Hybrid working arrangements

10th December 2021

With the easing of restrictions and employees beginning their return to the workplace. We take this opportunity to look at some of the key considerations facing employers from an employment tax viewpoint.

At the start of the pandemic, many employees were required to start working at home.  Consequently, HM Revenue & Customs (‘HMRC’) relaxed the rules relating to the working from home allowance and the ability for employers to reimburse employees for purchasing home office equipment.

Working from home allowance

Employers are currently (tax year 2021-22) able to pay employees who are required to work from home £6 per week tax free towards increased costs due to working from home, for example gas and electricity costs.  No records need to be kept of the additional costs incurred providing the £6 payment is not exceeded. Whilst the general use of the exemption will no longer be available, under very limited circumstances relief can continue to be claimed until 5 April 2023.

Purchase of equipment to use at home

There is currently (tax year 2021-22) a temporary tax exemption and National Insurance disregard put into effect to allow employers to reimburse employees who need to buy home office equipment as a result of the COVID-19 outbreak. Similarly, to the working from home allowance this change will come to an end from 6 April 2022.

The exemption is no longer available.

Travel to the office

The pandemic caused a reduction in the number of employees traveling to the office for the entire working week.  Instead, many employers have introduced new hybrid working arrangements where employees work from a mix of home and the office during the week which raises the question as to where an employee’s permanent workplace is and if an employee reimbursed travel cost is taxable. The following is a high-level summary of the points an employer needs to consider.

However, with this brings the considerations of where an employee’s permanent workplace is and if an employee reimbursed travel cost is taxable.

Travel expenses and permanent v temporary workplace

Travel from home to a permanent workplace is considered as ordinary commuting which is a taxable expense or benefit.

A permanent workplace is a place an employee attends regularly in the performance of their duties which is not a temporary workplace.

A temporary workplace is one which the employee attends for a limited duration or for a temporary purpose. However, if an employee attends somewhere for more than 24 months of continuous work, this place will be a permanent workplace.  Continuous work is deemed by HMRC as an employee undertaking 40% or more of their work at that place.

Working in the office

Where an employee is required to work from the employer’s premises, this will be considered as the employees’ permanent workplace. Consequently, where the employee travels from their home to the office this is ordinary commuting. In these circumstances even if the employee choses to work from home from time to time or has to work at the office outside their normal working hours the office, the employer’s office will still be regarded as the employees’ permanent workplace.  Any payment made by the employer for travel from home to the office will be a taxable expense or benefit.

Formal homeworking arrangement

Where there is a formal homeworking arrangement the application is different. The employee will be contracted to work from home full time which can be considered as the employee’s permanent place of work. Care needs to be taken when looking into any homeworking arrangements which includes:

  • Does the employee work from home occasionally?
  • Does the employee work from home full-time?
  • Do they have a dedicated workspace at home?
  • What is the regularity of any visits to client premises?
  • Finally, who initiated the home working arrangements?

For the employee to obtain tax favourable treatment, the employer must initiate homeworking arrangements and no dedicated workspace can be available to the employee at the employer’s office (now or in the future).

Hybrid working arrangement

The pandemic has accelerated many employers to rethink their position regarding flexible, or hybrid working arrangements. Employers are now offering employees the opportunity to split their working days between home and the office. Under formal homeworking arrangements an employee will always have a desk available to them and their contractual workplace is stated as the office, but the employer is also agreeable to the employee working from home should they wish to do so. As the employee will be attending the office regularly in the performance of their duties, not on a temporary basis. However, the employee will need to consider a wide range of issues, including:

  • What over-arching policies are in place?
  • What changes need to be made to the HR procedure manuals?
  • Whether an changes need to be made to employee expense claim procedures
  • The provision of any workplace benefits

Furthermore, employers need to consider making changes to employment contracts as well.

Cycle to work

Many employers will have made available a cycle to work scheme, helping to encourage employees with the commute between home and the office. Under the scheme there was an expectation that the employee will use the cycle for at least 50% of their journeys to work.

During the pandemic period there was an easement to this requirement so long as the employee had joined the scheme on or before 20 December 2020, in which case they were not required to meet the 50% commuting condition until 5 April 2022.

HMRC do not expect employees to keep detailed records of the use of the cycles. However, employers are required to undertake an annual assessment, ensuring that the cycles are being used for qualify journeys.


Many employers have adopted some form of hybrid working strategy and care needs to be taken where employers are considering paying for or reimbursing an employee’s expenses for home to office travel. The distinction between an employee’s permanent v temporary workplace is an important consideration as well as the reasons for the attendance and HMRC have traditionally applied a very strict approach to ordinary commuting.

Employers should also consider the impact of any benefits which are made available to employees, such as the cycle to work scheme, to ensure all compliance obligations are being met.

For further advice concerning workplace arrangements please contact Nick Bustin, Employment Tax Director.

Nick Bustin

Employment Tax Director
+44 20 7969 5578
View profile

Awards and Accreditations

Accounting Excellence Large Firm of the Year 2023
eprivateclient top accountancy firm 2023

Get in touch