HMRC confirmed employees working from home can have a £6 per week or £26 per month allowance paid tax-free by employers or, during the pandemic, can claim a deduction from earnings for this allowance.
The relaxation to enable employees working at home because of COVID-19 to claim a deduction (under 336 ITEPA 2003) where they have not been reimbursed by their employer (which would be exempt under s316A ITEPA 2003) was announced in a Parliamentary question answered on 27 March.
Employees who are not reimbursed by their employer can claim this allowance as a deduction from their earnings in their tax returns (self-assessment return or a postal form P87) or via the government gateway to claim tax relief in-year for 2020/21 through the code number. To find out which you should use, visit HMRC’s new online claims checker.
This relaxation is explained in HMRC’s guidance at EIM32815 and the normal conditions that need to be met are in EIM32760.
The tests that apply before a deduction can be permitted under Section 336 are:
the expense must be one that each and every holder of that employment would have to incur, see EIM31640
the expense must be necessarily incurred, see EIM31645
the expense must be incurred in the performance of the duties of the employment, see EIM31650
the expense must be incurred and paid, see EIM31655
the expense must be wholly and exclusively so incurred, see EIM31660.
Examples of conditions:
The additional unit costs of gas and electricity consumed while a room is being used for work
The metered cost of water used “in the performance of the duties” (if any) - as regards water rates, see EIM32820
The unit costs of business telephone calls (including “dial up” internet access).
Disclaimer: This publication is meant to act as general guidance and should not be considered as professional advice or a substitute for such advice.