With the Covid-19 pandemic continuing, lots of employers have needed to ask their employees to work at home on a regular basis either for part of all of a week.
For some employees, this has led to additional household expenses for things like utilities, business calls and we’ve had a number of clients face the question “Can I claim these increased costs back?”
In this blog post we’ll explore the options for employers and employees, answering questions including:
1. As an employer, does my business have to contribute to working from home expenses?
In short, no.
You have no obligation to contribute towards these costs and some of our clients are gently reminding employees that, whilst the employee may now be incurring additional costs at home, for many people these are more than covered by the decrease in commuting costs.
The general approach that we’re seeing businesses take is to reimburse for normal business expenses (cost of calls made on personal mobile phones) but not contribute towards increased costs relating to heating, electricity, etc.
2. As an employer, can my business contribute to working from home expenses?
If you want to do more, however, then you have a couple of options:
- You can pay £6 a week to your employees (increased from £4 prior to 6 April 2020) to contribute towards the additional home working expenses; this will have no tax, NI or additional record keeping implications.
- You may also reimburse employees for additional costs they incur as a result of working from home, such as heating and lighting costs, additional insurance, metered water and telephone or internet access charges.
- Any costs that you reimburses to the employee must relate to the work area of the employee’s home. So, if an employee’s work space amounts to say 10% of the total property then you can reimburse 10% of the heating and lighting costs.
- Costs that remain the same, regardless of whether the employee works from home or not, such as mortgage interest and council tax, cannot be reimbursed without tax and NI implications.
- You will need to keep records of how you are calculating what you are reimbursing and we think it’s this burden that puts many employers off from taking this approach.
3. Are employees able to claim expenses due to COVID-19 directly from the government?
It may well be that the business simply cannot afford to pay the £6 weekly or reimburse any additional costs an employee has incurred to be able to work from home. If that is the case, employees can claim tax relief for the £6 a week or on costs incurred.
To be able to do this, the employee must demonstrate their home is a workplace and it is not optional that they work there. The rules on what a business can claim are similar to those listed above, and employees cannot claim for anything that is used for both private and business use; the expense must be solely for work purposes. Note: This does not cover the cost of business calls, for which an additional claim can be made based on actual costs.
Employees will get tax relief on the rate at which they pay tax. For example if they pay the 20% basic rate of tax and claim tax relief on £6 a week they would get £1.20 per week in tax relief (20% of £6).
Employees can claim tax relief here https://www.gov.uk/tax-relief-for-employees/working-at-home
In relation to all things tax, we strongly advise you to contact your accountant.
Nothing in this guidance should be viewed as constituting financial advice; the article is designed to inform you of the options available and you should then seek professional guidance from a tax adviser to determine what will be best for your business.