With many employees currently working from home due to the Covid-19 lockdown, it’s worth highlighting some of the key opportunities for employers to provide financial support tax efficiently to staff who are remote working:
IT and office equipment
The provision by an employer of IT and office equipment is not taxable benefit for the employee, provided it is for business purposes and any private use is insignificant. HMRC recently introduced a special temporary exemption from Income Tax and National Insurance Contributions (NICs) where employers reimburse employees who have had to buy home office supplies themselves to enable them to work from home as a result of Covid-19. This special exemption applies from when the lockdown began on 16th March through the end of the current tax year on 5th April 2021.
Mobile phones and home broadband
Company-provided mobile phones are not a taxable benefit, regardless of the amount of private use (limited to one mobile phone per employee). But the tax treatment is different where an employer is looking to pay a contribution towards the cost of an employees’ personal mobile phone bill or home broadband costs. Most mobile and broadband packages are bundled with inclusive (sometimes unlimited) calls, texts and data and so are on a fixed monthly charge - this means that there is no additional cost for any business usage.
So any payments to employees towards the cost of their own mobile or broadband to work from home is simply taxable as additional earnings. Often a grossing-up calculation is needed to provide the employee with a required net amount, which is not very tax efficient.
Home working allowance
Where a business requires an employee to work from home under the Covid-19 lockdown, they can pay a home working allowance to cover some of the extra costs incurred whilst working at home (e.g. electricity and heating).
HMRC allows a payment of up to £6 per week (£26 a month) to be paid free of both tax and NIC, making this approach much simpler and a more tax and NIC efficient option than paying towards personal mobile/broadband costs on a grossed-up basis.
Richard Whitelock, Director, Private Clients at Garbutt + Elliott
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