• Date

    15 Dec 2021
  • Category

    Tax

Flexible Working | Key Considerations for Employers

Many employers are currently facing challenges with recruitment and one way that is being used to entice staff is a push towards more flexible working practices for employees. Many employees now consider this to be a key requirement in any new role they are considering.  As a result of this, many employers have introduced flexible working as a permanent measure. Whilst this can be a great benefit to employees, employers should be mindful of any tax and National Insurance consequences of this. Below are some of the key considerations for employers.

Home working costs

Employees working from home may seek tax relief for additional costs related to home working, (e.g. utilities costs). This is only available where there is a genuine home working arrangement in place and not for occasional or voluntary working from home.

There are two options to claim:

  • Using HMRC’s simplified method (flat-rate exemptions)
  • Using the actual method (apportioning all expenses for their business element, evidence of costs required)

Alternatively, employers can make payments of up to £6/week tax and NI free to cover home working costs.

Action: Employers should understand where it is appropriate to reimburse costs and formalise home working arrangements where appropriate.

Employee business travel

Where an employee spends time working from home, the position may be unclear with regards to where commuting and business travel begins and ends.

This will make it more difficult for employees to make accurate claims and for employers to verify these.

Action: Employers should guide their employees and consider implications as working patterns evolve.

Relocation of key employees

Linked to home working, we have seen some employers consolidate their locations. Where a key employee’s commute is no longer sustainable, an employer may wish to support them in relocating to a location within commuting distance of a new workplace.

Currently, HMRC allows up to £8,000 to be paid, free of tax and NI, to cover ‘qualifying’ costs incurred by the employee.

Action: Employers should identify any employees they wish to support and familiarise themselves with the conditions to be met for a tax efficient relocation policy and what expenditure qualifies for exemption.

Remuneration

Home working may change what employees want from their overall remuneration package. Employees who previously had to fund expensive season tickets for a commute may now focus less on cash remuneration, preferring to receive other tax-free benefits such as increased employer pension contributions or taxable benefits such as private medical insurance.

Action: Employers should review their remuneration structures to consider whether this is both fit to retain existing employees and attract potential new hires.

Overseas working

Employees may wish to carry out their work from further afield such as at second homes overseas.

It is unlikely that any travel here will be allowable, particularly if the employee is carrying out their normal duties and not attending the overseas location for a temporary purpose.  Where the trip has a ‘holiday’ element, expenditure would not be incurred ‘wholly, exclusively and necessarily’ in the performance of the duties.

Overseas work may present further risks from a corporate perspective by creating overseas tax and social security withholding obligations. It could also create a taxable presence for the company overseas. 

Action:  Employers should carefully consider any corporate implications before granting working overseas requests.

If you wish to discuss how we could assist you, please contact Cathrin Richards, Partner at Azets on  01242 252555 or email Cathrin.Richards@azets.co.uk

About the author

Cathrin Richards Photo

Cathrin Richards

Partner Cheltenham
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