P11D & working from home expenses: What you need to know

Businesses who provide expenses or benefits to their employees or directors need to inform HMRC and pay tax and National Insurance on them. To do this, you report the details on a P11D and P11D(b) form. The deadline for submitting the forms is Tuesday July 6th.

Filing end of year tax returns can be a busy and stressful job for employers and their accountants, this year even more so, with Covid-19 lockdowns complicating matters. Although there are many types of expenses and benefits which require you to pay tax and National Insurance for, there are thankfully, exemptions for expenses associated with working from home. For many businesses, whose employees were required to work remotely this past year, this will alleviate some of the hassle during this busy time.

Employee Reimbursement:

In May of last year, a temporary exemption was introduced for reimbursements of coronavirus-related home office expenses. Employees can be fully reimbursed for equipment expenses made from 16 March 2020, free from Income Tax and National Insurance. The exemption only applies to equipment that was bought as a result of the coronavirus outbreak and would have otherwise been provided by or on behalf of the employer. This exemption was due to end on 5 April 2021, but was recently extended and will now stay in effect until 5 April 2022.

What are considered at-home expenses?

HMRC considers remote working expenses to be:

• Office equipment such as computers, office furniture, internet access, and stationary
• Additional household expenses, such as electricity, heating, or broadband

P11Ds do not need to be submitted for at-home office equipment, as long as that equipment is being used for work purposes.

Additional costs can only be reimbursed if there is an actual increase in costs incurred by the employee. You do not need to report additional household expenses if payment or reimbursement to your employees does not exceed £6 a week (changed from £4 to £6 in April 2020) or £26 a month.

When it comes to broadband expenses, it will only qualify as an additional cost that can be reimbursed tax-free, if the employee is required to install a new broadband connection. If one already existed, it cannot be reimbursed.

Which employees are eligible?

Typically, employees are eligible if they regularly carry out their employment duties while working remotely, i.e. those who work at home frequently or whose at-home work follows a pattern. During the Covid-19 pandemic, HMRC will accept that all employees working from home are eligible because offices are closed or because the employee was required to self-isolate.

Submitting P11Ds

On BrightPay payroll software you can produce P11Ds for sending to HMRC after year end, which includes your Class 1A NICs declaration and details of the expenses and benefits provided including cash equivalents. This feature is provided to our customers at no extra cost.

To learn more about BrightPay’s features and how they can benefit your business, book a free demo today.

Related Articles:

• Don’t miss the P60 deadline
• The payroll mistake that could cost you (and how to avoid a fine)
• Working from Home Tax Relief 2021/22