Chartered Institute of Taxation calls for review of tax rules on working from home

Workers have the right to request flexible working if they have worked for the same employer for 26 weeks and the Government is now looking to cut that threshold so that they have the right to do so from day one.¹

The CIOT believes the tax rules could be more helpful for people who choose to work from home, particularly where work is partly at home and partly at the employer’s premises.

An employer can pay a standard £6 per week tax-free to an employee to meet extra household expenses which an employee incurs in carrying out their duties at home under a ’home-working arrangement’ – or more if the costs justify this.

But, as Colin Ben Nathan, Chair of CIOT’s Employment Committee, explains:

“Where an employer does not cover extra household expenses and the employee is instead seeking a deduction then it is a different story. The employee must then demonstrate to HMRC that the extra household expenses were incurred wholly, exclusively and necessarily in the performance of the duties of their work.

“This is a high bar and HMRC will only allow a deduction where there are no appropriate working facilities available at their employer’s premises and home-working is a necessity rather than a choice. While deductions have been accepted during the pandemic they would not be where, for example, an employee chooses to work partly from home under a flexible working arrangement.

“We believe the Government should review the rules and allow a deduction in these circumstances  to reflect modern, flexible working patterns.”

The CIOT recommends the Government reviews the tax rules on the deductibility of travel costs to and from an employer’s premises where employees work part-time at home as a result of flexible working.

There is no tax relief for the cost of travel between an employee’s home and their permanent workplace (for example the employer’s premises). This is commonly referred to as ‘ordinary commuting’.

Colin Ben Nathan said:

“There will be times when an employee who works partly from home is asked by their employer to attend the employer’s premises on a day when they would not normally do so. In these circumstances we believe that the cost of travel to and from the employer’s premises on those days should be deductible, rather than being disallowed as ordinary commuting.

“Buried in HMRC’s guidance² they do acknowledge that a deduction may be available in this sort of situation. But we believe this needs much more publicity, with more examples to reflect the variety of flexible working arrangements that increasingly arise and a review of the underlying rules to ensure that they work with, rather than against, the grain of flexible working.”

The CIOT believes that the temporary easement³ introduced during the pandemic and permitting employees to be reimbursed tax-free for the cost of purchasing home office equipment should be made permanent.

Colin Ben-Nathan said:

“This easement expires on 5 April 2022, but we think it was a very sensible change which should be retained in a world where flexible working is increasingly prevalent. At the end of the day what is the point of distinguishing between employer-provided home office equipment and an employee purchasing equipment and being reimbursed? We would say none!”

The distinction between employer-provided and employer-reimbursed benefits also arises elsewhere in tax legislation and the CIOT thinks this point needs to be revisited across the board.