Tax relief for home working and home working allowance

Tax Relief and Homeworking Allowance for employees/clerks

Tax relief for household expenses is permitted where it is demonstrated that the expense has been incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

HMRC accepts that those conditions are met where the following circumstances all apply:

• ·        the duties that the employee performs at home are substantive duties of the employment. “Substantive duties” are duties that an employee has to carry out and that represent all or part of the central duties of the employment.

• ·        those duties cannot be performed without the use of appropriate facilities.

• ·        no such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect them to travel to those premises on a daily basis).

• ·        at no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.

These conditions are very restrictive and will only apply in limited circumstances. Individuals working from home under agreed home working arrangements including an element of personal choice are unlikely to be able to claim the relief.

Where relief is available this is a claim that an individual makes directly with HMRC and cannot be made multiple times if the person holds more than one job. If the conditions are met, the individual may claim relief on £26 per month without having to provide evidence of additional costs. If costs are incurred above this level, additional relief may be claimed subject to having appropriate evidence, e.g., bills, receipts.

The claim is made directly to HMRC and information about this process can be found on the .gov.uk website at this location https://www.gov.uk/tax-relief-for-employees/working-at-home

Rather than an employee making a claim to HMRC, it is also possible for an employer to pay a ‘homeworking allowance’ to employees without giving rise to a tax/NIC liability. Unlike the tax relief claim, the exemption conditions for the payment of the allowance are less restrictive and so only two tests need to be met:

• ·        there must be homeworking arrangements between the employer and the employee; and

• ·        the employee must work at home regularly under those arrangements.

The arrangements should be part of the clerk’s contract, and these arrangements do not need to apply to all employees who may have a home base but work in a hybrid manner. Where these conditions are met, the employer may pay up to £26 per month (or £6 per week) to the clerks without any tax/NIC being due. Higher figures than this can be paid, but anything above the £26 will be treated as earnings for tax/NIC purposes.

If a clerk has multiple employers, each employer would be treated separately and so they could each pay the £26 per month.