Working from home tax relief

HMRC will accept that your home is a workplace if you are performing substantive duties from your home
Malachy McLernon

QUESTION: I am a recently qualified chartered surveyor working for a large construction company and since March 2020 I have been working from home more or less full time. Can you explain what home living expenses I can claim against my salary?

ANSWER: With many people working from home due to Covid-19, establishing what can be claimed as an allowable expense against employment income is particularly important.

For someone like you who is an employee, the treatment of home working expenses depends on whether your employer makes a payment to you for working from home. If you have been told to work at home by your employer because of Covid-19 and, as a result, your household costs (electricity, heating and the internet) have increased, you are eligible to claim the working from home tax relief.

To be eligible for tax relief, you must be carrying out your work at home. This means you must be able to show that your home is your workplace. HMRC will accept that your home is a workplace if you are performing substantive duties from your home, and these duties must be related to your current work.

You won't be able to claim working from home tax relief if you have agreed with your employer that you'll voluntarily work from home. These rules are relaxed for those working from home because their workplace has closed due to the coronavirus pandemic, or they are following advice to self-isolate.

The good news is that if your employer chooses to reimburse you for the additional costs from working at home, these costs can often be paid tax free where the reimbursement is no more than £6 per week (£4 a week prior to April 6 2020). If reimbursement is no more than this, less records need to be kept to prove the expenses. If more than £6 is paid, agreement should be sought with HMRC and the costs must be justified, and detailed records will have to be kept.

Should your employer choose not to cover your extra expenses, you can ask for them to be deducted from your taxable income. To make the process of claiming easier, HMRC has said that you won't need to justify the figure by keeping receipts as proof. You can make a claim on all additional expenses. If you're working from home due to the coronavirus pandemic, you can make the whole claim at once. Your tax code will be adjusted, which means you might pay less tax.

If you normally file a self- assessment tax return, you can make a claim there.

Alternatively, if you are not in the tax return system you can complete a form P87. This form can be filled in online through the UK Government website, or by filling in a postal P87 form. Some information you'll need to include if you return this form by post is as follows:

• Employer's name

• PAYE reference

• Job title

• National insurance number

• That you're using your home as an office

• A list of your expenses

If you complete your P87 online, you'll need to complete two sections as follows:

• The amount paid by you, which is £6 per week for the period you've been working from home

• The amount paid to you by your employer. If your employer isn't paying you a working from home allowance or reimbursing your additional expenses, this will be £0.

The tax relief you receive will depend upon the rate at which you pay tax. For example, if you pay the 20 per cent basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20 per cent of £6).

If you were required to work from home last year but did not claim for the tax relief, HMRC will accept backdated claims for up to four years. You will receive a lump sum payment for any successful backdated claims.

:: Malachy McLernon (m. is a director of PKF-FPM (pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

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