HMRC internal manual

Employment Income Manual

EIM32790 - Other expenses: home: working from home: examples

The examples on this page concern the availability of a deduction under section 336 ITEPA 2003 for the additional expenses incurred in working from home. Guidance on the availability of a deduction in these circumstances can be found at EIM32760.

Example 1 – substantive duties

A member of an NHS trust board attends meetings of the board in Exeter. She has no office facilities available to her in Exeter to prepare for meetings. She receives papers from the NHS trust at her home in Salcombe and reads the papers at home. This takes several hours and she would not be able to take a full part in meetings if she did not do this work at home. She requests a deduction for the cost of travel between her home and her permanent workplace in Exeter.

No deduction should be permitted for either the costs she incurs while working from home or the cost of travel. Her work at home is preparatory in nature and not part of the duties of her employment. Home should not be accepted as a workplace.

Example 2 – nature of duties requires employee to live at a distance from employer’s premises

A is an area sales manager who lives in Glasgow. He manages his company’s sales team in Scotland. The company’s nearest office is in Newcastle, and A therefore carries out all his administrative work at home where he has set aside a room as an office. The administrative work is part of the substantive duties of his employment. A is entitled to relief for the additional costs which he incurs as a result of working at home. The nature of his job requires him to live in Scotland, where no employer-provided office facilities are available.

Example 3 – employee working at home by choice

B works for the same company as A. He is the company’s sales manager for the North East of England. The company would be happy for him to work from its offices in Newcastle, but they have agreed that B can work from his home in Durham, where he has set aside a room as an office. B is not entitled to a deduction for his homeworking expenses because he is working at home by choice.

Example 4 - nature of duties requires employee to live at a distance from employer’s premises

The company which employs A and B decides to close its regional offices and to operate solely from its head office in London. B is still the area sales manager for the North East of England and he continues to work from his home in Durham. The work that he does at home is part of the substantive duties of his employment. Following the closure of the Newcastle office he has no practical alternative but to provide himself with office facilities at his own expense. B is now entitled to relief for the additional costs which he incurs as a result of working at home.

Example 5 – employee working at home by choice

A is promoted to become the company’s national director of sales. That is normally a head office job. However A is a fervent supporter of his local football team and rather than relocate to London he persuades the company to allow him to continue to work from home. A is no longer entitled to a deduction for his homeworking expenses because he is now working at home by choice.

Example 6 – voluntary homeworking scheme

C works at his company’s offices in Leeds. His home is in Kings Lynn and he spends the week in Leeds, travelling home at weekends. His employer then introduces a homeworking policy under which those employees who wish to do so can work from home. C accepts the offer and thereafter works from his home in Kings Lynn, where he sets aside a room for use as an office. He is not entitled to a deduction for homeworking expenses because he is working at home by choice. (This example is based on a real case: Kirkwood v Evans, 74TC148, see EIM32374.)

Example 7 – contract reflecting employee’s personal choice

D lives in Gloucester and applies for a job with a company whose offices are in Birmingham. The company are happy to pay his expenses of moving from Gloucester to somewhere on the outskirts of Birmingham. However D does not want to disrupt his childrens’ schooling, or to commute between Gloucester and Birmingham, so he asks the company if he can work from home. The company agrees, and D’s employment contract says that he will be home based. He sets aside a room for use as an office. D is not entitled to a deduction for homeworking expenses because he is working at home by choice. The contractual term requiring him to work at home is simply an expression of his personal choice.

Example 8 – no appropriate facilities at employer’s premises

A company employs a team of sales people whose job is to follow up sales leads by telephone. The company trades from two small offices which house the director, her secretary and two clerical staff. There is no room for the sales team, who are recruited specifically on the basis that they will work from home. The members of the sales team are entitled to a deduction for the additional costs which they incur by working at home.

Example 9 – personal choice

The company in example 8 becomes so profitable that it is able to move to larger premises. New recruits to the sales team are required to work at the company’s premises. Existing team members who live within daily commuting distance are invited to do so. Those who decide to continue to work from home are now doing so by choice, and are no longer entitled to a deduction for a proportion of their household costs.

Example 10 – UK representative of foreign company

E is the UK sales representative of a Dutch company. The company does not have an office in the UK so E is recruited on the basis that he will work from home. He is entitled to a deduction for the additional costs that he incurs as a result of working at home.

Example 11 – appropriate facilities available at employer’s premises

F is a teacher at a secondary school. During term time she regularly takes work such as marking exercises home to complete in the evenings and at weekends. However she has free periods during the school day and the school has rooms available where she can mark papers if she wishes to do so. F is not entitled to a deduction for the expenses of working at home because appropriate facilities are available on her employer’s premises. She may feel that those facilities are inadequate, but that is not enough to satisfy the statutory test, see EIM70735. It is not an objective requirement of her job that she should perform any of her duties at home.

Example 12 – claiming tax relief when you work from home

Amber works for an advertising company and is based at their Birmingham office. Following the outbreak of COVID-19, her employer tells her to work from home, to comply with legal Covid restrictions set by the UK Government. She does this for the tax year 6 April 2020 to 5 April 2021.

Amber’s employer does not pay her for the extra household expenses she incurred while working from home. As Amber has no choice but to work from home, given the legal Covid restrictions, she meets the tests set out in section 336 of the Income Tax (Earnings and Pensions) Act 2003. Therefore, Amber can claim tax relief for these extra costs, from HMRC.

During the tax year 2021 to 2022, the Government lifts the restriction to work from home. Amber’s employer offers hybrid working. This allows Amber to choose if and when she wants to work from home, or in the office. Her employer amends her employment contract to reflect this.

As the Government has lifted the restriction to work from home, Amber no longer satisfies the tests in section 336. This is because she can now choose if she works from home or not, even though this arrangement is part of her contract.

But Amber can continue to receive tax relief for her homeworking expenses, for the full tax year (6 April 2021 to 5 April 2022), even though she’s only been required to work from home for part of the tax year. She can do this under the ‘time-limited easement’ because she meets the tests in section 336 for part of the tax year.

The time-limited easement allows you to claim tax relief for homeworking expenses for a full tax year, even if you’ve only been required to work from home for part of that tax year. However, you’ll no longer be able to do this, when the time-limited easement ends on 5 April 2023.