Working from home has become a popular choice for many, offering flexibility and convenience. However, it’s important to understand the tax implications that come with this arrangement.
At Fiander Tovell, we recognise the challenges that employees face in navigating these complex tax rules, and we’re here to provide the expert guidance you need to manage your homeworking arrangements effectively.
General Tax Rules for Employees
For employees, understanding how to claim tax relief is essential. Any costs paid by your employer or reimbursed to you are generally considered taxable. To claim personal tax relief, you must demonstrate that these expenses were incurred “wholly, exclusively, and necessarily” for your job. This standard is much stricter for employees than for the self-employed, making it crucial to approach your claims with care.
Additionally, how services or equipment are provided can significantly impact your tax outcome. For example, if your employer provides equipment such as a laptop or desk, it often results in more favorable tax treatment than if you purchase the items yourself and attempt to claim tax relief.
Homeworking Exemption
There is a specific tax exemption that allows certain household expenses reimbursed by your employer to be tax-free, but this only applies under formal homeworking arrangements. These arrangements refer to a clear agreement between you and your employer under which you regularly perform some or all of your duties from home. While the arrangements don’t need to be in writing, it’s highly advisable to document them, as the exemption does not apply to informal homeworking setups. Eligible expenses can include costs for heating, lighting, internet access, and business-related calls, but not fixed household costs such as mortgage interest or rent. Fiander Tovell can assist you in structuring your homeworking arrangements to ensure you’re fully benefiting from this exemption while staying compliant with HMRC’s requirements.
Claiming Tax Relief
If your employer doesn’t make tax-free payments to cover your homeworking expenses, or if the payments fall outside the specified criteria, you might still be able to claim personal tax relief. However, this can be challenging, as you must prove that these costs were incurred “wholly, exclusively, and necessarily” for your job. The conditions set by HMRC are strict and can be difficult to meet.
To qualify, you must perform the central duties of your job from home, require specific facilities that aren’t available at your employer’s premises, and have no option to work elsewhere either before or after your employment contract is established. Given these stringent requirements, it’s often more advantageous to receive tax-free payments from your employer rather than relying solely on personal tax relief. Fiander Tovell has extensive experience in handling these claims and can help you navigate the process, ensuring that you meet all necessary criteria and maximise your tax relief.
Equipment and Travel Costs
When it comes to equipment provided by your employer for homeworking, such as laptops, desks, or chairs, there are opportunities for tax relief, provided the private use of these assets is minimal. No taxable benefit arises for you in such cases, especially when there is a clear written policy stating that the equipment is provided for work-related purposes. Fiander Tovell can guide you in structuring these provisions to avoid any unintended tax liabilities and ensure that your business claims the correct allowances.
Travel costs are another area where the tax rules can be complex. Although your home may be treated as a workplace for tax purposes, this alone does not automatically permit tax relief for travel expenses to another permanent workplace. You can claim tax relief on travel costs incurred while performing your duties, but not for ordinary commuting or private travel. However, if your home location is dictated by the job’s requirements, travel expenses may qualify for tax relief.
How Fiander Tovell Can Help
At Fiander Tovell, we understand that the tax implications of homeworking can be daunting, but we’re here to help you make sense of it all. From advising on general tax rules to assisting with specific claims for tax relief, we offer the expertise and support you need to optimise your tax position while working from home.
If you want to find out more, please contact our Commercial Client Director, Fabrice Legris, at fabice.legris@fiandertovell.co.uk.