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Tax Relief Available – Working From Home

The coronavirus lock down has resulted in many workplaces being closed, and millions of UK employees now being asked to work from home.

Prior to the coronavirus pandemic only 1.7 million people in the UK worked from home. Data from the Office for National Statistics now estimate that nearly 20 million have now relocated to working from home. The situation is unlikely to change in the short term.

Whilst the employers have continued to meet the cost of the staff wages, many are not in a position to assist employees with their additional expenditure incurred from working at home.

This briefing note is a simple overview of the current situation regarding the additional cost of working from home and the tax breaks available.

Tax Relief Available – Working From Home

With so many workplaces closed and a significant amount of people being required to work from home it is important to understand any assistance available. HMRC guidance says that it will consider claims for increased costs from employees working at home due to coronavirus measures.

How Do I Calculate the additional cost?

It is difficult to calculate the additional costs of working from home, which will include heating and electricity. In the Budget 2020, the government announced that it will increase the limit to £6 per week tax relief, without the need to provide receipts to justify the claim.

You can claim for higher increased costs, if you believe these have been incurred, but you will need to produce evidence and there is a lot more paperwork required.

What eligibility is required to make the claim?

HMRC accepts that the general rule is met where the following circumstances apply:

  • the duties that the employee performs at home are ‘substantive duties’ of the employment
  • those duties cannot be performed without the use of appropriate facilities
  • no such appropriate facilities are available to the employee on the employer’s premises or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis, and
  • at no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere

What tax savings will this provide?

The claim for a basic rate tax payer of 20% the saving is £1.20 per week (approx.£62 per annum)

The claim for a higher rate tax payer of 40% the saving is £2.40 per week (approx.£124 per annum)

How do I obtain the tax relief?

Unless you currently complete a self-assessment tax form, where you can make the claim for working from home, you will be required to submit a P87 form. This is available online, by post or you can claim by phone if you have already claimed expenses in a previous year and your total expenses are less than either:

  • £1,000
  • £2,500 for professional fees and subscriptions

For the online submission, if you already use the Government Gateway you will need your User ID and Password, if you are a first time user, you will have to register. You will then be asked to provide your employers name and PAYE reference (which is available on your payslip)

For postal submission you will need your national insurance number.

This is based on our understanding of the current position as this is a rapidly evolving situation and further development or change cannot be ruled out.

Broadstone are not tax specialists and the information contained in this article should not be construed as advice. We strongly recommend that you seek appropriate advice in relation to tax matters through a tax specialist or accountant.

Some useful links below:

https://www.businessleader.co.uk/how-many-people-in-the-uk-worked-from-home- prior-to-coronavirus-outbreak/81646/

https://www.gov.uk/government/publications/budget-2020-overview-of-tax- legislation-and-rates-ootlar para 2.11

https://www.gov.uk/guidance/claim-income-tax-relief-for-your-employment-expenses- p87

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32760