Essential Equipment Purchases may be Eligible for Annual Investment Allowance Tax Relief
As a result of the Covid19 pandemic, a large number of workers have found themselves furnishing and equipping a home office in order to comply with working from home requirements. Although many companies have reimbursed their employees for those additional costs, what happens for those workers who have been left with the cost of their home office equipment? David Redfern, tax preparation specialist and director of DSR Tax Refunds Ltd, explains how homeworkers might be able to claim capital allowances through the Annual Investment Allowance to recover the cost of their home office equipment.
In the widespread move to working from home that has resulted from the UK Government’s encouragement of homeworking to slow the spread of Covid19, many workers have found themselves providing themselves with office equipment in order to be able to perform their jobs. Whilst employees have been reimbursed in full for these costs, others have been left footing the bill themselves. Redfern explains, “Employers who have reimbursed their employees for any essential office equipment purchases have been able to do so on a tax-exempt basis, meaning that the reimbursement has not been taxed as additional income. However, where workers haven’t been reimbursed for those costs, all is not lost as they may be eligible to claim those costs as tax relief using capital allowances, particularly the Annual Investment Allowance”. If employers have reimbursed some but not the full amount of these costs, the employee can claim the difference as tax relief using capital allowances.
Essential office equipment, such as computers, laptops and printers, are among the items which can be claimed as capital allowances if they have been necessary to allow the worker to work from home during the pandemic. Redfern stated, “Providing these items were crucial to allow the employee to do their job, and that they are used in the performance of their job duties without any significant personal usage, these could be eligible under the Annual Investment Allowance, which allows for the deduction of the full value of “plant and machinery”, which does include essential IT purchases. As an example, it was recognised by the government that laptops are not ideal for long-term working so desktop computer purchases would be eligible for capital allowances where their cost has not already been covered by an employer”. In order to be eligible, the employee must have incurred the cost. Where the employee already owned the required home office equipment, or it has been leased, these items are not eligible for tax relief. Office equipment such as furniture is a more contentious issue, with HMRC guidance suggesting that these purchases may not be eligible for tax relief because making the employee more comfortable is not necessarily considered to be essential in order to perform their job duties.
However, many employees may not have sustained any large costs related to providing essential office equipment but may still find themselves acquiring additional costs as a result of their working from home. These workers are eligible to claim tax relief on those expenses. Redfern explained, “For many people working from home, the main expenses have been in the form of the additional utility costs, such as heating, lighting and metered water costs which they wouldn’t have otherwise incurred had they been office-based during these past months of the pandemic. Luckily, HMRC have stated that workers can claim tax relief on those costs – even if they haven’t been based at home for 100% of the pandemic. Provided the worker has had to work at home for some of the time, they can still claim the full amount of tax relief which has been set at £312 for the current tax year”.
Homeworking employees who are unsure of how much tax relief they might be entitled to claim can make use of the tax refund calculator on the DSR Tax Refund Ltd’s website, which contains a wealth of resources dedicated to explaining tax refunds and tax relief. Alternatively, they can speak to one of the DSR Tax Refunds team on 0115 795 0232 or 0330 122 9972.
About DSR Tax Refunds Ltd
DSR Tax Refunds Ltd is a firm of tax preparation experts who specialise in CIS tax returns for construction workers working within the Construction Industry Scheme (CIS) as well as employees who are eligible to claim a tax refund for their work-related expenses, including employees working from home as a result of the Covid19 pandemic. Their friendly and helpful team can help with all relevant paperwork to ensure clients claims are handled in an accurate and efficient manner.
For more about DSR Tax Refunds Ltd, visit https://tax-refunds.co.uk/
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