ICAEW’s Tax Faculty highlights that employees should check whether they are eligible to make a claim.
Two relaxations were introduced as a result of the COVID-19 pandemic lockdowns to allow millions of employees to claim tax relief for the costs of working from home during the 2020/21 and 2021/22 tax years. These were:
- the relaxation of the strict eligibility requirements; and
- allowing relief to be claimed for the full year, even if there was a full or partial return to working at the employer’s location during the tax year.
From the current tax year 2022/23 onwards, employees who are eligible can still make a claim for tax relief for working from home. The claim can be made in self assessment (SA) returns, online, or on a paper P87 form.
The amount that can be claimed is £6 per week (£26 per calendar month), or actual evidenced amounts incurred on electricity and gas relating to the work area and business phone calls, as a deduction against earnings in respect of the weeks worked from home. A claim for the full tax year is no longer automatic.
Another key difference from 6 April 2022 for employees in England and other parts of the UK that did not continue COVID-19 working from home restrictions into 2022/23, is that the very strict eligibility requirements of s336, Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) apply.
These tests are summarised in HMRC’s guidance, at:
For example, employees are not eligible to claim a deduction if they have chosen to work at home. Also, even if the contract allows the employee to work from home for some, or all of the time, no deduction can be claimed if the employer has appropriate facilities to allow the employee to work at the employer’s premises. An exception to this is where the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect them to travel to those premises on a daily basis.
If making a claim for actual expenditure, a deduction is not allowed if the amounts are not wholly incurred in the performance of the employment (eg, costs of broadband that is used privately as well as for the employment).
It is not too late for employees to make a claim for 2020/21 and 2021/22. SA returns that have been submitted can be amended within twelve months of the filing deadline. HMRC’s portal allows backdated claims for up to four years.
- agents cannot file claims online, but can submit a paper form;
- claims cannot be made by phone;
- employees in SA must claim via their SA tax returns, and
- a claim cannot be made where the allowance (or reimbursement of evidenced amounts incurred) is paid to the employee by their employer, which would be tax-free under s316A, ITEPA 2003, see HMRC’s guidance Expenses & benefits: homeworking.
ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.