If you or any of your employees are working from home due to Coronavirus because your workplace has closed or you are following advice to self-isolate then you may be able to deduct some of the costs of home working as a taxable expense.
The rules around expenses and whether or not they are taxable differs depending on the type of equipment, service or supply used and so we have covered the main categories below:
Mobile phones and SIM cards (no restriction on private use)
If your company provides a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.
If you or your employee already pays for broadband, then no additional expenses can be claimed, but if a broadband internet connection is needed to work from home and one is not already available, then the broadband fee can be reimbursed and is non-taxable.
The broadband must be provided primarily for business use and any private use must be limited.
Laptops, tablets, computers, and office supplies
Where any of these items are used for business purposes and not significant private use, these are non-taxable. Where an employee has bought office equipment or supplies and wishes to be reimbursed, this is taxable and should be reported via PAYE Settlement Agreement.
Electricity or heating
Employees are entitled to a payment or reimbursement of up to £4 a week (increasing to £6 a week from 6 April 2020), which is non-taxable. This is intended to cover additional household expenses incurred when your employee is working from home.
Where a claim exceeds this amount then an employee should check with you beforehand to see if you will make these payments and you should keep receipts.
A salary advance or loan to help your employee at a time of hardship counts as an employment-related loan. Those loans with a value less than £10,000 in a tax year are non-taxable.
If your employee needs to self-isolate but cannot do so in their own home, you can reimburse hotel expenses and subsistence costs, these are taxable.
Use of a private vehicle for business
Employers can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.
If you do not pay mileage allowance, your employee can claim tax relief through their Personal Tax Account.
Reporting expenses to HMRC
Any expenses or benefits which are related to Coronavirus can be reported via a PAYE Settlement Agreement, which will allow you to settle tax and National Insurance contributions on any expenses or benefits, even though the responsibility would usually be on your employee, or on both you and your employee. This applies to Coronavirus related items only, for example, a new desk can go onto a PAYE Settlement Agreement.
Where you are already including benefits in kind in your payroll reporting, you can continue to report expenses and benefit this way, or they can be reported through P11D returns.
It is important to keep a record of all expenses claimed, although you do not have to report of every instance of private use to prove a claim for exemption.
Any non-taxable expenses or benefits should not be reported to HMRC.