by David Watkinson www.watkinsonblack.co.uk
THE rules that govern whether an employee can offset expenses against his taxable income, and get any tax repaid, are very stringent.
To be tax deductible an expense must be “wholly, exclusively and necessarily” incurred “in the performance of the duties”. Meeting these conditions are very difficult. The main obstacles to be cleared are:
- The expense must relate solely to the employment. The usual example given is the use of a personal telephone. If a business call is made on your home phone then the specific cost of the minutes used on that call can be claimed. However, no claim can be made for costs that would be incurred in any event such as monthly line rental, and it precludes claiming any part of bundled minutes.
- The expense must be incurred in actually doing the work. The usual example given is the travel costs between your home and your usual place of work. These cannot be claimed as the duties only commence when you arrive at your place of employment so the expenses are incurred in getting you into a position to perform your duties. Similarly, training costs are generally not claimable.
- There can be no choice about whether the expense is incurred. If the duties can be performed without incurring the expense then there is a choice and the claim fails as the expense is not necessary. The usual example is claiming for home expenses when you choose to work from home.
Working from home, however, is not always from choice. Since March 2020 it has been a government instruction that you must work from home if possible. This means that there no choice involved, and the expenses can be claimed.
HMRC is reminding taxpayers to submit tax relief claims for working from home due to coronavirus during 2021/22 via the easy to use online portal
So far this tax year more than 550,000 employed workers have already claimed and are benefitting from the tax relief, which pays £6 a week for home workers. If employed workers were told to work at home by their employer because of coronavirus and, as a result, their household costs have increased, they are eligible to claim the working from home tax relief.HMRC received more than three million claims for the tax relief for the 2020/21 tax year.
Myrtle Lloyd, HMRC’s director general for customer services, said: ‘Half a million people have already reduced their income tax this year by up to £125, by claiming tax relief on their working from home expenses. ‘We want everyone who’s eligible to benefit, so we’ve made it quick and easy to do online. Check if you’re eligible and apply at gov.uk by searching ‘working from home tax relief’. ‘HMRC is continuing to help and support people affected by the pandemic.’
The online portal can be found at https://www.gov.uk/tax-relief-for-employees/working-at-home
From 6 April 2020, the amount employers have been able to pay tax-free without employees having to provide evidence of an increased bill is up to £6 a week. Employees who have not received the working from home expenses payment direct from their employer can apply to receive the tax relief from HMRC. If the employee wishes to claim more than £6 per week then they will need to provide evidence of the increased expense.
Eligible employees can claim tax relief based on the rate at which they pay tax. For example, if an employed worker pays the 20% basic rate of tax and claims tax relief on £6 a week, they would receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills. Higher rate taxpayers would receive £2.40 a week (40% of £6 a week). Over the course of the year, this could mean taxpayers can reduce the tax they pay by £62.40 or £124.80 respectively.
Once an application has been approved, the online portal will adjust the individual’s tax code for the 2021/22 tax year. They will receive the tax relief directly through their salary until March 2022.
If employees were required to work from home last year but did not claim for the tax relief, they have not missed out; HMRC will accept backdated claims for up to four years. They will receive a lump sum payment for any successful backdated claims.
Unfortunately, agents will not be able to use the online portal to apply for the relief on a client’s behalf. The claim must be made personally by the taxpayer.
WatkinsonBlack have considerable experience in all areas of taxation and business services, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Our office is now open during all normal office hours. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
