24 March 2020

Will Covid-19 affect my tax position and can I claim tax relief and other sources of support?

Working from home may be the safe and responsible choice but can come with added costs to employees – extra heat, light, internet or telephone charges, for example.

Here we look at what tax relief you may be entitled to if you are now a homeworker.

You may also need to think about other forms of support, if you are not eligible for the range of Government schemes introduced to help both businesses and employees in the last 10 days.

Employees

Tax relief on your taxable income could be available – the possibilities include:

Reimbursement by employers for additional household expenses (s316A ITEPA 2003)

These include heating and lighting costs, additional insurance, metered water, telephone or internet access charges incurred that relate to the work area of the home. Where working at home leads to a liability for business rates, this can be included.

Costs that would be incurred regardless of whether or not the work is done at home would not be reimbursed. These include mortgage interest, rent, council tax and water rates. Other expenses such as building alterations, furniture or office equipment are also not reimbursed.

As long as the employee meets the conditions for relief, HMRC will accept reimbursements up to £4 per week without the need for supporting paperwork. If reimbursements are to be a higher level, these must be justified and detailed records kept by the employee, or they must be specially agreed with HMRC. So far HMRC has announced no concessions to these rules in response to Covid-19.

Provision of office equipment by employers (s316 ITEPA 2003)

Employers can provide the necessary office furniture, equipment and internet connections for a homeworker, without there being a liability for the employee, as long as the sole purpose is to enable the employee to perform their duties and private use is insignificant.

Travel for necessary attendance (s338 ITEPA 2003)

Costs of travel to a temporary workplace can be deducted from an employee’s taxable income. There is no deduction for the cost of travel between an employee’s permanent workplace and an employee’s home or any other place at which the employee’s attendance is not necessary for the duties of that employment.

Other sources of support

For those whose income has been badly affected by the coronavirus, including those who earn less than an average of £118 per week, are not eligible for Statutory Sick Pay, some of those working in the gig economy, or self-employed people, then Universal Credit, Working Tax Credit and the new Employment and Support Allowance (ESA) may be of help.

If you are eligible for the new style ESA, it will now be payable from day 1 of sickness, rather than day 8, if you have COVID-19 or are advised to stay at home.

Changes to Universal Credit and Working Tax Credit were introduced in the Budget. From April 6, the standard allowance in Universal Credit and the basic element in Working Tax Credit will be increased for one year. Both will increase by £20 per week on top of planned annual uprating.

This means that for a single Universal Credit claimant (aged 25 or over), the standard allowance will increase from £317.82 to £409.89 per month. This will apply to all new and existing Universal Credit claimants and to existing Working Tax Credit claimants.

Local Housing Allowance for all private renters who are new or existing Universal Credit housing element claimants or existing Housing Benefit claimants will also rise from next month.

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About the Author
Sarah Woodall, Partner (Barrister), Head of Tax

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