Claiming Expenses when Working From Home

When this firm relocated its head office from the north of Birmingham to Cornwall in 2015, we did not make any redundancies and all staff were allowed to work remotely from home.  We costed out the requirement for broadband, hardware, office furniture and additional utility bills based upon real costs, the size of the ‘home office’ and the proportion of time spent working at their desks rather than at leisure in the whole of their home.  Many of our team were working from home long before the covid-19 lockdowns of 2020 and 2021.

Working from Home - there are two routes that you may have to consider:

• Your employer/your business covers all your work at home expenses – no need to claim tax offsettable expenses.
• Your employer does not cover work from home expenses, and you need to make a claim for tax offsettable expenses with HMRC.

Employer Covers All Additional Expenses

• Broadband line must be exclusively for business use only, if you also use the same broadband for private use, your employer should not cover this expense.
• Mobile telephones can be paid in full (provided use for business).
• Hardware such as laptop, screens, desk, chairs etc are allowable.
• Utilities bills – your employer can only cover these in proportion. 
• For example, you work 8 hours for 4 days a week (total 32 hours per week).  There are 168 hours in a full week.
• This means your energy, fuel and water costs are only used for business for 19% so you should only claim 19% as a maximum.
• You should also reduce this for room size:  If your home/office is 100 square feet but your home is a total of 500 square feet, then again you should reduce your utilities claim to 20% of the 19%.  4% of total utility costs or thereabouts.
• You should keep all receipts for expenses as the onus of proof is on you not HMRC.

HMRC Expenses Claim if Employer Does Not Cover Work from Home Costs

HMRC will allow work from home expenses if:

• Your job requires you to live far away from the office or
• Your employer does not have an office.

HMRC will not allow work from home expenses if:

• Your employment contract lets you work from home for some or all the time.
• You have continued to work from home after Covid-19 pandemic.
• Your employer has an office, but you sometimes cannot go there if it is full e.g., all ‘hot desks’ have been taken/booked.
• You should look to your employer for reimbursement of costs if HMRC will not allow you to claim.

What Does HMRC Allow You to Claim As an Expense?

HMRC will allow you to either claim tax relief on:

• £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) - you will not need to keep evidence of your extra costs.
  • Meaning as a basic rate (20%) taxpayer you get £1.20 tax refund per week.
  • Higher rate taxpayer (40%) - £2.40 per week.
  • Additional rate taxpayer (45%) - £2.70 per week
• OR you can claim the exact amount of extra costs you’ve incurred above the weekly amount - you’ll need evidence such as receipts, bills or contracts see below:

If you want to claim more than £6 per week expenses, you’ll get tax relief based on the rate at which you pay tax for:

• Business telephone calls.
• Broadband line exclusively for business use only.
• Hardware, software, office furniture depreciation (if employer has not supplied).
• Utilities bills based upon office size compared to whole home and the amount of time it is used as an office.
• You should keep all receipts for expenses as the onus of proof is on you not HMRC.

Capital Gains Tax (raised courtesy of site user 'GW')

Many people ask whether using the home for business purposes causes Capital Gains Tax (CGT) issues on the sale of the property.  The answer is relatively simple (as per HMRC guidance notes):

• If you use part of your home exclusively for business or you build a self contained office or workshop on your land and the local authority rate it as commercial premises, then yes CGT may be payable when you sell.
• If where you work is not exclusively used for business, e.g.  a spare bedroom is doubling up as a part-time office or your 'outbulding' is part business and mainly private use e.g.  private gardening and personal car maintenance as well as your woodworking business 'on the side' then no CGT is likely.
• You should always check with HMRC whether any use of or conversion of your home may create a CGT liability as it may then not be worthwhile claiming any tax breaks if the CGT penalty outweighs it.

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