Tax employees who opt to work from home? It’s a ‘no’ from us

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The recent suggestion that staff who choose to work from home should pay more tax has received a mixed reaction. Kelly Thomson and Robert Waterson explain why such a policy would be damaging for society and challenging for employers.

HR practitioners might have seen support from some quarters for the government to create a new tax on working from home. The idea being mooted is that employees who are not forced to work from home by Covid-19 restrictions, but choose to do so anyway, should be subject to additional tax.

Given the perilous state of the public finances, anything that may generate tax revenue is likely to appear attractive in Whitehall. This idea is, however, a dud. Here are three reasons why.

1. This policy would be plagued by practical difficulties

 A tax on home working would be extremely difficult to implement.

We have seen it suggested that those who already work from home and the self-employed should be exempt from such a tax but it is unclear how such a distinction could be justified. It has been proposed elsewhere that employers should bear the burden of the tax to the extent that they do not provide workers with permanent desks – but, in reality, it is unlikely that all employers will choose (or indeed be able) to bear this extra cost of employment.

Equally, how would the tax apply to those who work from home on an irregular or flexible basis? It is widely expected that, going forward and in very many sectors, this will be a much larger group of people than in pre-Covid-19 days. How could this tax be calculated for these people and what evidence would be required to get that calculation right?

Attempting to administer the levy though either employer taxes, self-assessment or PAYE would be fraught with practical problems requiring a large number of HR professionals to administer – and an army of HMRC employees to check – an endless variety of individual circumstances. The Tax Tribunal would have to expect a swathe of new appeals. The swelling of the public purse could soon be eroded – not least by the suggestion also made that the proceeds should be hypothecated towards a grant to be payable to minimum-wage workers.

2. The policy appears indirectly discriminatory and, therefore, potentially unlawful

A working from home tax would be applied equally to all UK (non-exempt) taxpayers and, therefore, would not be directly discriminatory against any particular protected group.

However, the effects of the policy – i.e. the increased tax burden on individuals – would disproportionately impact women who primarily shoulder childcare, eldercare and “sandwich care” responsibilities.

This means that such a tax would, on its face, indirectly discriminate against women and, also, against any other protected groups which traditionally benefit from remote working, in particular disabled people and certain age groups. Without objective justification such an impact would almost certainly be contrary to existing law.

3. Levying a tax on working from home would tread a risky societal and political path

In its October report, ‘How coronavirus has affected equality and human rights’, the Equality and Human Rights Commission raised serious concerns about the negative impact of the pandemic on our collective advances towards greater equality. It is clear that we could very easily lose prior tentative gains if we are not mindful about our response to this crisis.

In the Commission’s own words: “Hard-won equality and human rights are at risk of going backwards with clear and long-lasting damage to society and the economy as a result of the coronavirus  pandemic.” It is imperative that this is taken into account by policymakers.

In a climate where so many will be working with reduced income, this tax would inevitably discourage home working. Don’t forget, many who choose to work from home may already need to agree a salary reduction to do so.

And this discouraging of home working would further reverse progress made in supporting those grappling with mental ill health. It would also be a step backwards from any tentative progress we may have made towards the recalibration of caring responsibilities – throwing the baby out with the bathwater, so to speak.

Don’t forget, many who choose to work from home may already need to agree a salary reduction to do so.”

This policy would quite obviously be bad for the environment, effectively encouraging people back onto a congested road and rail network in order to avoid further taxation.

Back to the drawing board

All things considered, it is doubtful that such a dramatic change of tax policy against an expanding and economically diverse section of the voting public would be well received.

Policymakers are, of course, being encouraged to be creative as we emerge from the Covid-19 crisis, but in a year of knee-jerk policy making, taxing home workers would be wholly inappropriate.

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Kelly Thomson and Robert Waterson

About Kelly Thomson and Robert Waterson

Kelly Thomson is a partner in the employment team, and Robert Waterson is a partner in the tax disputes team at RPC.

2 Responses to Tax employees who opt to work from home? It’s a ‘no’ from us

  1. Avatar
    Worksnaps 23 Dec 2020 at 1:24 am #

    Great outlook on this topic, Kelly! You’re right, implementing tax to work from home personnel is extremely hard to implement. Sharing this!

  2. Avatar
    Dave West 23 Dec 2020 at 4:40 pm #

    The other issue is that you’re actually being taxed on something that costs money. Either the employee or the employer has to pay for extra pieces of kit at home like printers (plus consumables) and scanners that may well be shared in the office. There will also be additional costs of heating, lighting and insurance. Still to see a proper comparison of total costs vs office savings but many employers have pushed the cost onto the employee so it will be real but hidden and then to get taxed on top because of a hypothetical travel saving (which doesn’t apply to those with travel concessions like the disabled and older workers anyway)? Madness.

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