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Employer-provided equipment – Tax implications for employees of working from home

Since the start of COVID-19 in March 2020, the number of people working from home in the UK has dramatically increased. As of January 2023, research shows that 44% of workers in the UK work from home – which translates into approximately 23.4 million people.

Many of the companies those employees work for would have provided equipment, even if it was only a computer. Supplying equipment for business use is usually viewed as a tax-deductible expense for the business where the employee works in the office. However, what are the tax implications should an employee return to the office at least part of the time and keeps their home working equipment for personal use? The answer depends on who owns the equipment.

Employer transfers ownership to the employee

A PAYE benefit in kind tax charge will arise of at least the market value of the equipment at the date of transfer should ownership be transferred to the employee but no payment made. Any payment made by the employee will reduce the tax charge. Documentation confirming the transfer will be important.

Employer retains ownership

In comparison, should the employer retain ownership but the employee be allowed to use the equipment for personal use, the PAYE benefit in kind tax charge is based on the ‘annual value’ of the equipment. This is 20% of the market value at the date on which it is first made available for the employee’s personal use. Class 1A NIC is also charged on the value of the benefit. It would be advisable for the invoice to be in the name of the business if the delivery address is to the employee's home.

If the employee works flexitime, continuing to work from home for at least some of the time, no tax charge will arise for the employee on the personal use of the equipment, provided this is insignificant. The employer can decide how much private use is allowed but this must be stated clearly to the employee. At the end of the employee’s contract, they must return the item to the employer.

Employer reimbursements

The usual rules regarding reimbursement to employees for the cost of equipment purchased for the company apply. Tax relief will be available for the business should the employer reimburse the employee and the employer retains the equipment.

Notification to HMRC of a taxable expense or benefit is either via the usual PAYE process or by a PAYE Settlement Agreement (PSA). Using a PSA will allow the employer time to consider whether a particular expense or benefit is taxable, rather than having to decide at the time the expense or benefit arises. A PSA allows the employer to make one annual payment to cover all the tax and NIC due on such irregular employee expenses or benefits.