As lockdown restrictions are easing, albeit at different paces in the different nations across the United Kingdom, more and more employees will be returning to their workplaces as the ‘new normal’ starts to emerge.
Therefore, it is relevant and timely that HMRC have updated their ‘Check which expenses are taxable if your employee works from home due to coronavirus (COVID-19)’ guidance. As explained in their updates section, a new section about returning office equipment has been added. This is entitled ‘Taxable benefit charge – returning office equipment’. There are two sections and it is important to note that there is a difference between:
- Equipment that has been provided by an employer (that an employee is returning)
- Equipment that the employee has purchased and the employer has reimbursed (and is now returning)
Equipment Provided by the Employer
Here we are concerned with the possibility that the ownership of an employer asset has been transferred to the employee.
As the guidance says, it is possible that the employer has supplied the employee with office equipment to enable them to work from home. When the employee returns this, there is no liability to Income Tax on the employee or Class 1A National Insurance Contributions on the employer, as long as there has not been a transfer of ownership.
Where ownership has been transferred and the employer does not require the return of the asset for example, this does become a benefit. The taxable and Class 1A value is the market value, less any monies that the employee might have paid the employer.
Equipment Reimbursed by the Employer
Here we are concerned with the situation that the employee bought their own office equipment (or some of it) and the employer reimbursed them the exact cost. If they reimbursed more than the exact cost then this should be treated as earnings through the payroll.
It is important to realise in this instance that the equipment is owned by the employee, unless the employer specifically stated that they must transfer ownership to them:
- There is no benefit charge on the reimbursement
- There is no benefit charge if the employer lets the employee keep the equipment (as they own it already)