ATT calls for clarification on homeworking expense exemption

Although it was by no means the most eye-catching announcement in yesterday’s Budget, the increase in the weekly tax-free homeworking allowance from £4 to £6¹ could have a modest part to play in temporary arrangements under which employees work at home as part of the measures to contain COVID-19.

The exemption applies where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs in carrying out duties of their employment at home under homeworking arrangements. That sounds as if it should apply to temporary arrangements like those which are being considered by many employers at the moment. However, the relevant legislation defines homeworking arrangements as those under which an employee regularly performs some or all of the duties of the employment at home.

Jeremy Coker, President of the ATT, said:

“The inclusion in the legislation of the word regularly creates some uncertainty as to whether the exemption can apply where the arrangement is temporary. HMRC’s guidance refers to situations where working at home is frequent or follows a pattern.

“In the uncertain situation created by COVID-19, it may not be clear whether an employee’s homeworking will be frequent or follow any particular pattern. It would be very helpful if HMRC could confirm that the weekly allowance can be paid tax free so long as the employee is working at home under arrangements in response to COVID-19.”       

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Notes for editors

1. The relevant section of the Treasury’s Red Book reads:

“2.174 Increasing the flat rate deduction for homeworking – The government will increase the maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.”