Covid-19: rules on home office expenditure relaxed

The government has bowed to pressure to address the additional costs of working from home during the coronavirus crisis, and has announced a temporary tax exemption and National Insurance disregard to ensure that home office equipment purchase by employees will not attract tax and NICs liabilities where reimbursed by the employer

In a statement to the House of Commons Jesse Norman, financial secretary to the Treasury, said the exemption is a temporary measure and will have effect from the day after the regulations come into force until the end of the tax year 2020/21.

The expenditure must meet two conditions to be eligible for relief. Firstly, the equipment must have been bought for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak.

Secondly the provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer (under section 316 of ITEPA).

Norman said HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any reimbursed payments made from 16 March 2020 (the date the government recommended working from home) to the date these regulations take effect.

The Association of Taxation Technicians (ATT) welcomed the announcement, saying it would ensure employees were not left out of pocket as result of changes in working patterns during the pandemic, given that many can expect to work from home for a substantial period of time and it is likely they will need additional equipment in order to create a functional office space.

Jeremy Coker, ATT president, said: ‘Such reimbursement of the cost of office equipment would under existing rules be taxable and result in a tax bill for the employee.

‘This is clearly unwelcome, and the announcement of a temporary exemption from income tax and national insurance for such reimbursements is fair and very welcome.’

Further details of the relaxation of the rules are expected from the government later this month.