Farm Work Accommodation Benefit

The tax treatment of employee accommodation changed on the 6 April 2021, impacting those who have been providing accommodation free of charge, or below market value rent, from before 6 April 1977.

HM Revenue and Customs (HMRC) have withdrawn the Extra Statutory Concession (ESC) which allowed tax free treatment of individuals provided with living accommodation by their employers prior to legislative changes in 1977, described as “Representative Occupiers”. A ‘Representative Occupier’ is an employee:

  1. Who resides in a house provided rent free or at discounted rent by the employer;
  2. Who is required to reside in that particular house and is not allowed to reside anywhere else under the terms of their contract of employment; and
  3. Whose occupation of the house is for the better and more effectual performance of their duties

Following the withdrawal of the ESC, Representative Occupiers will be in receipt of a taxable benefit in respect of the living accommodation provided, which is required to be reported on form P11D (employee benefits in kind). The amount of income tax the employees will need to pay will be determined by their marginal tax rate.

There will be an additional cost to employers as they will need to pay Class 1A National Insurance at 13.8% on the value of the taxable benefit.

There are provisions within the tax legislation which exempt accommodation provided to qualifying employees, meaning no taxable benefit arises. The three main exemptions available are where accommodation is:

  1. necessary for the proper performance of the duties of employment: This is where it can be substantiated that an employee needs to be on-site, outside usual working hours - for example to be regularly on-call to carry out duties at anti-social hours, such as calving cows or lambing sheep.
  2. for the better performance of the duties of the employment and it is customary to provide it for that type of employment: Farm workers often fulfil these criteria, particularly where they live next to the farm providing a degree of security and work varying hours.
  3. required for the personal security of the employee: This is less common with farming businesses and refers to work where the kind of activity the employee carries out may mean there is a threat to their personal safety and security.

It is important for those employers with long standing employees or retired workers living in accommodation provided by the business to review their position, to ensure that they understand whether the tax position has altered as a result of the above changes.

Written by Rosie Bennett ACCA


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