COVID-19: Employee expenses

Last updated 24 June 2020

We have drafted a number of short articles covering the key announcements relevant to individuals working at home during the COVID-19 crisis including:

  • Home Sweet Home – a guide to the homeworking allowance, claiming tax relief and the tax issues on purchase of office equipment
  • An introductory guide to the tax implications of working from home and other related expenses and benefits which has been produced by the CIOT.

HMRC Guidance 

On 26 March 2020, the Government released specific guidance on the tax treatment of expenses paid to employees who work from home due to the COVID-19 crisis.

The guidance will be relevant both for employees who are working from home because  their usual workplace has closed, and for those who are following advice to self-isolate.  However, it is not relevant to those workers eligible for the COVID-19 Job Retention Scheme.

The guidance identifies the following as being non-taxable for relevant employees:

  • Provision of a single mobile phone and SIM card per employee (even where there is no restriction on private use).
  • Provision of laptops, tablets, computers and office supplies where they are mainly used for business purposes with no significant private use.
  • Payment of up to £4 a week (£6 a week from 6 April 2020) to cover additional household expenses whilst working from home.
  • Payment of approved mileage allowance payments.

  • Reimbursement of broadband costs, but only where:

    - a broadband connection is needed;

    - the employee did not have one already; and

    - private use is limited.

On 19 May, the guidance on reimbursement of expenses for office equipment was changed.

Reimbursement of expenses for office equipment an employee has bought, were previously advised to be taxable. However, following a change in the law, employers are now able to reimburse employees for the actual cost of the purchase (even though the equipment will be owned by the employee), provided that there is no significant private use. This will apply to reimbursements made between 16 March 2020 and 5 April 2021. There is also no benefit if the employee is allowed to keep the equipment as they are already considered to own it.

However, if an employer transfers an asset that they own to the employee's ownership, then a tax charge may arise.

Reimbursement of hotel and subsistence costs incurred by employees who are required to self-isolate away from their home is taxable.

If, as an employer, you wish to settle the tax on any business expenses or benefits which are related to COVID-19 (and which are not covered by the exemptions above) so that you bear the cost rather than your employees, you can consider if the relevant costs can be reported on a PAYE Settlement Agreement (PSA).

Further guidance is also available from HMRC here.