Don’t be caught out by complex staff accommodation tax rules
For schools that provide their staff or their families with living accommodation, a benefit in kind can potentially arise both in respect of the living accommodation itself and the associated benefits (such as utilities, furniture, and other services) met by the employer.
A change in rules was implemented from April 2021, whereby the “representative occupier” concession was be removed. The exemption was a practical measure, introduced when the current living accommodation legislation started from 6 April 1977, and provided an exemption to tax for employees who were provided with living accommodation for the better and more effectual performance of their duties. It was available to employees who were ‘representative occupiers’ of employer-provided accommodation up to 5 April 1977.
It is often claimed that accommodation is job-related and therefore not taxable on the employee. However, many of these claims do not meet the criteria set by HMRC and taxable earnings/benefits could go unreported. This can result in the failure to pay the correct amount of employer NIC, completion of inaccurate forms (P11d) with the risk of penalties and employees underpaying income tax on benefits.
An exemption is available in certain circumstances and it is referred to as the proper performance exemption and this can only be applied when it can be demonstrated that the benefit provided is essential to ensure proper performance of the job role.
Another exemption available is referred to as the “better performance and customary performance of duties” and this can be applied when the benefit provided is for better performance of duties and accommodation is provided customary for that type of employment.
This is a complex area of taxation and therefore if accommodation is provided to any employee or their family, then please contact Haslers to see whether the benefit is taxable or exempt.