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Flexible working and what it means for personal tax

An enormous amount of financial assistance has been provided by the Government during the course of the current pandemic, which has been vital for the protection of businesses and jobs.

Businesses and their employees have adjusted remarkably well to new patterns of working during the various lockdowns, and it seems the world of work will be changed forever as we learn to live with Covid-19.

With staff not keen to commute into city centre offices in the same droves as in pre-pandemic days, there is much talk about new ways of working. The buzzword appears to be ‘flexible working’.

The employee’s job might still be based in the office as before but with flexible working, staff will be able to choose how many days they have to trek into the office and how many days they can elect to work remotely from home.

We are now all digitally smart so that such arrangements can work seamlessly (at least in theory).

But what is the tax position on all this? We asked our head of Tax Advisory Cormac Marum.

“During the lockdowns, staff had to work from home,” said Cormac. “They had no choice. Hence, ‘homeworking arrangements’ were mandatory and, as a result, for example, flat-rate tax exempt payments up to a set limit (of £6 per week) could be made by the employer to cover the additional household expenses of employees.

“Home became the office but there was not much scope for business travel as the restrictions were in place to stop people intermingling. You could mix to your heart’s content online, and everyone did so. But it involved no actual travelling.

“During lockdowns, therefore, an employee’s place of work had to be their home. Flexible working is different, however. The Government is not ordering everyone to work from home where possible.”
Having sampled working from home, many employees have liked the experience and, at least presently, prefer it to trekking each day back into the office. Hence, under flexible working, increasingly they are choosing to work from home.

“Choosing to work from home is different from being ordered to work from home,” says Cormac. “As a result, it is a personal decision of the employee to opt for ‘flexible working’ and to work from home rather than work each day in the office.

“If employers meet the additional costs of employees in such circumstances, those payments are taxable in the hands of the employees as they always have been.

“The employee can make a claim personally for tax relief on the costs incurred but such claims will rarely be successful as they have to surmount the time-honoured statutory test of being incurred ‘wholly, exclusively and necessarily’ in the performance of the duties.”

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