By David Watkinson – WatkinsonBlack
2022 PROVED to be an interesting year for everybody, with numerous budgets and reversals, and ending with an immense hike in fuel bills despite a huge amount of support given by the government.
Hopefully, the Xmas break has given you all a welcome break, and let us all raise a festive glass and wish each other a healthy and prosperous New Year.
As usual, January heralds the usual tax return season. So let us look at a couple of the most popular expenses that can be claimed by employees.
Firstly, there is the Working From Home expense claim. This is a deduction of £6 per week, or £312 per annum. This is worth a tax saving of £62 for a basic rate taxpayer, and £125 for people paying the higher rate of tax. The WFH deduction was widely prompted during the Covid-19 pandemic when many employees were required to work from home for all, or part, of their working time. HMRC did not require the employee to provide any evidence of the expenses incurred by the requirement to work from home, to support claims for the tax years 2022/21 and 2021/22. They were also quite relaxed about whether the employee was required to work at home for all of their working week or just part of it.
However, from April 2022 the conditions necessary to claim the WFH deduction reverted to almost the position that existed before the pandemic. This year an employee can only claim a deduction from their employment income for WFH if:
1. substantial duties of the employee are performed at the employee’s home, and
2. there are no facilities at the employer’s premises for the employee to work, and
3. the employee is required to work from home by their employer, and
4. the employee has no choice about whether they work at home or not.
If all of the above conditions are met, and the employer does not pay a working from home allowance, the employee can claim the deduction.
If the employee can show that their extra costs of working at home are higher than £6 per week, they can claim the actual costs if they keep the evidence. With electricity and gas bills at the current high levels, then this may be worth considering.
Secondly, employees who use their personal vehicles for work can claim a deduction for the costs involved. In order to be deductible the following conditions must apply.
1. the obligation to incur the expense must come from the employment, and
2. they must relate to the actual performance of the duties.
Consequently, a claim cannot be made for normal commuting as this does not meet the second condition but merely puts the employer in a position where he can perform them. However, travel to a temporary workplace could usually be claimed, as would travel to see a customer or supplier.
Claims by employees must be made using HMRCs Approved Mileage Allowances. Since 2011/12, for cars and vans the allowance has been 45p per mile for the first 10,000 business miles in the tax year, and 25p per mile for each mile above 10,000.
These rates purport to reflect the actual cost of using a vehicle. However, they were set at a time when the average cost of unleaded petrol was about £1.35p per litre and have remained unchanged since. However, unlike the Working From Home expense claim, the employee cannot claim the actual expense incurred if higher. Also, should the employer reimburse the employee at a higher rate then tax will be payable on the surplus. However, if the employer reimburses at a lower rate then a claim can be made for the difference.
And now some Christmas cheer from the infamous WatkinsonBlack Book of Jokes… A patient was about to have a heart transplant and was offered the choice of the heart from a 28 year old marathon runner or the heart of a 60 year old tax inspector. He picked the tax inspectors heart because he said it would never have been used.
HAPPY NEW YEAR, EVERYONE.
