WFH? WFP? WTF!

Yes: What Tremendous Fun is to be had from looking at the tax treatment of Working From Home (‘WFH’) or (according to recent press reports) its newer sibling Working From Pub (‘WFP’).

What WFH costs can I claim?

Under the coronavirus rules you were able, as an employee, to claim tax relief if your WFH was required either by your employer or under government guidelines.  You could claim tax relief on £6 per week (or, if higher, additional costs actually incurred – and in either case only to the extent that your employer didn’t meet the costs).  But as of 6 April 2022 that rule no longer applies.  Now you can claim the relief only if

  • there are no appropriate facilities available for you to perform your job on your employer’s premises; or
  • the nature of the job requires you to live so far from the employer’s premises that it is unreasonable for you to travel to those premises on a daily basis; or
  • you are required, under government restrictions, to work from home

You can’t, therefore, get tax relief for your costs if you could work from your employer’s premises but choose not to do so.

Interestingly, no such restriction applies to tax-free reimbursement of costs by your employer.  If by arrangement with your employer you work from home regularly – for whatever reason – the employer can pay you up to £6 per week (or actual additional costs you incur, if higher) tax-free.

If you are self-employed, the rule has always been that you can claim relief for costs referable to the time during which you use part of your home solely for business purposes.  Where business use of the home is reasonably substantial, (25 hours a month or more), tax relief for running costs (heat, light, power) can be claimed at a rate which varies with number of ‘homeworking’ hours rather than by estimating actual costs.  In addition, an appropriate proportion of fixed costs (mortgage interest or rent, insurance, council tax, repairs), and communication costs (broadband, telephone) can be claimed.

What about WFP?

It is reported that some public houses are offering to make workspace available for a fixed daily fee, with some minor element of food or drink usually included.  Unfortunately, the tax rules have not wholly caught up with developments.  Although we refer here to WFP costs, the same principles will apply to any costs incurred by an employee in providing a workspace outside of the home, whether pub, internet café, or even serviced offices.

As an employee, you will be able to claim relief for WFP costs you incur under the same criteria as WFH, with the added complication that there will need to be some restriction to take account of any (non-allowable) food and drink element.

Unlike WFH costs, there is no special rule allowing tax-free reimbursement to an employee of WFP costs: so reimbursement of WFP costs will rank as taxable income unless the criteria for WFH deductibility are met.

However, if your employer contracts with a pub to provide WFP facilities for you, there is no tax charge under the benefit-in-kind rules (even in a case where the WFH criteria aren’t met and you wouldn’t get tax relief if you incurred the cost yourself).  This is because the exemption for the provision of accommodation, supplies or services used by the employee in performing the duties of the employment (which is what stops you being charged to tax on the use of an office at work!) is not limited to things provided on the employer’s premises.  Whether your employer will be prepared to enter into a contract with the Dog and Duck (or vice versa) is another matter.

If you are self-employed, the position is more straightforward: if you incur WFP costs, you should be able to claim tax relief for them (again, after making any restriction to exclude any food and drink element).

Does WFH affect CGT?

Sometimes concern is expressed about whether claiming tax relief for WFH costs will affect any exemption from Capital Gains Tax (‘CGT’) otherwise available on sale of your home.  Almost always the concerns are ill-founded.

Tax relief for WFH costs will compromise CGT exemption only if part of the home is used exclusively for the purposes of a trade, business, profession or vocation.  Use of a room that is sometimes used for business and sometimes for other purposes will not affect the CGT exemption, even if the business use is dominant.  HMRC confirm that:

The exclusive use test is a stringent one and you should not usually seek any restriction to relief for a room which has some measure of regular residential use.  But occasional and very minor residential use should be disregarded.  For example, if a doctor keeps private possessions in a room used as his or her surgery the surgery should still be regarded as exclusively in business use’.

So, letting the children play in the office at weekends or installing a Z-bed for when Aunt Agatha visits should be enough.

Will WFP taint forever your enjoyment of your last sanctuary from work?

Some questions are outwith the expertise of tax advisers and accountants.

For more information on the tax implications of remote working for employees, please get in touch with your usual BKL contact or use our enquiry form.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

ENQUIRY FORM

By submitting this form, the data provided will be used to perform your request according to our privacy policy.