Jobhop Jobhop's blog : 4 Employment Tax Considerations For Today’s New Hybrid Working Style

The Covid-19 pandemic accelerated the move towards working from home, and despite many employees starting to return to the office, lots of employers have chosen to adopt hybrid working models for the future.

This allows employees to split their time between their traditional workplace and a remote location, usually from their home but not in every instance.

This shift in working styles has meant employers have had to spend the last year or so updating their workspaces, technologies, systems and policies.

In particular, they’ve had to re-think taxation of their employees, taking into account workplaces, travel, home office equipment, expenses and more. So, whether you’re an employer or HR professional in the midst of revamping your workplace policies, this guide is for you.

In the following chapters, we’re going to look at four important tax considerations you must take into account in today’s new hybrid workforce.

Permanent workplaces in relation to travel expenses

In most cases, a permanent workplace is defined as the place you regularly attend to perform your job. When moving to a hybrid workforce, you need to determine whether this will lead to an employee’s home becoming their permanent place of work. This is important because this will affect the tax position on employee travel expense claims.

This is because HMRC claims, in most cases (setting aside the pandemic, of course), that working at home is a personal choice. So while they may work from home, this is not necessarily their permanent workplace for tax purposes.

Plus, if the employee still attends their workplace even just once a week, this is likely to still be named as their permanent workplace. This, in turn, means that their travel into work each week is regarded as a normal commute, so for those employers that reimburse for commutes and travel, these expenses will be taxable.

That being said, this is a grey area, and circumstances can differ. For those who have deemed their home their permanent workplace, travel from homes to other workplaces could therefore be treated as business travel. So, whatever the case may be, it’s important to consider travel expenses and taxation as a result of this new working style.

Provisions for home office equipment

With so many people forced to work at home during the pandemic, lots of employers quickly had to find equipment for those working remotely. Of course, this was crucial for the employee to be able to continue working as normal.

However, under existing rules, if an employer provided an employee with home office equipment to enable them to work, this equipment would be exempt from tax and NIC. This is because the employer technically retained ownership of that equipment.

But as employees work from home full time (or even most of the time) tax liability issues may arise if ownership is then passed on to the employee or if they provide their own equipment to allow them to work.

Although a temporary tax and NIC exemption were set out in March 2020 amidst the pandemic to ensure that no tax liability would arise, this temporary arrangement is set to stop in April 2022. Therefore, you need to look into this further after April 2022 and ensure that you’re taking this into account when providing the equipment required for your employees to be able to work at home.

Payment of expenses

When working from home as a self-employed professional, you can claim back on costs of using your home as your office - so do these rules need to apply to those in full-time employment?

Well, while some employers have decided to contribute towards these costs, prices are rising, and so are the figures being put in as expenses. Others have determined that the removed cost of commuting means employees can more than cover the additional electricity, gas, internet costs, etc.

Existing rules state that when an employee is working from home, any additional household costs incurred can either be reimbursed for reasonable expenses, or the employer can pay an HMRC-agreed tax and NIC-free allowance of up to £26 per month or £6 per week.

This can be a challenging task to settle when the employee is operating on a hybrid model, though currently, HMRC rules state that no apportionment of the £26 per month is required if the employee works from both the office and home.

So, although you ultimately have to work out what is going to be most cost-effective for your business whilst keeping your employees happy, it is widely recommended that if you do pay the tax and NIC-free allowance, a process is put in place. This should be set out to periodically review and assess whether the employee is still regularly performing their duties from home or whether they’re in the office more often than not.

Dealing with overseas matters and global workforces

In today’s digital world, you no longer have to employ people from your local area or even country, and lots of workforces are spread out across different continents. This, of course, brings about its own unique taxation and employment challenges. Because of this, it is important that requests to work outside the country or even to hire someone across borders are taken seriously. You will need to consider:

• Local payroll

• Tax and social security requirements

• Corporate tax implications

• Any employment law issues

• Employee benefit provisions

The move to hybrid working may result in changes to the demand for certain benefits, especially from those overseas. Therefore, before you begin approaching fully-remote workers or even those who can come into the workplace occasionally, you must consider overseas matters and whether this is going to cause taxation issues within the business.

Are you ready for the future of work?

There is no denying that the hybrid workforce is well and truly here to stay. Today’s professionals have come to expect certain flexible working options and employers need to be able to cater for this - otherwise, it could cost you talented employees.

That said, you should carefully review your current offerings and assess whether these should be amended in line with new working styles.

Ideally, the business as a whole will contribute to any new policies, and these should cover tax, legal and HR considerations. This then needs to be communicated effectively to all employees to make sure that everyone is aware of the new rules in the time of the hybrid workforce - as well as whether these rules affect them directly depending on their personal working arrangements.

Stuart Cooke is the Marketing and Content Manager at My Baggage, he’s fond of creating informative content helping students make the move to university around the globe. He also attends different events on marketing, travel and education.

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