Tax implications of hybrid and home working – will HMRC be looking at how you provide home working equipment?

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Graham Wallace

For many business owners the transition to hybrid and home working for their employees has at times been difficult to manage. Understanding and managing the overall impact on the business, employee’s wellbeing, company culture, working relationships, collaboration and communication has been a key focus for business leaders in the last few years.

However, one of the areas of home and hybrid working that many business owners have overlooked are the tax implications of employees working from home and provision of office equipment.

With an estimated 40% of the UK workforce having the ability to work from home and companies providing equipment to support this, this area will be easy pickings for HMRC now an in the future.

I have no doubt that it’s likely that HMRC will begin to start looking into how equipment is provided, paid for or expensed to employees working from home. You may be thinking ‘So what?’ because the amounts of money involved are minimal. However, the consequences of HMRC investigating this in your business can be far more expensive than you imagine!

Working From Home allowance

HM Revenue & Customs define an allowance for additional expenses arising from working from home.  But this is a very limited amount of only £6 per week to remain tax free.  HM Custos & Excise will allow more to be claimed if it can be demonstrated by evidence.

Home broadband

But we have also seen employers paying the employee’s home broadband as an additional benefit.  However reasonable this seems, it is not tax free and should be grossed up through the payroll for tax and National Insurance in the month paid.

Office equipment reimbursement

To work effectively and safely at home, employees probably require some form of additional office equipment to be supplied. This may have included monitors, keyboards, printers, desks and chairs for example.

During the pandemic many businesses sent out additional equipment or allowed people to purchase equipment and reimburse them for the cost to make a speedy transition to home working.

Thankfully, during the pandemic, a temporary concession was made meaning that any reimbursement by an employer for the cost of office equipment was exempt from income tax and national insurance contributions, however this is concession is no longer in place beyond 5 April 2022.