What can you do to support remote workers?
Given the majority of businesses (ourselves included) currently have their staff working from home, it is worth highlighting the options available to employers to provide support for additional home working expenditure, and the associated tax implications.
IT equipment and company mobile phones
As is probably expected, the provision of computer/IT equipment and associated office supplies is not taxable on the employee, provided any private use is insignificant. The same applies to the provision of a company-provided mobile phone, which regardless of the amount of private use is not taxable (limited to one mobile phone per employee).
Personal mobile phones and home broadband
This is not the case however if an employer is looking to contribute towards the cost of an employees’ personal mobile phone bill or home broadband costs. Most mobile phone and broadband packages are bundled with inclusive (sometimes unlimited) usage – be it calls, texts or data. This means that there is no additional cost for business usage.
So where an employer makes a contribution to their employees towards the cost of using their own mobile or broadband to work from home, this would simply be taxable as additional earnings. If the employer wanted to pay a net monthly amount (say £20), it would need grossing up for PAYE tax and NIC – this would require a gross payment of £29.40 for a basic rate taxpayer or a payment of £34.50 for a higher rate taxpayer. This is not an efficient way to deal with home working expenses as this gross would of course also suffer Employer’s NIC, increasing the cost further.
Home working allowance (£6 per week)
Where an employer requires an employee to work from home (as is the case with the current COVID-19 lockdown) employers can consider paying a home working allowance, which covers the increased costs for working at home (e.g. electricity and heating).
HMRC allows a payment of £6 per week (£26 a month) to be paid free of both tax and NIC. Furthermore, no bills or evidence are required, which makes it much simpler and more tax/NIC efficient than paying towards mobile/broadband costs on a grossed-up basis.
Clearly, right now many employers are struggling with cash flow, so paying any additional cash amounts may not be possible. So if the £6 per week is not paid by the employer, the employee can instead claim for tax relief at these rates – either via their online Personal Tax Account, or by using form P87. Any claim above the approved rates is possible, but the individual would need to evidence the additional rise in costs.
Salary exchange – “life event”
A final point to note is that generally an employee is unable to opt out of a salary exchange scheme mid-way through a scheme year unless there is a “life event” (e.g. marriage, divorce, birth of a baby etc). HMRC have recently confirmed that COVID-19 constitutes a life event, so employers could consider ending existing salary exchange schemes part-way through the current scheme year. This may be of benefit as it would provide additional net income for the employee in the short term.