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26th May 2020Covid-19: Exemption for reimbursed home office equipment

It has been confirmed by the Treasury minister that organisations reimbursing staff for equipment purchased that enables them to work from home during the pandemic lockdown will not have to pay tax. We would caution however, that this exemption may not be as generous as it first appears.

Generally, the rules on what an employee can receive tax-free from their employer are notoriously strict. Unless covered by a specific rule, expenses have to be incurred “wholly, exclusively and necessarily” in the performance of the employees’ duties.

If followed to the letter, this would result in tax charges for employees using their work computers to follow the news, check the cricket scores or do very minor personal tasks outside of working hours.

There is already a specific exclusion that allows business equipment provided by an employer to be used for insignificant personal matters.

However, in the current circumstances it is not always practical for the employer to purchase and provide the equipment an employee needs, and the rules do not allow for an employer to reimburse an employee for equipment that they have bought. If the employer were to buy items off an employee then only the second-hand value would be allowed, with the balance taxable as earnings.

New regulations are now published that will allow employers to fully reimburse employees for items they have bought to allow them to work from home.

This is not blanket exemption for such reimbursement and is likely to prove less generous than it may appear. The test remains strict and reflects the “necessary” element of the general expenses rule. The wording implies that the equipment must have been bought to enable the employee to work from home; references to working more comfortably or more efficiently are conspicuous in their omission. The rigidity of HMRC in enforcing this will not be known for some time.

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