Chapter 18 – Living Accommodation taxable benefit Flashcards
job related accommodation, rented accomodation
Job Related Accommodation - If an employee provides an employee with accommodation for the performance of duties, this is referred to as job related accommodation and is not a taxable benefit. The employee will need to demonstrate that the occupation of the property is essential for the proper performance of the duties and for better performance. Also, if accommodation is provided by the employer because there is a threat to the employee’s physical security, there will be no benefit.
Rented accommodation – where the property is rented by the employer the benefit is the higher of the rents paid by the employer or the annual value of the property. In practice HMRC will use the gross rateable value as the annual value, if a property has no rateable value an estimate is made. Any disputes to the amount of the annual value will be dealt with by the first-tier tribunal. You the deduct any employee contributions to the property.
Where a lease premium is paid for a lease of 10 years or less the amount of the premium is treated as rent paid by the employer. The annual rent paid by the employer will be calculated as:
Lease premium / length of lease +actual rent paid
employer owned accommodation, the 6 year rule and household expenses
Employer Owned Accommodation – if the accommodation cost the employer no more than £75,000 then the benefit is equal to the annual value. If it cost more than £75,000 there will be an additional benefit called the additional yearly rent. To work out the additional benefit you take the original cost plus any improvements and then deduct £75,000 and then multiply the difference by the ORI (HMRC’s official interest rate at the start of the year). When calculating the cost of the property only improvements carried out before the beginning of the tax year are considered. If the employee makes contributions this is deducted from the benefit, if the contributions exceed the amount of benefit, no loss will arise. If the house is not available to the employee for the whole of the tax year the benefit needs to be apportioned.
The 6-year rule – this applies when a house was bought by an employer and is used by an employee more than 6 years after it had first been acquired. The additional yearly rental in respect of accommodation will not be based on cost, but instead on the market value of the house at the date the property was made available to the employee.
Household expenses – if the employer pays any household bills on behalf of the employee this gives a separate benefit, the benefit is the cost of the bills to the employer. No chargeable benefit occurs in respect of the cost of any structural alterations paid by the employer, the cost of the improvements will be considered when determining the cost of the property in future years.
