Newsletter March 2019

Working from Home

Claim tax relief for your expenses

An increasing number of employees work from home some or all of the time. Where they do so, they may be able to claim tax relief for the costs that they incur from working at home, regardless of whether their employer meets those costs.

Nature of expenses

Where an employee works from home, they can claim tax relief for the extra costs that are incurred as a result of working from home. This may include the cost of phone calls from the landline, the costs of electricity and gas to heat and light the workspace, power the computer, and the cost of cleaning the workspace.

Wholly, exclusively and necessarily incurred

The rules on claiming tax relief for employment are strict; relief is only available for those expenses incurred wholly, exclusively and necessarily in the performance of the duties of the employment. This is a difficult test to meet.

Mixed business and private use

Tax relief is not available for expenses that have both a work and a private element. This may prevent a deduction for, say, the cost of broadband which is used for both by the family for private use and also for work use. Likewise, no deduction for rent would be permitted unless a room was used exclusively for work, in which case a proportionate amount could be claimed.

Voluntarily working at home

To be allowed to claim tax relief for additional expenses incurred as a result of working from home, the employee must be required to work from home, rather than doing so voluntarily. Under the letter of the law, the employee should be working at home because the duties of the employment demand it, rather than as a matter of personal choice. However, from a practical perspective, if the employee’s contract requires that the employee works from home, either part time or on specified days or when required to do by the needs of the job, tax relief should be forthcoming.

Employer meets the expenses

Many employees will be able to reclaim the additional costs of working from home from their employer. If the expenses are such that the employee would be eligible for tax relief, the tax exemption for paid and reimbursed expenses comes into play and the employer and employee can both ignore the reimbursement for tax purposes – there is no tax to pay and nothing to report.

Keep it simple

To avoid the need to keep records and work out the additional costs of working from home, employers can pay a tax-free allowance of £4 per week (£18 per month) to employees who work from home. The amount is the same regardless of whether the employee works at home one day per week or five days a week. It may be possible to pay a higher amount if this is agreed with HMRC.

DATES TO REMEMBER:

1 March 2019 - Due date for Corporation tax for companies with an accounting period ended 31 May 2018.

7 March 2019 - Due date for filing and payment of VAT for the period ended 31 January 2019, unless you submit a paper return then the date is 28 February 2019.

13 March 2019 - Date of the Spring Budget.

1 April 2019 - Making Tax Digital (MTD) for VAT registered businesses mandated from today.

Monthly Dates:

19th of the Month:

Due date for postal payments of PAYE, NIC and CIS deductions and on-line filing deadline for CIS300 monthly return to HMRC.

22nd of the Month:

Due date for electronic payments of PAYE, NIC and CIS deductions to HMRC.

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