It goes without saying that the current nationwide COVID-19 lockdown measures are having a major impact on UK business. For many, they have meant adopting new ways of working with whole teams working from home.
From a business finances perspective, this can throw up a host of challenges.
So, how can business finance teams strike a balance between supporting staff while ensuring costs don't spiral during a time when many businesses are so cash-strapped?
Have an expenses policy in place
This may seem obvious, but ensuring you have in writing your company policy on what can and can’t be claimed for will stop any confusion further on down the line. You may wish it to include details of additional stationery, equipment or electricals that can be purchased and claimed back with potential price limits on each item.
Perhaps you’re willing to foot the bill for a new home desk or office chair, for example. The key will be ensuring that all employees are clear if there is a price limit on what you’re willing to cover.
However, bear in mind that in accordance with government guidance, employees will be able to claim back on any expenses that at are deemed ‘reasonable’.
HMRC's guidance on expenses while working from home
When it comes to deciding what expenses are classed as reasonable, it’s not explicitly stated in the standard government expense guidance.
Each claim will need to be taken on a case-by-case basis. For things like laptops, for example, if a standard model will do the job over one with a higher spec, then that would most likely be deemed to be the reasonable choice.
Of course, depending on their role, it may be that certain employees may require higher spec tech equipment, more licenses or new software for them to perform their role to the best of their ability. Here, it all boils down to striking the balance between what is reasonable and what is essential.
Next, it’s worth taking a look at the latest specific government guidance on working from home due to the pandemic. These measures will cover all employees that are now having to work from home due to the workplace being closed as well as those working from home due to having to self-isolate, but furloughed staff will not be eligible.
Claiming utilities and broadband
Under the official government advice, laptops, tablets, computers and office supplies can all be claimed for so long as they are used mainly for business purposes, with employees reimbursed in full and details reported on your PAYE settlement agreements.
However, where things start to get a little confusing is for things such as household utility bills and broadband. For broadband, the important distinction lies between whether the employee already had broadband or whether they will have to pay to get it set up.
If they have to pay for the broadband set-up, then they will be able to claim for the set-up fee but, as the broadband has been set-up for business use, it will mean any private use will have to follow strict limits.
For additional household utility bills, employees will be able to claim for up to £6 a week.
Business use vs private use
Further challenges will come in the form of differentiating between business and private use. For services such as the internet, landlines and even laptops, if an employee is claiming expenses back for them then it’ll be important to show that there has been no significant private use. Naturally, this will be tricky to monitor as clearly you won’t be with the employee in their home.
So, though it will mean there will have to be a level of trust between you and your employee, it’ll also be essential for you to include in your expenses policy clear details about when and how private use is permitted, along with disciplinary consequences of non-compliance with the policy.
Harness the power of tech
Now more than ever, increasing numbers of businesses are turning to the latest tech applications to take on some of the burden of many day-to-day business tasks. With business finance teams now so stretched and often having to spend time crunching the numbers to keep their businesses afloat at a time when so much is uncertain, financial management software is often a welcome lifeline.
Allowing finance teams to achieve greater visibility across all financial aspects of the business while driving efficiencies helps teams better assess where cost savings can be made, leaving them better equipped to tackle the impact of COVID-19.
In addition, with such tools able to pull through the latest scale rates automatically every three months from HMRC, keeping track of the latest rates is one less thing finance teams have to worry about.
It could be easy to assume that with more staff working from home, it'll cut down on claims for expenses due to less travel and client entertainment costs. However, in reality, if left unchecked, those expenses could soon add up.
Given that employee expense claims cost the UK £1.9bn each year under normal circumstances, and with the current lockdown measures in place for the foreseeable, the time has never been more pertinent for finance teams to keep a closer eye on expenses, whilst still ensuring teams are supported.
