Working from home allowance – current position

The working from home allowance has been around for 20 years but it was “relaxed” during covid meaning more people were entitled to claim.

If you are required to work from home, you could claim up to £6 per week as an expense, for a basic rate taxpayer this means a reduction in tax liability for the year of up to £62.40, for a higher rate taxpayer this jumps to £124.80. These amounts are based upon working from home full time, if you only worked from home for say 2 days a week you would only be entitled to claim 2/5ths of the allowance, this is simplified for illustrative purposes, the actual restriction is calculated on an entire tax year basis.

The Covid relaxations only apply to 2020/21 and 2021/22, as part of that relaxation HMRC created a new online portal for claiming. See here. The relaxation of the rules was incredibly generous, it allowed a person to claim tax relief for the entire tax year even if they were only required to work from home for 1 day.

There was also a relaxation in relation to the rules around the provision of home office equipment, such as desks, chairs, keyboards, monitors etc which allowed the employees to purchase, and the employers to re-imburse, tax free.

As we have now passed into the 2022/23 tax year HMRC have issued clarification to ensure taxpayers are aware the rules have reverted to the original position, that is it must be a requirement that you work from home, and not just your choice, and further, the amount claimed must be restricted based on a time apportioned basis.

Further, assets provided to the employee to assist with working from home and owned by the employer may give rise to a befit in kind if there is any significate private use. If these are not returned when the working from home ceases there will also be a further benefit in kind.

Those who may have the working from home allowance included in their tax code from 2022/23 are being warned that if they are no longer entitled on this basis they should contact HMRC otherwise they may fine themselves with an unexpected tax bill in the future.

It is a key point that “flexible working” offered by your employer does not entitle you to the relief, you must be required to work from home.

There are other expenses that a worker can claim against their employment income, such as mileage for using your own vehicle for business journeys that are not normal commuting, or hotel and meal expenses when working away from home, or professional fees/subscription. All these claims, including the working from home allowance, are reduced by amounts actually paid to you by your employer.

Before 7 May 2022 if you wanted to make these claims you could do so by phone if your claim were under £1,000 of expenses, of £2,500 if your claim included professional fees/subscriptions and you had claimed in the previous tax year. In the first year of such a claim you were required to fill in a form P87. HMRC allowed the use of substitute claim forms and these were often used by high volume repayment agents.

If your expenses claim was £2,500 or over you are required to fill in a self assessment form each year you wish to claim for.

From 7 May 2022 substitute forms will no longer be accepted, form P87 or a self assessment form must be used, the online/phone options remain open for the lower value claims.

The P87 form has also been updated as part of this process, enabling multiple year, multiple employment claims, and HMRC will be using Hyperscience technologies to process the returns removing the need for human intervention.

As ever, if you require any assistance with your client’s expenses claim position please feel free to get tin touch today.

Jim Calverley

16th May 2022

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