Nowadays, the most popular trend is going on is that employer allow their employees to work from home, and in doing so, they pay an amount to cover any additional household costs incurred. What are the tax consequences of such expenses for the employee?
Broadly, if an employer makes a payment to an employee for reasonable additional household expenses and in which the employee incurs in carrying out duties of the employment at home under ‘homeworking arrangements’, there will be no tax liability which will arise.
Homeworking arrangements are basically arrangements between the employee and the employer under which the employee systematically executes some or all of the duties of the employment at home. If any part of the home is utilized exclusively for work, problems could arise on the future sale of the house as part of the capital gains tax; exemption on private residences may be lost.