The legislation introduced in 2003 specifically allows payments made by employers to employees to cover homeworker’s additional household expenses to be tax free in certain circumstances. The exemption applies to payments made on or after 6 April 2003 for expenses incurred on or after that date and 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 the employment at home under homeworking arrangements.
“Homeworking arrangements” means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home; and “household expenses” means expenses connected with the day to day running of the employee’s home.’
Homeworking arrangements are in place where the following two tests are met.
- there must be arrangements between the employer and the employee; and
- the employee must work at home regularly under those arrangements.
The arrangements need not be in writing but usually will be. They do not need to apply to all employees. The exemption does not apply where an employee works at home informally and not by arrangement with the employer. For example, it will not apply where an employee simply takes work home in the evenings. It applies where an employee works at home by arrangement with the employer instead of working on the employer’s premises.
Household expenses: What costs can be reimbursed?
‘Exempt payments can be made to meet or reimburse reasonable additional household expenses that an employee incurs in carrying out the duties of the employment at home under homeworking arrangements. No liability to income tax arises (for the employee) in respect of the payment.
The additional household costs must be reasonable and must be incurred in carrying out the duties. This excludes costs that would be the same whether or not the employee works at home, for example mortgage interest, rent, council tax or water rates. It also excludes expenses that put the employee into a position to work at home, for example building alterations or the cost of furniture or office equipment.’
Check this space out next time to find out how much of the employees household expenses can be reimbursed under this arrangement.
If you have employees who work from from home or are an employee who works from home and need some advise on the tax implications and savings you might make by reason of the homeworking arrangement you have in place, then please do not hesitate to contact us at 020 7038 8046 or email: accountants@tdanda.co.uk
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