Where employees buy their own home office equipment and are reimbursed by their employer, the payments are generally subject to income tax. Although an exemption under ITEPA 2003 s 316 applies where an employer provides home office equipment directly and retains ownership of that equipment, and the employee’s private use is not significant, the exemption does not extend to employer reimbursements for employee expenditure on home office equipment. In essence, the general tax rule is that reimbursements for home office equipment expenses put the employee ‘in a position to perform their duties’ rather than the expenses being incurred ‘in performance of their duties’.
The Income Tax (Exemption for Coronavirus Related Home Office Expenses) Regulations, SI 2020/524, provide a new temporary income tax exemption to ensure that employees who have been encouraged to work from home as a result of the coronavirus outbreak, and subsequently obtain home office equipment which is reimbursed by their employer, will not be liable to a tax charge under ITEPA 2003 Part 3 Chapter 10 (taxable benefits: residual liability to charge).
The exemption will apply for amounts reimbursed on or after 11 June 2020 but before 6 April 2021. It applies to expenses incurred by an employee for equipment obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak, and where the provision of the equipment would have been exempt from income tax under s 316 if it had been provided directly to the employee by or on behalf of the employer.
The Social Security Contributions (Disregarded Payments) (Coronavirus) Regulations, SI 2020/525, provide the equivalent disregard from the calculation of earnings for primary class 1 NIC purposes for the same period.
Alongside the regulations, HMRC has published a detailed tax information and impact note which confirms an important concession that ‘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 until the regulations take effect, provided the relevant conditions set out in the legislation are met’.
Where employees buy their own home office equipment and are reimbursed by their employer, the payments are generally subject to income tax. Although an exemption under ITEPA 2003 s 316 applies where an employer provides home office equipment directly and retains ownership of that equipment, and the employee’s private use is not significant, the exemption does not extend to employer reimbursements for employee expenditure on home office equipment. In essence, the general tax rule is that reimbursements for home office equipment expenses put the employee ‘in a position to perform their duties’ rather than the expenses being incurred ‘in performance of their duties’.
The Income Tax (Exemption for Coronavirus Related Home Office Expenses) Regulations, SI 2020/524, provide a new temporary income tax exemption to ensure that employees who have been encouraged to work from home as a result of the coronavirus outbreak, and subsequently obtain home office equipment which is reimbursed by their employer, will not be liable to a tax charge under ITEPA 2003 Part 3 Chapter 10 (taxable benefits: residual liability to charge).
The exemption will apply for amounts reimbursed on or after 11 June 2020 but before 6 April 2021. It applies to expenses incurred by an employee for equipment obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak, and where the provision of the equipment would have been exempt from income tax under s 316 if it had been provided directly to the employee by or on behalf of the employer.
The Social Security Contributions (Disregarded Payments) (Coronavirus) Regulations, SI 2020/525, provide the equivalent disregard from the calculation of earnings for primary class 1 NIC purposes for the same period.
Alongside the regulations, HMRC has published a detailed tax information and impact note which confirms an important concession that ‘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 until the regulations take effect, provided the relevant conditions set out in the legislation are met’.
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