Living Accommodation provided to employees

If you allow an employee to live in accommodation supplied by you, they are liable to a benefit in kind on the annual value of that property. They will, however, be exempt from this charge if the accommodation is provided for the customary and better performance of the job, proper performance of the job, or is provided for security reasons. Managers of traditional off-licence shops (those with opening hours broadly equivalent to those of a public house like yours, but not those only open from 9 until 5 or similar) will qualify under the customary and better performance test and will be exempt from a benefit in kind.

Usually, in the scenario you have suggested, the accommodation is supplied for security purposes and (assuming the contract of employment specifies this) it will be job related accommodation.

However, if you are also paying the bills for the gas, water, electricity and other ancillary services such as redecorating on behalf of the manager, he will be assessed on a benefit in kind. This amount chargeable is equal to the lower of: the total of all bills paid or 10% of manager’s earnings in the tax year. Also, if you provide the flat furnished, then there is an additional benefit based on 20% of the market value of the furniture at the beginning of the tax year that the accommodation is first provided.

Date published 5 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.