I’m “Working From Home”

After surgically removing a piece of Lego from my foot for the third time in as many days I announced, through gritted teeth, that it was time to move to a bigger house.   I therefore had to sit down with Mrs TTF and discuss moving from our small mid terrace house in London to a bigger property in Saffron Walden.  For the uninitiated this is a small northern town…..well it’s above the M25 at any rate.

Finding a house was the easy bit.  Other issues like sourcing a removal van big enough for the children’s toys and the fact my journey extended from ten minutes to an hour were more of an issue.

Thankfully my employers were more than happy for me to work from home on a regular basis. The phrase “working from home” previously conjured up the idea of taking regular coffee breaks to watch 60 Minute Makeover (attempting not to cry at the end) whilst waiting for a parcel to be delivered.

 

The reality was that I had to set up a home office and gag the kids. After a week of reading Feng Shui books and putting the knowledge imparted by Catherine Gee into practice my workplace was ready for action.

THE TAX BIT!

When it came to preparing my self assessment tax return I wanted to ensure that I was claiming all the costs I was entitled to (well flat pack MDF office furniture is expensive!).

So what can expenses can you claim against your salary when you work from home?  The basic principle is that the expenses must be incurred wholly, exclusively and necessarilyin the performance of your duties.  Now I could write fifty blogs on the meaning of this small sentence but suffice to say it is very difficult to obtain any kind of deduction for work related expenses on your tax return. In terms of working from home you have to be able todemonstrate that it is not a choice for the employee i.e there are no facilities available at the office.  This was not the case so I was defeated on my first attempt to claim a deduction for my USB Keyboard Hoover.

Thankfully HMRC have started to embrace the 21st century and accepted that in some strict circumstances certain payments from your employer can be made tax free.  This is in the form of exempt homeworking payments*. To be clear this only applies to payments made by your employer to recompense you for reasonable additional costs you incur whilst working from home. You cannot claim money back from HMRC after you have incurred the costs personally.  This is a small, but, very important difference.

In order to qualify you must meet the following cryteria:

  • There must be arrangements between the employer and the employee and

  • The employee must work at home regularly under those arrangements.

To meet these tests you basically have to work formally at home (not just taking work home in the evenings) and you must have a regular pattern i.e. working one day out of five each week at home.

Typical expenses that can be reimbursed include the additional cost of heating, lighting and water meter costs in respect of the work area.  No payment can be made for costs that would be the same if you worked from home or note.  My Sky subscription for SSMO won’t count then.  Neither are costs incurred  to put yourself in a position to work from home allowed, so again no joy with my IKEA receipts.

To come up with a reasonable figure for these expenses you can add up all your utility bills, coffee consumed and trips to the toilet and prorate this by your house floor area compared to your home office space.  Alternatively your employer can pay you the following since 06 April 2003.

06 April 2003 to 05 April 2008​  £2 per week

06 April 2008 to 05 April 2012​  £3 per week

06 April 2012 onwards​​  £4 per week

Now I grant you that this does not sound a lot but if you had been working from home since 06 April 2003 you could agree with your employer (they are not obliged to do so) that they will make a back dated payment then you might be surprised.  This could total £1,144 tax free, saving some £457.60 in tax and a few quid more in national insurance if you were a higher rate tax payer.  This could be more if you scientifically worked out your actual expenses.  This tidy sum would certainly buy a new etch a sketch for my little monsters.

A word of warning if you use a room exclusively for work In your home HMRC may try to deny capital gains tax relief when you come to sell your property. You should therefore try to avoid exclusive use of a room by using it for other purposes e.g. a guest room.  This is not a problem for me as my relaxing office space also doubles up as a playroom and therefore I am still having to share my working day with Mr Potato Head, which make a nice change from looking at my boss…this bloging site is anonymous, right?

 By Peter Cross

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