COMPLIANCE
as there’s no tax or class 1 NI contributions (NICs) for the employee or employer. There must be a homeworking arrangement in place, preferably in writing and the employee must work from home on a regular basis. ‘Regular’ doesn’t require the employee to work from home full-time, but there should be an agreed pattern regarding the days when working at home takes place. The allowance doesn’t need to be pro-rated for part-time employees or the number of days worked at home. No evidence of the actual additional costs is required. Where the actual increased costs of working from home exceed £26 per month for heating, lighting and metered water, and those actual costs can be evidenced, employees can be reimbursed free from tax / NICs. The evidence must be retained by the employer. If employers choose this option, they must keep detailed records to support it, i.e., that could potentially stand up to scrutiny from HM Revenue and Customs (HMRC). While the option to reimburse the cost of employer-provided equipment is no longer tax / NIC efficient, please note where this is provided directly by the employer, it’s not regarded as a benefit if it’s required exclusively for work purposes with any private use being incidental. There’ll also be no additional benefit charge if the equipment is returned when it’s no longer required or the employee leaves. Where it’s retained, a benefit will arise of the market value of the equipment at the date of transfer and is reportable on a P11D. However, if the employee makes good the full market value by 6 July following the relevant tax year this will also avoid a benefit in kind charge on the transfer of the asset. Although this poses logistical problems for tracking and collecting equipment, it’s more tax efficient for the employer to provide employees with the equipment needed to work from home. By selecting a small catalogue of equipment which can be requested by the employee and ordered and purchased by the employer, there’s also the guarantee that the equipment used meets health and safety requirements. Business mileage and permanent workplaces As we’ve said above, HMRC will rarely recognise home as a permanent workplace. Where home isn’t a permanent
workplace, any travel to the ‘office’ will remain normal commuting and not constitute business travel. Employees can have more than one permanent workplace. If they’re carrying out every day, substantive duties at a location on a regular basis, HMRC may see that location – or those locations – as a permanent workplace or workplaces. Pre-Covid, employees working in the community may have started and ended each working day at an office or depot. Post-Covid, they may well be starting and finishing the day from home. Where they meet the conditions, these employees will have a geographical area as their permanent workplace. These employees won’t be able to claim tax relief against their ordinary commute from home to the edge of the geographical area they work in. They will, however, be able to claim tax relief on travel made within that geographical area. It should be noted there are several conditions that must be met for the employee to be categorised as having a geographical area as their permanent workplace, including the fact that there must be no single workplace they visit regularly which would make that their permanent place of work. These conditions can be found here: http://ow.ly/ VFcH50LFKxX. Summary In summary, there are several issues that must be considered in ensuring expenses policies and procedures keep pace with evolving working practices. We would encourage organisations to seek advice on new working practices and policies, and to review travel and expense policy changes to ensure they meet the needs of new workstyles and are both tax compliant and efficient. n There are several issues that must be considered in ensuring expenses policies and procedures keep pace with evolving working practices
buildings, which gives the potential for estate rationalisation and cost savings l business travel reduced because of online communication, saving both time and money. However, retaining the previous employment contracts can result in tax inefficiencies and potential compliance issues. Changes to tax rules during Covid During Covid, there were several reliefs and concessions given to those working from home. The conditions for receiving homeworking tax relief of £26 per month were amended to include working from home due to Covid. This allowed millions of employees to claim the homeworking tax relief for 2020/21 and 2021/22. This has now reverted to pre-pandemic rules, making it almost impossible to claim homeworking tax relief unless there is a homeworking arrangement in place that meets the very restrictive conditions of the tax relief. There was also a tax concession allowing home office equipment to be purchased by the employee with the cost reimbursed tax / National Insurance (NI) free if certain conditions were met. This has also reverted to the pre-pandemic rules, making the reimbursement of home office equipment subject to tax / NI through payroll. This point is considered further below. So, what practical solutions are available to employers? Employers can still pay the homeworking allowance of £26 a month to cover the additional cost of working from home. It should be noted that this isn’t the same thing as an individual claiming tax relief and does result in an additional cost to the employer. However, this is very tax efficient The need to live near to the workplace has gone, with many employees living some distance away or even in another country
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| Professional in Payroll, Pensions and Reward |
Issue 86 | December 2022 – January 2023
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