UK: Changes To Tax Treatment Of Employer Accommodation

Following changes in legislation, it would be worth reviewing the tax treatment of your employees living accommodation.

There has been something of a stir recently, brought about by the publication of details of a deal struck between tax advisers, acting on behalf of the National Housing Federation (NHF), and HM Revenue & Customs (HMRC). The deal concerns the tax treatment of employer-provided living accommodation for wardens on assisted housing schemes. It has been revealed that HMRC believes wardens have been receiving a taxable benefit in kind, since changes in the law concerning the working time directive and the minimum wage now oblige employers to set up call centre arrangements for 'out of hours' emergencies. HMRC has agreed that if employers come forward with details of the wardens and their living accommodation, tax arrears need only be paid from 2006/07.

Unfortunately, the publication has been written in technical language and the practical issues that you need to understand in order to decide whether this could have an impact on your employees are not adequately explained. If you have 'live-in' wardens, whom you have regarded as exempt occupiers of living accommodation, you might wish to consider:

• the circumstances that trigger loss of exempt status
• how the taxable benefit from living accommodation is valued
• the information that has to be gathered before the taxable value can be calculated
• the way in which loss of exempt status impacts on ancillary matters, such as planned maintenance and improvement expenditure; council tax, utility bills and furnishings
• what should be done about the current tax year for the employees who might be affected
• how to estimate the cost of making a settlement for 2006/07 and 2007/08 with HMRC
• the consequences of taking no action now and waiting for HMRC to make contact with you
• how an employer might 'come forward' to HMRC and take advantage of the deal struck by the NHF.

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.