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COVID-19: Homeworking expenses – what’s taxable?

COVID - 19: Homeworking expenses – what’s taxable?

HMRC publish new guidance highlighting which expenses are taxable for employees working from home due to COVID-19.

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Caroline Laffey

Partner, Tax and People Services

KPMG in the UK

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Also on home.kpmg

Due to COVID-19 many employees have been forced to work from home and in many cases have suffered additional costs as a result. HMRC have published guidance for employers to understand which of these expenses are taxable, and have confirmed that they can be reported to HMRC through a PAYE Settlement Agreement (PSA) where arising as a result of COVID-19. To make things easier, we have summarised the main points for you.

HMRC’s guidance
HMRC have confirmed the tax and NIC treatment of expenses incurred relating to equipment, services or supplies provided if your employees are working from home due to COVID-19.

The affected employees consist of individuals who work from home due to COVID-19, either because:

  • Their workplace has closed; or
  • They are following Government advice to self-isolate.

Affected employees do not include workers who have been furloughed.

There are a number of exemptions for certain types of employee expenses and benefits which include:

  • Mobile phones and sim cards bought for business use;
  • Newly installed broadband internet connection (and associated fees) where required for business use;
  • Laptops, tablets, computers and office supplies provided by the employer and mainly used for business;
  • Additional household expenses incurred whilst working from home (e.g. electricity, heating and broadband) up to £6 per week (£4 per week prior to 1 April);
  • Employer provided loans up to a total value of £10,000 in a tax year; and
  • Mileage allowance payments for use of own car for business 45p per mile up to 10,000 miles (25p per mile thereafter).

Where the conditions for exemption are met, no tax or NIC should arise. Where not exempt, HMRC have confirmed that taxable expenses and benefits incurred from working from home due to COVID-19 can be included on the annual PSA. This confirmation is welcome.

What can you do as an employer?
If your employees are incurring taxable expenses in this way, you can settle the tax and NIC due on these expenses through a PSA.

If you already have a PSA in place you may need to contact HMRC to ask them to amend the current enduring agreement. This will need to be done as soon as possible as the deadline to have the finalised PSA agreement in place with HMRC for the 2019/20 tax year is 6 July.

The deadline to apply for a new PSA if you do not have one in place is 6 July 2020.

For further information please contact :

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