Who is eligible to receive the homeworking allowance?
A homeworking allowance can be paid monthly to any member of staff who is on a home-based contract.
Those who are on hybrid or office-based contracts are not entitled to the payment.
How much is the homeworking allowance?
As of August 2022, the homeworking allowance is £26 per month.
This allowance is set by HMRC and is the maximum that can be paid to staff without evidence of the actual costs incurred.
How can a staff member opt-in to receive the homeworking allowance?
Eligible staff will automatically receive the allowance.
The homeworking allowance payment will be added to the payroll as soon as IPSA is notified that the staff member is eligible. This is when a staff member is employed on – or has moved to – a home-based contract.
All homeworking allowance payments are made through payroll.
Can staff members opt out of the homeworking allowance?
Tax positions can vary across individuals and in some cases, home-based staff may wish to opt-out of receiving the homeworking allowance and apply to HMRC for tax relief. In these cases, you should refer to HMRC guidance.
If a staff member is expecting significantly higher costs than the allowance payment, it is possible to opt-out of the homeworking allowance payment and claim actual costs. This option is more burdensome, is only payable for certain costs, and will need to be evidenced.
The homeworking allowance is the default option because it is the most straightforward way to cover costs.
If a staff member changes their home-based contract to a hybrid or office-based contract, they will no longer receive the homeworking allowance payment.
Can claims be made outside the homeworking allowance payment?
Only one of the options can be claimed for at any one time – either the homeworking allowance payment, reimbursement of actual costs or tax relief directly from HMRC.
Receiving the homeworking allowance does not require any claim or submission of evidence and therefore we think it is the best option for home-based staff.
How much can be claimed in actual costs?
If you opt for reimbursement of actual costs, claims are only considered when it can be demonstrated they are in addition to the normal costs of running the home. For example, to claim the cost of fuel or utilities, the staff member must be able to demonstrate the increase in usage as a result of working from home.
You can only claim for costs incurred directly as a result of your work, such as business phone calls or gas and electricity for your work area.
Normal running costs are not claimable. For example, in most cases, staff members will not incur any additional broadband costs as a result of working from home, because they would have a home internet connection anyway.
As claims are on an actual cost basis, they must be calculated for each claim made, rather than determining a regular or average figure.
Can your utility costs be claimed?
Claims for utility usage are based on the charges for which evidence is provided to show they are directly related to working from home. The easiest way to provide this is to calculate the difference in usage between working away from the home and working within the home.
This means that bills need to be provided as evidence of usage for a time when a home office space was not used and compared directly to usage when it is being used.
A like-for-like comparison based on cost alone is not sufficient to make a claim as other factors need to be taken into account, such as the standing charge (or equivalent) and a general increase in energy charges.
A further consideration is whether the entire increase in usage can be attributed to the home office and/or whether other home workers are using the space.
Additional costs must not be calculated on a pro-rata basis based on the size or business usage of the home nor should an estimation be used. An increase in the underlying fuel, utility or other costs will not be considered additional homeworking costs.
A description of how the claimed amount has been calculated and supporting evidence must be submitted with the claim.
Because providing evidence in this way could be an onerous task, our suggested route is to opt for the homeworking allowance to be paid as a fixed sum each month.
Can the costs of phone calls be claimed?
For business calls, details of the itemised business calls and charges must be provided. An estimation or a pro-rata split of overall costs will not be considered sufficient to support a claim.
What cannot be claimed for under actual costs?
Claims cannot be made for any amount of rent, mortgage, or standing charges for utilities and broadband or phone line rental as these would form part of the normal costs of running a home.
Claims will not be considered unless evidence is provided to show they are directly incurred as a result of your work – such as business phone calls, or gas and electricity for your work area.
Can staff members be moved to a home-based contract?
Staff members can be moved to a home-based contract if needed, but it is important to bear in mind that home-based contracts are likely to be appropriate only for a minority of staff members who carry out all of their normal duties from home and are rarely expected to attend the office. Very often, this is more likely to be the case where there is a significant distance to the nearest office.
It is important that the most appropriate contract is selected to ensure compliance with tax rules and to avoid any unexpected tax liabilities. For example, a home-based worker may be eligible to claim travel payments but where these are regular they are likely to be a taxable benefit.
Occasional, part-time, or full-time homeworking can all be facilitated by the flexibility of hybrid contracts.
MPs who are considering home-based employment are strongly encouraged to seek advice from the House of Commons Members HR team to ensure they are following best practice.
Members’ HR has produced detailed guidance on homeworking and other flexible working arrangements.
For staff members to be moved onto a home-based contract, the MP should complete a contract variation letter to amend the existing employment contract. Please send a copy of the variation letter to firstname.lastname@example.org.
For new starters, the MP must select the "home-based" option when using the contract generator tool. The new contract can be submitted to IPSA with new starter paperwork as normal.
Any new home-based contracts/variation letters received by the normal payroll cut-off date (the 15th of each month) will be taken into account when setting up payment of the allowance with that month’s payroll.
If contracts/variation letters are received after the payroll cut-off date, the allowance will begin from the following month and, if relevant, backdated to the effective date of the change.
Are staff members on hybrid or office-based contracts eligible to receive the homeworking allowance?
Staff on hybrid or office-based contracts are not eligible for the homeworking allowance.