Over the course of the last two years both employers and employees have had their working conditions altered as restrictions forced many companies to operate from their employees homes. Due to these changes in working conditions, benefits and expenses have both been impacted. There are many expenses and benefits in kind which will need to be reported, however there are some exemptions for expenses associated with working from home.
Home working costs and equipment
Where employees are required to work from home as part of a home working policy, an employer can pay an allowance of up to £26 per month (£6 per week) to cover the additional costs that come with working from home. Alternatively, HMRC has confirmed that employees may claim tax relief to the same value directly from HMRC whilst the current situation continues. In either scenario, it is not necessary to record such qualifying payments on P11Ds.
Remote working expenses include:
- Office equipment e.g. computers, office furniture, internet access, stationary
- Household expenses e.g. electricity, heating, broadband*
*Broadband expenses will only qualify as an additional cost if a new broadband connection has had to be installed.
P11Ds will not need to be submitted for home office equipment provided to employees as long as it is being used for work purposes and any private use is insignificant.
The employer should purchase and arrange for the items to be delivered to the employee, the items will remain property of the employer and will need to be returned should the employee leave or the home working policy cease.
If the company decides to transfer ownership of the equipment to the employees, that will cause a taxable benefit to arise which must be recorded on P11Ds no matter how minimal the cost.
Employee reimbursement
When the Covid pandemic forced many companies to begin working from home last March, a tax and NIC exemption was brought in for reimbursements of Covid related home work expenses. The exemption will only apply to equipment that was bought by employees as a result of the coronavirus outbreak and which would have otherwise been provided by or on behalf of the employer. The exemption will stay in effect until 5 April 2022. To qualify, the items must meet both of the following conditions:
- The item is obtained for the sole purpose of allowing the employee to work from home due to Covid-19
- The item would have been exempt from income tax under the current exemption had it been directly provided to the employee
This temporary exemption will mean a taxable benefit will not arise if the equipment is kept by the employee rather than being given to their employer.
Mobile phones
If a mobile phone has been provided by the company and the mobile phone contract is between the company and the provider then no benefit will arise and there will be no obligation to report.
If an employee is using their personal mobile phone for work purposes, the below table shows what cost is taxable and what is not.
| Taxable (through payroll) |
Not-taxable |
If an employee is claiming for their fixed call plan
|
If an employee is claiming for and can evidence itemised business calls, texts and data |
If there is no justification for the costs being claimed so neither the business or personal use can be determined
|
If an employee is claiming for costs over and above a fixed call plan, if the employee can demonstrate that the additional cost relates to 100% business use |
Broadband
Should a broadband connection be needed due to working from home and the business arranges this then the costs will be tax free and will not be reportable on P11Ds.
If an employee has an existing broadband connection, and it is not possible to divide the business use and personal use, any reimbursement made will trigger a benefit in kind and the entire payment will be taxable. Should the employee be able to split their bill and claim only for the business use element, a reimbursement can be given with no tax implications.
Cars
If a vehicle was not used privately by an employee during a period (e.g. during lockdown) in the tax year, there could be an opportunity to reduce the charge on this benefit in kind, this is because a car or van benefit is not charged for periods of unavailability to the employee for private use. As long as the time period lasts for 30 or more days in a row, the car/van benefit is reduced in proportion to the number of days when the car/van is not available for use. In order to prove that the vehicle was not available for private use by the employee, HMRC would want assurance that an employee had no way of driving the vehicle during that period. One example of assurance could be because they handed their keys back to their employer or hire company (under instruction from the employer). As long as the employee holds the keys to the vechile, it is considered to be available for private use, hence taxable and reportable on the employee’s form P11D.
Ultra low emission vehicles (ULEVs) are classed as cars with approved CO2 emission figures of 1 to 50gkm. The benefits in kind are now based on the
electric range (the distance the car can travel on electric power before the batteries need recharging) and the year of registration.
Travel and subsistence expenses in relation to “temprorary workplaces”
If an employee was furloughed when they were travelling to a temporary workplace, the period of furlough is classed as a period of continuous work. A period of working from home will also be classed as a period of continuous work.
The workplace stops being temporary from the date that attendance there is expected to be more than 24 months (
24 month rule). Tax and NIC will then become liable and reportable on any payments of travel and subsistence expenses.
Covid-19 provisions
The costs of employer provided coronavirus testing (e.g. lateral flow tests) is not to be treated as a benefit in kind. The cost of employer provided PPE (personal protective equipment) , relating to their work, is non-taxable and need not be reported on P11Ds.
Medical benefits
The taxable value of medical benefits may have changed for the 2020/21 tax year. Some medical providers have made refunds to employers where they have not provided services previously specified, the reportable value of the benefit in kind is the amount paid in the year minus any refund relating to that year (regardless of when it was received).
Official rate of interest
The ORI (official rate of interest) decreased from 2.25% to 2.00% in the 2020/21 tax year. This will be used to calculate the taxable benefit of employer-provided accommodation and employed provided loans in excess of £10,000.
P11D deadlines
| Task |
Deadline |
Submit P11D forms online to HMRC
|
6 July 2021 |
Give employees a copy of the information on their P11D forms
|
6 July 2021 |
Inform HMRC of the total amount of Class 1A National insurance you owe on your P11D(b) form
|
6 July 2021 |
If paying by cheque – Pay any Class 1A National insurance owed.
|
19 July 2021 |
If paying online - Pay any Class 1A National insurance owed.
|
22 July 2021 |
| Pay tax on any PAYE settlement agreements and Class 1B National insurance |
By Cheque – 19 October 2021
Online – 22 October 2022
|
Any PAYE tax or Class 1 National Insurance owed on expenses or benefit should be payed through payroll on a monthly basis.
If you require assistance with the above please contact the Moore (South) tax team
here.