Employed but Homeworking – Can I Claim Tax on Household Costs?Written on September 18, 2014 by Kirk Rice LLP
Financial Services QuestionsThe Question:
I am employed and I regularly work from home as well as spending time at the office. Can I claim a tax deduction for any of my household costs?
Kirk Rice LLP answers:
I assume from your question that your employer does not reimburse you for any of your household costs. However, I think it is important for readers to know what can be paid by employers tax free and then I will turn to your specific question.
Under current rules no tax liability arises where employers make payments to employees for reasonable additional household expenses, which the employee incurs in carrying out duties of the employment at home under ‘homeworking arrangements’. ‘Homeworking arrangements’ are arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home.
Reasonable household expenses
‘Household expenses’ are defined as expenses connected with the day-to-day running of the employee’s home. The exemption applies to additional household expenses, and HMRC have given the following guidance:
‘Typically this will include the additional costs of heating and lighting the work area or the metered cost of increased water use. There might also be increased charges for Internet access, home contents insurance or business telephone calls. Where working at home leads to a liability for business rates the additional cost incurred can also be included.
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.’
If the employer reimburses household expenses in excess of the guidance, the excess will almost certainly be taxable in the employee’s hands.
To minimise the need for record-keeping, employers can pay up to £4 per week (£208 per year) without supporting evidence of the costs the employee has incurred.
Turning to your question if your employer does not reimburse the expenses then HMRC do accept that employees who work at home may claim relief for additional household expenses. But there are strict conditions which include that the costs can not relate to facilities that are already available at the employers premises. It is therefore likely that relief would be denied for the majority of employees.
If you would like more advice regarding this issue or any other financial services matter, please contact us.
If you would like to receive Kirk Rice’s Financial Services Questions regularly by email, simply email info@kirkrice.co.uk stating Financial Services Questions in the subject heading and we will add you to our distribution list.
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
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