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COVID-19: Tax treatment of employees working from home

1 April: Employees forced to work from home due to measures to control the coronavirus pandemic are covered by home-working expenses rules, HMRC has confirmed.

An HMRC update has clarified that rules governing working from home expenses cover employees working from home due to COVID-19 because:

  • their workplace has closed, or 
  • they are following advice to self-isolate.

Workers furloughed under the coronavirus job retention scheme, however, do not come within the exemptions.

The key things that employees and employers should be aware of are: 

  • Mobile phone and SIM cards without a restriction on private use, limited to one per employee, are non-taxable.
  • If the employee already pays for broadband, no additional expenses can be claimed. But 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 the employer and is non-taxable. Private use must be limited.
  • Laptops, tablets, computers, and office supplies used mainly for business purposes and without significant private use are non-taxable.

However, if an employer reimburses expenses incurred by an employee on buying office equipment, this is taxable and should be reported on a PAYE settlement agreement.

Any expenses or benefits which are related to coronavirus can be reported on a PAYE settlement agreement.

Where employees work from home, it is good practice for the employer to ensure that there is a written homeworking agreement in place, detailing: the homeworking arrangements; the equipment and supplies to be provided by the employer; and any expenses that will be met.

Although current circumstances may make this difficult to achieve, especially where a large number of employees who have never done so before suddenly have to start working from home, we recommend that, to avoid subsequent disagreements, employers and employees should try to ensure that they that they agree the working from home arrangements.