Working from home usually leads to additional costs such as extra heat and light, and telephone or broadband costs as well as the expense of fitting out a home-office. HMRC has recognised that the current situation with Coronavirus means that for many employees, working in the office is no longer possible in the same way as before, either because offices are closed or because the employee has been advised to self-isolate.
Where working from home is not by choice, employees are able to claim tax relief on those expenses.
From 6 April 2020 employers can pay a flat rate allowance of up to £6 per week (£26 per month) with no deduction for tax or national insurance. Alternatively, employees can claim tax relief on the same amount.
If the flat rate doesn’t cover the expenses, the employer can reimburse the actual additional expense or the employee can claim tax relief for the higher amount, but this needs to be calculated accurately, and HMRC may ask for evidence of the amount claimed.
The claim cannot include costs which do not increase due to working from home, such as mortgage interest or rent, council tax or water rates. Broadband connection costs cannot be claimed if the employee was already connected before starting work from home. However, the cost of a new connection (specifically for work purposes) can be claimed.
Where additional office equipment, such as monitors, keyboards or desks is purchased by the employer and made available to the employee, again specifically only for work use, there is no benefit in kind. This also applies where the employee purchases these items and is reimbursed by the employer. The items will remain the property of the employer.
If the employee purchases these items and is not reimbursed, it might be possible for them to claim tax relief as capital allowances, but this is unlikely to be allowable, because the employee will have to justify the cost as being wholly, absolutely and necessarily for work use which is a far higher hurdle to jump over.
Tax relief can be claimed on form P87. More information can be found here.