COVID-19-related reimbursed home office expenses

The issue

Over the last few months many employees will have experienced sustained home working for the first time. With this has come the need to make homes fit for home-working, and employees have often incurred this expenditure unilaterally, with little involvement from their employer. Helpfully the Government yesterday released details of a temporary tax exemption and National Insurance disregard to ensure that home office equipment purchased by employees as a result of the coronavirus outbreak, will not attract tax and NIC liabilities where reimbursed by the employer. This applies from 16 March 2020 to 5 April 2021.

Requirements

This relaxation applies if:

  1. The equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak, and
  2. The provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer (under section 316 of ITEPA). This means that it is also subject to the proviso that private use is not significant.

Forbes Dawson comment

Perhaps if everything hadn’t have been so rushed then this relaxation would not have been required because employers could have catered for home working requirements directly (and these would not have been taxable). On the face of it this is welcome because employers do not need to enter into expensive PAYE settlement agreements to stop the employee bearing a tax burden. However when you look into the detail somebody (presumably the employer) still needs to make a judgement of whether private use is not significant. This is a highly subjective area and hopefully a pragmatic approach will be taken by HMRC. Generally an employer would not agree to take on the cost of items for which there is not a clear business need.

 

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