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Tax-free expenses for home-workers

Newsletter issue - October 2019.

Providing certain conditions are met, no tax liability will arise if an employer makes payments to employees for reasonable additional household expenses, which the employee incurs in carrying out duties of their employment at home under 'homeworking arrangements'.

'Homeworking arrangements' are arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home. There is no requirement for any part of the employee's home to be used exclusively for the purposes of the employment.

HMRC will accept that homeworking arrangements exist where:

  • there are arrangements between the employer and the employee; and
  • the employee works at home regularly under those arrangements.

The 'regularly' condition will be met if working at home is frequent or follows a pattern. The fact that the days spent at home vary from week to week is not a bar to claiming the exemption.

The HMRC guidance also advises that:

'the arrangements need not be in writing but usually will be. They do not need to apply to all employees. The exemption does not apply where an employee works at home informally and not by arrangement with the employer. For example, it will not apply where an employee simply takes work home in the evenings.'

'Household expenses' are defined as expenses connected with the day-to-day running of the employee's home. Typically this will include the additional costs of utility bills, but there might also be increased charges for internet access, home contents insurance or business telephone calls.

To minimise the need for record-keeping, employers can currently pay up to £4 per week (£18 per month/£208 per year) without supporting evidence of the costs the employee has incurred. If an employer pays more than that amount, the exemption will still be available but the employer must provide supporting evidence that the payment is wholly in respect of additional household expenses incurred by the employee in carrying out his duties at home.

Further information on homeworking expenses and benefits can be found on the Gov.uk website here.