The Government has updated its guidance on taxable expenses and benefits when they are paid to employees because of coronavirus, and has provided details of how to report them to HMRC.
If any of your employees have been working from home due to coronavirus, either because your workplace has been closed or they’re following advice to self-isolate, you may have encountered employee expense claims which you’ve not come across before. It’s important to understand that the equipment or services you have supplied to staff working from home could be taxable. Don’t worry about any of your employees who are furloughed as they won’t be affected.
Covid-19 tests and PPE
Despite some controversial news in the media last month, the Government has taken the decision that Covid-19 tests are not treated as a benefit in kind for tax purposes. If you need to provide PPE to your employees, this should be provided to them free of charge and it is non-taxable. If your employees purchase their own PPE you need to reimburse the actual expense – it is non taxable and employees cannot claim tax relief on these expenses from HMRC.
Phones and broadband
If you provide a mobile phone and SIM card to your employee, and you don’t restrict it being for private use, this is non-taxable (limited to one per employee).
If your employee already pays for broadband, then no additional expenses can be claimed.
If a broadband internet connection is needed to work from home and one was not already available, then the broadband fee can be reimbursed by you and is non-taxable.
In this case, the broadband is provided for business and any private use must be limited.
Electronic devices and office supplies
If laptops, computers and tablets are mainly used for business purposes and not for significant private use, these are non-taxable. However if your employee needs to buy home office equipment to allow them to work from home, they will need to discuss this with you in advance.
If you reimburse your employee the actual costs of the purchase, then this is non-taxable provided there is no significant private use. If you don’t reimburse your employee, then they can claim tax relief for these purchases on their tax return or P87 – as long as the amount claimed is incurred wholly, exclusively and necessarily in the performance of their duties of employment. Your employees will need to keep records of their purchase and claim for the exact amount.
Electricity and heating
You can pay or reimburse your employees up to £6 a week from 6 April 2020 for the additional household expenses incurred when they are working from home, and this is non-taxable.
If the claim is over £6 a week, then your employee will need to:
- check with you beforehand to see if you will make these payments
- keep receipts
Returning office equipment
If you have purchased office equipment for your employees so they can work from home, there is no tax charge when they return the equipment to you, so long as there’s no transfer of ownership. If you do decide to transfer ownership of the equipment to your employee, this becomes an employee benefit. The tax charge will be based on the market value of the equipment at the time of the transfer, minus any amount the employee may have paid towards the equipment.
Your employee may have agreed to buy their own home office equipment to use whilst working from home and you have reimbursed the exact expense. However unless you have specified that they must transfer ownership to you, this equipment is owned by your employee. There’s no benefit charge on the reimbursement you give them. There is also no benefit charge if you let them keep the equipment, as it is something that they already own.
How to report taxable expenses or benefits to HMRC
Any expenses or benefits which are related to coronavirus can be reported on your PAYE Settlement Agreement. So as the employer, you are able to settle the tax and National Insurance contributions on any expenses or benefits, rather than the responsibility lying with your employee, or with both you and your employee.
This only applies to coronavirus related items. So a new desk can go onto the PAYE Settlement Agreement, but a new sofa can’t.
If you are currently payrolling benefits in kind, you may continue to report expenses and benefits through your payroll. You may also continue to report expenses and benefits through P11D returns.