Living accommodation benefit in kind changes for University employees?
Living accommodation benefit in kind changes
HMRC has written to higher education and further education employers notifying them of a change in practice concerning employees’ living accommodation.
This was on the basis that the provision of accommodation was exempt under s99(2) ITEPA 2003 – which states that employer provided accommodation will not create a taxable benefit in kind where it is provided:
- For the better performance of the duties of the employment; and
- It is customary for employers to provide accommodation to employees where they carry out that particular kind of employment.
Employer provided accommodation may still be exempt from tax where:
- The employment falls within one of the (limited) categories where HMRC consider the provision of accommodation is necessary for the ‘proper’ performance of the duties; or
- The accommodation falls within the ‘representative employer’ concession, which allowed an exemption agreed pre-1977 to be carried forward, when the legislation was updated, provided the duties of the role continued unchanged.
What should employers do?
Employers in the HE and FE sectors should review the benefit in kind treatment of accommodation provided to employees, to determine whether the proper performance exemption or representative employer concession apply.
HMRC has stated that its change of practice will take effect from 6 April 2019. Potentially affected institutions will therefore need to act quickly to confirm their position prior to this date.
We understand that this change in HMRC approach is limited to accommodation provided by employers in the HE and FE sectors (and does not apply, for example, to boarding schools).
However, all employers providing accommodation to employees on a tax free basis may wish to take this opportunity to review whether they are treating the benefit in kind correctly, given the complexity of the exemptions and their limited application.
If you have any queries, please get in touch with your normal contact or e-mail email@example.com.
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