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Many remote workers abroad will opt to work from home, rather than use shared workspaces, and that raises questions about how tax and employment regulations will be applied to WFH. While many countries will still apply labor laws to WFH such as health and safety rules, it is less clear how expenses will be treated for tax purposes.
The reason is that when expenses are incurred in a home office, they are often mixed with personal use so there has to be some guideline to give employees. Otherwise, they may find that reimbursement for certain expenses will be taxable as a benefit unrelated to work.Subscribe to get more insights like this.
If you have remote employees in the UK, there are limits on reimbursable expenses, and methods to calculate the non-taxable portion. Prior to June 2020, most reimbursements were taxable to the employee (compared to employer direct purchases) but those rules were relaxed due the pandemic until April 2021.
Work equipment (laptop, desk, monitor, chair, etc.): Equipment that is purchased exclusively for work purposes can be reimbursed tax free to the employee.
Internet: If the service is a new connection and used primarily for business, then there will be no tax or reporting requirements. However, most existing home internet connections will have at least some personal use which would be taxable if reimbursed.
Mobile phone/ bill: These expenses are not taxable or reportable as long as 1) only one phone and SIM are provided to the employee and 2) the phone contract is set up by the employer. Otherwise, the phone charges must be reported by the employer, and reimbursed personal calls will be taxable to the employee.
Meals during work and meetings: Meals while home working are generally not reimbursable, as allowable meal expenses are typically for time away from the office or traveling. With a home office, the employee is at work when at home.
We had a client with an employee working from home who had purchased a new laptop prior to their start date, and they wanted to know if reimbursement would be taxable to the employee.
We informed them that as long as the laptop was primarily for business use, and was purchased reasonably close to their start date, it could be reimbursed tax free. In many cases it easier for an employee to purchase equipment locally than have it shipped from an overseas employer.
Employers who are hiring for the first time in the UK might have additional questions such as:
Are travel allowances in the UK taxable to the employee?
Can an employee be reimbursed for shared workspace costs?
If an expense is taxable, is it also subject to national insurance deductions?
Our clients benefit from our local experts and resources to answer these types of questions before calculating taxes, contributions and withholding, to avoid any issues with legal compliance. We make international employment simple.
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