On 29 April 2020, Inland Revenue released Determination EE002: “Payments to employees for working from home costs during the COVID-19 pandemic”. This determination is a temporary response to the COVID-19 pandemic and applies to payments made for the period from 17 March 2020 to 17 September 2020.
Some employers have made, or intend to make, payments to employees to reimburse costs incurred by their employees as a result of the employees working from home during the COVID-19 pandemic. This determination clarifies the tax treatment of such payments. This determination is intended to remove some of the administrative difficulties in establishing the extent to which expenditure is incurred by employees in deriving employment income or is private in nature. The determination is also intended to remove some of the difficulties in establishing or estimating the expenditure each employee has incurred or is likely to incur and reduce compliance costs for employers by providing safe harbours. Employers do not have to apply this determination and can calculate tax-free allowance and reimbursement amounts under s CW 17 of the Income Tax Act 2007 based on their own reasonable estimates or actual employee costs.
In December 2019, Inland Revenue released determination EE001: “Employee use of telecommunications tools and usage plans in their employment”. This determination provided employers with the option of applying certain percentages to make an allocation between business use and private use of telecommunications tools and usage plans. There was also a de minimis level of payment that could be treated as exempt income. Determination EE001 can be used in relation to payments made to employees for mobile phone and internet costs incurred by employees working at home. Determination EE002 applies to work from home costs not already covered by Determination EE001. Determination EE002 can be relied on in addition to Determination EE001.
Information reproduced with permission of Wolters Kluwer