Find out what equipment, services or supplies are taxable if your employees are working from home due to coronavirus (COVID-19). Full guidance from HMRC is reproduced below.
Who is affected
You could be affected if any of your employees are working from home due to coronavirus (COVID-19), either because:
- your workplace has closed
- they are following advice to self-isolate
Who is not affected
Furloughed workers who are eligible for the Coronavirus Job Retention Scheme.
Type of equipment, service or supply
Mobile phones and SIM cards (no restriction on private use)
If you provide a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.
If your employee already pays for broadband, then no additional expenses can be claimed.
If a broadband internet connection is needed to work from home and one was not already available, then the broadband fee can be reimbursed by you and is non-taxable.
In this case, the broadband is provided for business and any private use must be limited.
Laptops, tablets, computers, and office supplies
If these are mainly used for business purposes and not significant private use, these are non-taxable.
Reimbursing expenses for office equipment your employee has bought
This is taxable and should be reported on your PAYE Settlement Agreements.
Additional expenses like electricity, heating or broadband
Payment or reimbursement to your employees of up to £4 a week (£6 a week from 6 April 2020) is non-taxable for the additional household expenses incurred when your employee is working from home.
If the claim is above this amount, then your employee will need to:
- check with you beforehand to see if you will make these payments
- keep receipts
Employer provided loans
A salary advance or loan to help your employee at a time of hardship counts as an employment-related loan.
Loans provided with a value less than £10,000 in a tax year are non-taxable.
If your employee needs to self-isolate but cannot do so in their own home, you can reimburse hotel expenses and subsistence costs, these are taxable.
Employees using their own vehicle for business
You can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.
If you do not pay mileage allowance, your employee can claim tax relief through their Personal Tax Account.
Significant private use
For items which are taxable, exemptions for work related benefits must show that there is no significant private use.
HMRC accepts that where:
- your policy about private use is clearly stated to your employee and sets out the circumstances in which private use may be made (this may include making the conditions clear in employment contracts or asking employees to sign a statement acknowledging company policy on what use is allowed and any disciplinary consequences if the policy is not followed)
- any decision of the employer not to recover the costs of private use is a commercial decision, rather than rewarding your employee
Significant private use should not be based on the time spent on different uses. It should be based on your employee’s duties and the need for them to have the equipment or services provided so they can do their job.
You do not have to keep detailed records of every instance of private use to prove a claim for exemption.
How to report to HMRC
Taxable expenses or benefits
Any expenses or benefits which are related to coronavirus can be reported on your PAYE Settlement Agreement.
This means you can settle tax and National Insurance contributions on any expenses or benefits, even though the responsibility would usually be on your employee, or on both you and your employee.
This applies to coronavirus related items only, for example, a new desk can go onto the PAYE Settlement Agreement, but a new sofa cannot.
If you are currently payrolling benefits in kind, you may continue to report expenses and benefits through your payroll. You may also continue to report expenses and benefits through P11D returns.
Non-taxable expenses or benefits
Do not report to HMRC.
Contact HMRC if you’re an employer and need help and support on paying tax due to coronavirus.