COMPLIANCE
QUARANTINE
Covid-19 and workplace changes
John Harling, principal employment taxes consultant at PSTAX , reveals the tax and NICs implications
O ne of the many effects of the Covid-19 pandemic has been to make a number of organisations – including those in the public sector – seriously consider how they provide office accommodation and what will be their future requirements. During the pandemic virtually all public bodies have required or allowed staff to work from home, where they are able, and this looks set to continue for the foreseeable future. This has consequences for expenses payable (e.g. homeworking allowances, travel costs) and the applicable tax/National Insurance contributions (NICs) treatment. However, more fundamentally some organisations are considering selling-up and moving out of their main accommodation altogether. In addition to staff working from home, this could involve moving to smaller premises, relocating staff from main premises to different hub locations, or a combination of these. Such changes will lead to tax/NICs-related issues. By way of reminder, the current position is that an individual working from home under agreed homeworking arrangements – whether or not this is related to Covid-19 – can be paid £6 per week/£26 per month free of tax/NICs if the criteria below are both met. The allowance is intended to cover the additional cost for heating/ lighting etc incurred when working from
home. The two conditions are: ● there must be arrangements between the employer and the employee, and ● the employee must work at home regularly under those arrangements. There is no provision in the rules for the rates to be reduced if the employee works part-time, although it is generally the case that employers paying this allowance do so on a pro rata basis in the interests of fairness. An exemption applies to the provision of office equipment for staff required to work from home, subject to certain criteria being met: ● the equipment is provided other than on the employer’s premises (e.g. employees who work at home or whilst travelling), for the sole purpose of enabling the employee to perform the duties of the employment, and ● any use for the employee’s private purposes is not significant. The exemption is predicated on the employer providing the equipment, so it does not apply if the employee purchases the equipment and is reimbursed the cost. However, as part of temporary relaxations put in place during the pandemic, HM Revenue & Customs (HMRC) has introduced a new exemption to apply until 5 April 2021 under which, if the employee initially purchases the equipment and is then reimbursed by the
employer, no tax/NICs implications arise. A strict interpretation of the exemption in cases of reimbursement would require this to be on the condition that all employees are entitled to receive the benefit on the same basis, although there is no mention of this in HMRC’s updated guidance. Where an employer provides an employee with office equipment to allow them to work from home, without transfer of ownership, there is no tax charge when the employee returns the equipment. However, if the employer transfers ownership to the employee at any stage of their employment, a benefit charge arises on the market value of the equipment at the time of transfer less any amount made good by the employee. Where an employee agrees to purchase their own home office equipment for use whilst working at home as a result of Covid-19 and the employer reimburses the expense on the basis of receipts, ownership of the equipment rests with the employee unless the employer has specified that ownership transfers to the employer. There is no benefit-in-kind charge if the employee is allowed to keep the equipment as they already own it. Although the tax system supports employers in providing additional help to staff working from home, this help represents additional costs and many public sector employers with large workforces have been somewhat reluctant to incur. After all, employees are saving home-to-work travelling costs. Therefore, employers have to weigh this additional cost against benefits derived; e.g. increased
...£6 per week/£26 per month free of tax/NICs if the criteria below are both met.
| Professional in Payroll, Pensions and Reward | November 2020 | Issue 65 20
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