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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Other expenses: home: household expenses: expenses that are deductible

Section 336 ITEPA 2003

The guidance on this page applies for 2006/07 onwards. For 2005/06 and earlier years it was HMRC practice to include council tax, and rent, in the expenses qualifying for relief. For detailed guidance on the approach to be adopted for 2005/06 and earlier years, see SE32810 onwards.

This guidance only applies where an employee’s home is a workplace, see EIM32760.

It is a condition for relief under Section 336 ITEPA 2003 that the expenses must be incurred “wholly and exclusively” “in the performance of” the employee’s duties, see EIM31660. In practice that means that relief can only be allowed for

  • the additional unit costs of gas and electricity consumed while a room is being used for work
  • the metered cost of water used “in the performance of the duties” (if any). As regards water rates, see EIM32820
  • the unit costs of business telephone calls (including “dial up” internet access).

It may be difficult for employees to calculate the exact amount of the allowable additional costs that they have incurred as a result of working at home. For ease of administration, from 6 April 2012 you may accept that employees who satisfy the conditions for relief (see EIM32760) are entitled to a deduction of £4, or £18 per month for monthly paid employees, (exclusive of the cost of business telephone calls) for each week that they are required to work at home, without having to justify that figure. Employees who wish to deduct more than £4 per week/£18 per month will be expected to keep records and to be able to show how their figure has been calculated.

For 2006-07 and 2007-08 the guideline rate was £2 per week.

For 2008-09 to 2011-12 the guideline rate was £3 per week.

This is similar to our approach to Section 316A ITEPA 2003 under which employers can make tax- and NIC-free expenses payments to employees who work at home under “homeworking arrangements”. See Tax Bulletin 68 (December 2003) and EIM01472 onwards. The interaction between the deduction and the exemption is explained at EIM32825.