In our article, 'Expenses and benefits when employees are working from home', we highlighted that where employers provide employees with home office equipment (for example desks, printers, monitors etc) for the sole purpose of enabling the employee to perform their employment duties from home, and any private use of that equipment is insignificant, the provision of the equipment should be exempt from tax under Section 316 ITEPA 2003.
This exemption only applies to items that an employer owns, or has otherwise entered into a contract for, and made available to employees. It will not generally apply where an employer reimburses the employee for the cost of such equipment which the employee has acquired themselves. Such a reimbursement should normally be subject to tax and Class 1 NIC under PAYE when reimbursed or can potentially be dealt with via a PAYE Settlement Agreement.
However, to support employees who are working from home as a result of the coronavirus and who need to purchase home office equipment as a result, a temporary tax exemption and National Insurance disregard has now been announced which will ensure that the expense reimbursed by the employer will not attract tax and NIC where both of the following two conditions are met:
- the equipment is obtained by the employee for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and
- the provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer (ie under Section 316 ITEPA 2003 - see above).
This tax and NIC disregard is a temporary measure and will have effect from the day after the regulations come into force until 5 April 2021. HMRC will also exercise discretion and will not collect tax and NICs due on any reimbursed expenses made from 16 March 2020 (the date the government recommended working from home) to the date these regulations and the disregard officially take effect, provided that the above two conditions are met.
If you have any further questions about employee expenses and benefits provided to employees during the coronavirus outbreak, please contact Lee Knight, Susan Ball, or your normal RSM contact. Please also see the HMRC guidance here.