An employer can reimburse any employee, including directors, for the
additional household expenses that the employee incurs in carrying out
the duties of the employment at home under a homeworking arrangement.
There is no cap on the level of household expenses that can be reimbursed
free of tax, but the employee must be able to prove that the
costs are additional to what would be incurred without working from
home and that they are reasonable. The Revenue have said that a payment
up to £2 per week for additional household expenses does not have
to be supported by evidence.
Such a tax free payment does not allow the company to pay a proportion
of the household fixed costs, such as mortgage interest or council tax,
as these will remain the same whether the company operates from the
property or not. However it can reimburse the director for a reasonable
proportion of the variable costs, such as energy bills, and metered
water.