Tax

HMRC guidance | homeworking and expenses and benefits provided during coronavirus

Written on 18 Jun 2020

HMRC has published guidance on various employee tax issues which are regularly arising for employers in connection with the pandemic.

Expenses and benefits

"How to treat certain expenses and benefits provided to employees during coronavirus" draws together relevant HMRC guidance on the income tax treatment of certain benefits (such as living accommodation and other costs). Guidance has been added about paying travel and subsistence expenses to an employee travelling to a temporary workplace.

It also confirms that changes in circumstances because of coronavirus are accepted as a lifestyle change which allows salary sacrifice arrangements to be reviewed.

Working from home expenses

"Check which expenses are taxable if your employee works from home due to coronavirus" sets out specific guidance on which expenses are taxable if an employee is working from home due to coronavirus. This may be because their workplace has closed or where they are following advice to self-isolate. It does not apply to furloughed workers.

The guidance covers a number of different types of equipment, services and supplies (ranging from broadband to additional expenses such as utilities), setting out whether they are taxable or non-taxable and how they should be reported to HMRC.

For items that are taxable, exemptions for work related benefits must show that there is no significant private use.

New temporary exemption for reimbursed expenses of home office equipment

A new exemption for Covid-19 related reimbursed home office expenses has been introduced, which will have effect until 5 April 2021.

This temporary income tax and NIC exemption is intended to ensure that no tax liability arises where employers reimburse employees' personal expenditure on home office equipment arising from arrangements to work from home during the Covid-19 outbreak.

The following two conditions must be satisfied:

  • The expenses must have been incurred on the purchase of equipment that is obtained for the "sole purpose" of enabling the employee to work from home due to COVID-19.
  • Had the equipment been provided directly by the employer to the employee, it would have been exempt from income tax under the relevant homeworking tax provisions.

Reporting

HMRC has also published guidance on submitting online end-of-year expenses and benefits reports.