COVID-19 impact on office expenses for UK homeworkers

COVID-19 pandemic forced businesses to quickly adapt to home working operations.

This rapid shift from office-based to remote work has created some particular challenges for managers of employee expenses.

As remote working continues for a large proportion of UK businesses, more information has now been issued to help finance professionals navigate some of the newfound complexities. Here’s a look at the latest guidance on managing expenses for COVID-19 related homeworkers.

What are the tax rules on home office expenses?

The UK Treasury recently changed the way that COVID-19 related home office expenses are handled by HMRC. These temporary changes are intended to help employees who are finding themselves having to work from home as a result of the pandemic.

The latest announcement from Jesse Norman, the Financial Secretary to the Treasury outlines the exemptions for coronavirus related reimbursed home office expenses.

In summary, the main change is that businesses that reimburse employees for equipment that’s purchased to help them work from home during the COVID-19 crisis will not have to pay tax.

It’s a year-long exemption that means no tax or national insurance has to be paid on these costs until the end of the financial year - April 5th, 2020.

Normally, tax exemption is only available when costs are incurred directly by the employer, they maintain ownership of the equipment and any personal use of the item is ‘insignificant’.
How do you know if an expense is covered by the exemption?
Eligibility for the exemption requires an expense to meet two criteria. These are:

• The item purchased is for the sole purpose of helping an employee to work at home as a consequence of the COVID-19 crisis.
• The item would have been exempt from income tax if it had been provided directly to the employee by the employer.

Some examples of the types of costs that are covered by this exemption include computer equipment, office furniture, and internet access.

What about more general costs incurred by homeworkers?

An employee who is having to work from home may incur additional expenses such as increased heating, lighting, and water costs. Finance teams need to agree on how these are handled and what proportion of household bills should be covered.

One approach is to make use of the HMRC’s Home Working Allowance. This is a tax-free payment made to homeworking employees to cover any additional costs. The rate is reviewed each financial year and is currently set at £6 per week.

This allowance is only applicable if the worker is required to work from home and is not eligible if the person does so as a matter of choice.

Want a better way to manage homeworkers’ expenses?

Webexpenses provides a remote-friendly way to manage the expenses of homeworkers. The cloud-based system allows costs and claims to be monitored in real-time with automated compliance checks and faster processing ensuring that legitimate costs are promptly paid.