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On 16 March 2020, the UK Government advised that workers needed to start working from home ‘where they possibly can’.

As a result, this meant:

  • A lot of homeworkers who were only used to a traditional office environment
  • A lot of increased expenditure, often met by the employee reimbursed by the employer
Employee is already a homeworker

Where an employer purchases home office equipment for a homeworker, Section 316 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) provides that there is a tax exemption.  This enables the homeworker to perform work under their contact of employment.  This is on the condition that the employer retains ultimate ownership of the equipment and private use is insignificant.

316 does not apply if the employer reimburses costs or pays the provider direct.  However, Section 336 applies where the expenditure of reimbursement is ‘wholly, exclusively and necessarily in the performance of the duties of their employment’.

Both ways, there is tax relief and an existing homeworker does not have to incur a tax liability.

Employee is a homeworker as a result of UK Government advice

However, if an employee is normally based in the office, works from home in accordance with UK Government advice and is reimbursed for the purchase of home office equipment, Section 316 of ITEPA does not apply.  Technically, this is because the reimbursement only puts the employee in a position to be able to perform their duties and is not a cost in performance of their duties.

Section 336 does not apply either, as this relates to costs in the performance of duties.

Effectively, the office worker turned homeworker would not have been entitled to tax relief.

The beauty of the tax system!

From 16 March 2020

This anomaly is being correct courtesy of the Income Tax (Exemption for Coronavirus Related Home Office Expenses) Regulations 2020.  They come about as a result of a provision in ITEPA (Section 210) which gives HM Treasury the ‘Power to exempt minor benefits’.  Essentially, a new and limited Income Tax exemption is being introduced to say that there will no Income Tax liability on ‘coronavirus related home office expenses’ where they are provided or reimbursed by the employer.  The Regulations equalises the treatment of existing homeworkers and homeworkers as a result of the pandemic.

The Regulations come into force on 11 June 2020 and relate to:

  • Expenses reimbursed on or after 11 June 2020 but
  • Reimbursed before 05 April 2021

However, see the House of Commons Written Statement from Jesse Norman, Financial Secretary to the Treasury on 13 May 2020 which says:

‘HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any reimbursed payments made from 16 March 2020 (the date the government recommended working from home) to the date these regulations take effect.’

The Regulations apply UK-wide and corresponding National Insurance contributions (NICs) regulations will be introduced under section 3(2) and (3) Social Security Contributions and Benefits Act 1992 and Social Security Contributions and Benefits (Northern Ireland) Act 1992.


There are several conditions:

  • This does not apply to furloughed workers – as furloughed workers are not performing work under their contract of employment
  • The costs are reimbursed for the sole purpose of enabling an employee to be able to work from home
  • The costs are such that they would have been exempt if they were provided by an employer to a homeworker (under Section 316)

The Regulations are a welcome and necessary outcome of the pandemic and do put existing homeworkers and new homeworkers on a level playing field.

Note that if the employer does not reimburse the employee, tax relief on purchases can be claimed on the individual’s tax return or form P87.  This is as long as the amount claimed is incurred wholly, exclusively and necessarily in the performance of their duties of employment.

Employers and employees may also want to look at HMRC’s guidance ‘Check which expenses are taxable if your employee works from home due to coronavirus (COVID-19)’.

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