UK: Do You Have Sufficient Cover? A New Approach To The Tax Benefits Of Sheltered Housing Schemes

Are you concerned about HMRC’s recent change in attitude towards the provision of living accommodation for sheltered housing wardens?

To determine if the change in HM Revenue & Customs’ (HMRC) approach towards the provision of living accomodation for sheltered housing wardens will affect you, it is necessary to consider why, historically, the provision of the accommodation may not have given rise to a taxable benefit and what has changed since.

In the past, HMRC accepted that the living accommodation for wardens of sheltered housing schemes was provided for the ‘proper performance of the duties’, as long as the employees lived on the premises and were on call outside of normal working hours. If these conditions still apply to those wardens you provide accommodation for, then no taxable benefit should arise.

However, your organisation’s working practices may have changed over time and wardens may now not be on call outside of normal working hours due to the increased use of call centres. This is particularly the case when call centres are used to action all or the majority of the calls received instead of the on-site staff being on duty.

Even if a call centre is used extensively, the accommodation may still not create a taxable benefit if it can be demonstrated that it is provided for the ‘better performance of the duties’ and it is customary for employers to provide accommodation to employees engaged in these specific duties. However, this may be difficult to show if the warden is not often required to react to a call.

This change to HMRC’s approach regarding accommodation could result in additional tax bills for employees if HMRC considers the accommodation to be taxable. Furthermore, HMRC will seek to recover from the employer any potential liabilities for the last six years, unless there has been a change of circumstances in that time. This could result in an organisation facing a substantial tax bill.

We recommend that social landlords who provide staff with live-in accommodation review the terms of their employment contracts and consider what impact the use of call centres may have had. It would be wise to do this before receiving an enquiry from HMRC.

If this is currently not an issue for you, it might still be advisable to monitor the extent to which call centres forward calls to wardens to ensure that no unexpected exposure risks arise in the future.

In addition, employers should ensure that employment contracts for wardens are structured to support the premise that the accommodation given to wardens is for the purposes of the proper performance of their duties, and to minimise any potential risks.

The working practices of staff provided with accommodation should also be reviewed to ensure that current procedures do not fall foul of HMRC guidelines. Having the correct procedures in place should help to reduce the risk of HMRC seeking to recover potential liabilities and help you provide the right type of shelter for all concerned.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.