Employer-provided living accommodation – change of tax position?

With the budget just days away, it may well be that the Government unveils its response to this shortly. It seems likely that some employees, such as church ministers and those living in sheltered housing schemes, who are provided with accommodation tax free may in future be taxed on provision of that accommodation.

Although employer-provided accommodation is generally taxable, there are a number of exemptions that exist.  These exemptions principally apply where accommodation is necessary for the proper performance of the employee’s duties or it is customary for the better performance of the employees’ duties.  Examples of the sorts of roles where accommodation has previously been provided tax free include caretakers, church ministers and wardens of sheltered housing schemes.

The Government set out 16 questions in the call for evidence.  The questions are essentially based on 3 themes:

• why accommodation is provided;
• what type of accommodation is provided; and
• do jobs require accommodation to be provided?

The Office for Tax Simplification considered that the exemptions from tax of living accommodation provided by employers weren’t clear and were outdated and arbitrary.  It also felt that the value of the benefit provided is often difficult to calculate.  The Government has particularly been considering whether exemptions are still relevant given the increasing availability of technology, good transport links and more flexible ways of working.

The Government has said that it proposes to revise the rules with a view to making them simpler.  It also seems likely that they will take the opportunity to fundamentally redraw the exemptions.  This could mean some significant changes.

For instance, it has historically been the case that it was helpful for church ministers to live close to the church building in order to help them perform their duties.  Whilst this made sense when people tended to go to their local church, with people travelling from longer distances to go to a particular church and with technology making communication with church members easier, it is conceivable that the Government may consider that this exemption is no longer appropriate.

Similarly, with the advance of technology it may no longer be so important for the warden of a sheltered housing scheme to live on site.  Personal care alarms, tele-care systems and mobile phones mean that there are now different ways of alerting staff to emergency situations.  It could be that the Government decides to tighten the criteria for an exemption from tax for wardens of sheltered housing and those in similar roles.

For more information

For advice in relation to employer provided accommodation, please contact Doug Mullen.

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