Working from home: Get the details rightby
The number of employees working from home due to necessity, to save the employer money, or for reasons of work-life balance, is steadily increasing. Chris Williams explores what this means for accountants.
Set aside the jibes about “shirking from home” because the indications are that employees working from home (WFH) as a general practice is here to stay and the benefits outweigh the disadvantages for employers and employees alike. Here we pick out the main practical positives and pitfalls.
WFH in a time of Covid-19
There are no specifically legislated Covid-19-related dispensations or restrictions on tax reliefs for WFH, so what follows applies equally to everyone who works from home regardless of whether they do so to suit a short-term situation such as a pandemic, to accommodate personal circumstances, or for the convenience of employer and employee. HMRC’s line is that WFH allowances are only available to those who “have to work from home”, but there is a lot to consider when deciding if the employee has to work from home.
Covid-19 and the need to work at home
Covid-19 has focused a lot of attention on the circumstances in which there is a need to work from home. Strictly speaking, a lot of home working during the pandemic time may not have been “necessary” in the terms of the s336 test because the need was one imposed externally, but on this point the Government and HMRC have adopted a pragmatic approach. It will be interesting to see whether the changes brought about by the pandemic will lead to the evolution in taxation of home-working expenses, and indeed the whole “wholly, exclusively, and necessarily” rule that has long been regarded as necessary in the modern world of work.
It would be too strict to rule that WFH could only apply to work that needed to be done at home, so practical need must be the guide, which can include absence of space at the employer’s premises as well as a contractual obligation: if the employee’s contract designates their home as the place of work, it follows that that is where they have to work.
Switching between the two is feasible but can be difficult to keep track of unless there is a regular split between home and office work. Therefore as a matter of practice, contracts of employment should always make clear the need to work from home.
Allowable household expenses
Home-related expenses that are claimable are restricted to:
- domestic power, principally gas and electricity;
- water services; and
- phone call charges.
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Chris Williams is a tax author, AccountingWeb contributor, co-editor with Satwaki Chanda of Bloomsbury's CGT reliefs for SMEs and contributor to Claritax Books. Main interests are Rugby (either code), motorbikes (volunteer bloodbiker) and crosswords. Lifetime ambitions: lead Wales to World Cup glory (hope fading); win IoM Senior TT (hopeless);...