Office-based staff usually incur expenses when they’re not in the office, whether they’re travelling for business or attending offsite meetings. In recent times, however, up to 100% of your employee’s work might be conducted away from the office, in their home environment.
In this unprecedented scenario, what constitutes a valid expense claim might be entirely thrown up the air. In fact, with a much larger proportion of employees now working from home, you might find yourself out of your comfort zone when it comes to expense claims. No doubt your employees will too.
The best thing to do is set out a clear working from home expenses policy. Research from GBTA has shown that in light of recent events, 86% of organisations say they have a working from home policy. But in the long term, if not the short, this will have to include sections on how to handle employee expenses.
Here are a few things to consider including in your travel and expense policy, home working expense policy, or any similar type of document that outlines what expenses are permissible:
Most people have internet at home anyway, but what about the time employees are now spending sending emails, conducting online research and video conferencing? Every home package will differ and some employees may not have unlimited broadband.
According to HMRC rules on claiming for broadband usage at present: “If your employee already pays for broadband, then no additional expenses can be claimed.” If, however, they do not have broadband and now need it to conduct business from home, the company can reimburse the cost and it is tax-free.
Homeworking might have been sprung on some people in recent weeks. They’re going to require a laptop at the very least, perhaps a printer or other accessories. Will you be supplying this, or will they be sourcing it themselves? If so, what are the limits on spend? If these are mainly used for business purposes and not significant private use, these are non-taxable.
3. Working from Home Equipment
Even if you can provide them with a laptop, employees are also going to need somewhere comfortable to work. Many will be perched on a kitchen table or dressing table in the short term but, depending on the length of time they are expected to work from home, there might be a demand for a dedicated desk and an ergonomic chair. Reimbursing expenses for office equipment your employee has bought is taxable and should be reported on your PAYE Settlement Agreements.
4. Electricity and Gas
Breaking down utilities into work and personal use is of course tricky. Your employees need to work out how much of their time is spent doing business – to equate how long, each day, your business is benefitting from the usage of their electricity and/or gas. Government guidance says that - payment or reimbursement to your employees of up to £4 a week (£6 a week from 6 April 2020) is non-taxable for the additional household expenses incurred when your employee is working from home.
If the claim is above this amount, then your employee will need to:
- check with you beforehand to see if you will make these payments
- keep receipts
Your employees might have a separate work phone, or they might not. Increasingly people prefer to have one phone for everything. You’ll need to ensure that mobile phone expense claims can be submitted easily and intuitively. If you provide a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.
6. Travel Outside the Home
If your employee leaves their home to deliver products, provide a service or collect items, their fuel or postage expenses will have to be included. You can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.
If you do not pay mileage allowance, your employee can claim tax relief through their Personal Tax Account. Further information can be found here.
An Opportunity to Rethink Your Finance Processes
There’s a lot to think about. But, on a positive note, this is an opportunity to prepare for the future. Often with homeworking the lines can be a slightly blurred between what proportion of work is done in the home environment and what’s done in the office, or offsite. This can cause confusion over what and cannot be claimed.
We now have an opportunity to review the way home working expenses are handled. Think of it as an investment in the future – the trend towards more flexible working is only going to get stronger.
Sources of Further Information About Expenses When WFH
The landscape is changing all the time and you may find yourself having to adapt your expenses policy more than once. If you are looking for guidance, the Government has provided information on allowable expenses when employees are working from home: www.gov.uk/guidance/check-which-expenses-are-taxable-if-your-employee-works-from-home-due-to-coronavirus-covid-19.
The standard rules are at www.gov.uk/employer-reporting-expenses-benefits. And for homeworking in general https://www.gov.uk/expenses-and-benefits-homeworking
You might also like to check out our ebook, Frequently Asked Questions on Managing Travel, Expenses and Invoices or take a tour of the SAP Concur Expense Policy.
And of course, if you’re in any doubt about the tax implications of any expenses you are reimbursing, it’s worth taking the time to check and talking to your accountant.