Freelancers’ Questions: Can I expense a covid-19 safety kit?

Freelancer’s Question: Would a Covid-19 safety kit be an allowable expense for my newly formed freelance consultancy, given that a client wants me at their premises?

I’m looking at a 50-pack of masks because the client, who was letting me and others work from home due to the coronavirus, is now reopening some offices with one-day-a-week workplace attendance for us off-payroll workers.

But to be safe, I’ll need the masks (half are re-usable, half are not); 30 miniature bottes of anti-bac hand gel and a pack of disposable tote bags to carry my laptop and devices. It’s just over £150 in total. Would this be expense-able to the client, or expense-able to my company, or neither?

Expert’s Answer: Government guidance on expenses and benefits during covid-19 has been changing rapidly, which is infuriating but also probably inevitable.

Given the speed at which the science is moving, guidance, which includes taxation and temporary adjustments or clarifications to taxation, is bound to evolve.

Keep the covid guidance you base your decision on

As a general point, if you make any decision amid the coronavirus crisis that relates to taxes, or claims for support, you should keep a copy of the guidance you were relying on at the time, in case of future challenge by HMRC.

But here, your situation is fairly straightforward.

You are a freelancer, presumably operating through a Personal Service Company (such as a limited company) and are outside IR35.

Your client premises is now slowly opening up and there’s talk of you going on-site once a week (that’s an IR35 question for another day -- if they’re telling you to attend once a week, is that operationally required or are you not in control of your timetable?).

PPE, risk assessment and the virus threat

Lastly, you want to know how you go about obtaining Personal Protective Equipment (PPE) for anti-viral purposes, and crucially, who pays?

Well, businesses have been required to carry out risk assessments when opening premises, and are generally then allowed to give any necessary PPE to staff, and claim for the reasonable costs of doing this. The receipt of PPE for the purposes of work is not a taxable benefit in the hands of the employee.

As with benefits-in-kind when there was no virus threat, personal use of any equipment or material should be insignificant for this to hold true.

Freelancer expenses

In your company, whatever kind of risk assessment you have carried out for your employee (you), I assume will have identified that you require normal PPE when attending your client’s site.

Assuming they are not providing you with PPE (doing so could be seen by some as making you look more like an employee than a freelance, self-employed contractor), then you -- as the PSC -- needs to provide that equipment.

You will be able to expense the ‘reasonable’ costs of this through your PSC, and these should be allowable in calculating the taxable profits of the company.You would not get a benefit-in-kind charge for the costs.

Employee treatment?

You ask if your end-client could pay these costs. They could if they agree to. Yet that should be an addition to your invoice, and will be taxable income in your company, but of course you’ll have the cost of the PPE in your profit and loss account too.Again for IR35 purposes, it may seem strange for an end-client to make very specific allowances for the costs of PPE for a freelancer or contractor – this smells like the kind of treatment an employee would expect.

That said, some small businesses have recently added costs on for PPE.

In the long run, these costs will need to be allowed for in the rate you agree with your end-client, depending how long the current restrictions last. It’s another good reason to try to work away from the client’s premises as much as possible – saving PPE costs, and reinforcing in most cases, your ‘outside’ IR35 status.

Prove it's reasonable before an HMRC inspector calls...

The only outstanding issue is whether the amount of equipment you’ve mentioned is ‘reasonable.’ An eagle-eyed HMRC inspector may question the need for 25 reusable masks, if you’re attending just once a week. And 30 bottles of hand gel does sound excessive, but it depends how much you use of course, and exactly how small the bottles are.

Make sure you only claim for an amount of PPE that your business would reasonably need – assuming you’re the only employee.

Given the overall cost, a challenge from HMRC seems unlikely – but of course, the usual rules still apply, even in these unprecedented times.

The expert was Chris James, director of accounting services at JSA Services, and the chairman of the Freelancer & Contractor Services Association.