What tax allowances can employees claim when working from home?

It is a common trend to see companies offer their employees flexible working hours, including the option to work from home. 

You might ask yourself ‘what tax allowances can I claim as an employee working from home?’ to which the answers are within this blog. 

As an employee working from home, you are entitled to some tax allowances as long as you satisfy a number of conditions details further in this blog. 

It should be noted, under section 336 ITEPA 2003, expenses must be incurred ‘wholly’ and exclusively’ in the performance of the employee’s duties. 

In essence, this means tax relief will only be allowed for: 
-    The additional units of electricity and gas used when using a room for work
-    The metered cost of water used ‘in the performance of the duties’ (if any). As regards water rates, no tax relief would be available. 
-    The unit costs of business telephone calls (including ‘dial up’ internet access). 

How much can you claim? 
Since 6 April 2012, HMRC has agreed that employees who satisfy the conditions for relief are entitled to a deduction of £4.00 per week, or £18.00 per month for each week/month that they are required to work from home without having to justify that figure.

However, employees who wish to claim more than the allowance are expected by HMRC to keep records and calculations to demonstrate how these figures have been reached. 

The following expenses are not allowable for employee tax purposes, as the employee would be required to make the payments regardless as to whether they work from home. 
-    Council tax
-    Rent
-    Water rates
-    Mortgage interest/endowment premiums
-    Insurance for the property or its contents 

What are the conditions for relief?
HMRC will usually accept that an employee is entitled to claim allowable expenses under section 336 ITEPA 2003 if all of the following conditions apply:
-    The duties that the employee performs at home are substantive duties of the employment (these 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 him or her 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.

Other allowances
The tax allowances for those who are self-employed are slightly different and slightly more than employees. Our blog ‘what tax allowances can self-employed claim when working from home?’ covers this in greater detail. 

 

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