforced homeworking for many. But are there any tax traps for either an employer or employee?  What about those who are self-employed? Article provided by Lynne Rowland, Partner at Moore Kingston Smith, for Beacon Gainer private wealth advisory services group.

“Under normal circumstances, an employee can claim tax relief for expenses incurred ‘wholly, exclusively and necessarily’ in the performance of their role. The test is less stringent for those who are self-employed in that tax relief is available if an expense is ‘wholly and exclusively’ for business purposes.

“Whether an employee or self-employed, individuals may become temporarily based at home due to voluntary or enforced isolation, alternatively staff or contractors may be forced to work from a different location to reduce travel and use of public transport. Any costs incurred may be reimbursed to employees without any tax cost to them personally.  Expenses incurred in the course of fulfilling a contract by a self-employed person would be tax deductible if not directly reimbursed as part of the invoicing arrangement.

“The main types of tax-free benefits and costs likely to be claimed by employees for working from home are:

  • The cost of business telephone calls;
  • The provision of one mobile phone or SIM card paid for directly by an employer;
  • The cost of office equipment (e.g. computers, printers, etc.), office furniture and stationery provided that the purpose private use is not significant;
  • The provision and payment of a broadband connection if the employee does not already have one and the broadband is provided to enable the employee to work from home..
  • The cost of additional household expenses (e.g. gas and electricity) up to £4 per week (£6 per week from next month). If payments exceed this limit, records should be kept to show the additional cost of working from home;
  • The cost of using your own car for work at the approved mileage rate of 45p per mile for the first 10,000 miles and 25p thereafter. An extra 5p per mileage can be claimed if the individual carries a fellow employee;
  • The cost of travelling to a temporary workplace (e.g. a local business centre to hot desk) provided the journey is outside of their ordinary commute.

 

“Sole traders or other self-employed individuals forced to work from home can either claim the business proportion of their household costs for gas, electricity, telephone or broadband or a monthly flat rate deduction based on the number of hours worked from home per month as follows

Hours Monthly Deduction
25-50 £10
51-100 £18
101+ £26

 

“In addition, they can also claim a deduction for the business element of fixed costs such as council tax, insurance and mortgage interest.”

The recent Budget also confirmed assistance for those needing to claim sick pay, and time to pay tax bills.  Business owners should take advice to ensure that they are taking advantage of all the assistance on offer, and the measures for supporting small businesses are especially generous. Working from home might become the norm for us all over coming weeks and months.