Employee Expenses - Co-Working costs

DonnaGrimmer

Hi, Can an employee claim back cost of Co-Working space as an expense? Employment contract states they are a remote worker.

TaxAdvisorWB

Your reference point will be ITEPA 2003, Section 336. This sets out the general rules, the key elements are:
1- the employee is obliged to incur and pay it as holder of the employment
2 - the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment

These are very challenging tests to meet, and each element must be met to confidently claim a deduction.

An 'obligation' to incur an expense indicates it would not be a personal choice or preference. Also 'necessarily' suggests the job could not be done without incurring the expense.

1 - If a remote based employee decided to rent an office space instead of working from home it would be difficult to say they were 'obliged' to incur the expense. The choice is one they have made out of preference, regardless of how impractical it may have been for the family to have them working from the kitchen table etc. However, if they were obliged by their employer to provide a space for professional client meetings the situation could be different.

2 - If rented wholly for work and no activities are carried out in the space it would be easy to argue it is wholly and exclusively for the duties of the employment. However the key question would be if it is 'necessarily' incurred. Can the duty typically be performed without incurring the expense. If others in similar roles (especially within the same company) are not renting office space it would be challenging to say it is a necessary expense. Also if the employer has not set specific requirements it would be hard to justify.

You would need to carefully examine the expense in the context of employment duties and requirements set by the employer against the legislation when determining if the expense would qualify as a deduction.