28 April 2020
Whilst ‘every little helps’ is a well-known slogan for a national supermarket chain, it is very apparent in the current climate that we would all be advised to wider promote this mantra.
Be that in saying thank you to the shop staff or the public transport worker helping keep some elements of our life “normal”; our children for giving us time to keep on top of things as we all live through the history lessons of future generations or the IT developers that had the foresight to automate traditional methods of communication so that we can work from home much more efficiently than we might have imagined was ever possible.
Well you can add the taxman to this too if your employer is willing to make a contribution to the added cost of household bills whilst you are working from home.
It is an established practice that where there is a home working arrangement in place, an employer can pay a weekly amount to its employees tax free, without subsequent scrutiny or challenge.
This allowance has existed for nearly 20 years and in the first Budget statement by Rishi Sunak back on 11 March, (yes there was a life before all this), and the rate was increased to £6 per week with effect from 6 April 2020.
Now, I appreciate this doesn’t sound much but for our owner managed businesses and small business clients, any amount of tax free income is always welcome.
One important point to be aware of is that there strictly does need to be a payment from employer to employee to allow a claim to be made as there is no specific mechanism for employees to make a standalone claim, as is the case when claiming for business mileage in your own car.
That said, in these unparalleled times, (I promised myself not to use the other unp-ed word), the tax industry has made representations for fairness to be adopted by HMRC when reviewing any claims in future. So hopefully once the dust settles, the gravity of the current situation won’t be forgotten by your local tax inspector.
As to what types of cost this payment can cover, it is primarily household bills and business phone calls, however, broadband is not on the qualifying list unless you had to get it for the first time when you were asked to start working from home – sorry no tax free payment for Netflix to watch Tiger King!
For completeness, you can technically claim more than £6/week and can make a standalone claim providing that you can justify the amount as being “wholly, exclusively and necessarily” needed to cover the cost of your additional household bills incurred during lockdown.
With my silver anniversary working in tax fast approaching, as with all matters related to tax relief claims and allowances, my advice to clients is always to make sure you retain contemporaneous evidence to support any claim, because despite living near to the home of Robin Hood, experience tells me that the concept of taking from the rich and giving to the poor is probably just a fairy tale.
After all who would really believe that ‘Once upon a time there was this virus that came along and the whole world just stopped’.
Read our previous blog on the tax implications of working from home.
If you have any queries or concerns on the home working allowance, please speak to your usual UHY contact.
