Employer provided living accommodation ? call for evidence

15 December 2015

A call for evidence has been published to find out what complexities employers currently face and what, if any, simplification could be made.

Employer provided living accommodation is a benefit in kind and is liable to tax and employer Class 1A National Insurance contributions. The current rules setting out how and when employer provided accommodation should be taxed have been in place for a long time, and some parts are over 40 years old. The government would therefore like to understand how well understood the rules are, and to what extent they are still relevant and appropriate today.

In 2010 the government set up the Office of Tax Simplification (OTS) to give independent advice to the government on simplifying the tax system. The OTS published two reports in January1 and July2 2014 covering their review of employee benefits and expenses. The review included employer provided living accommodation. This highlighted that, while the world of work has moved on, the tax rules for employer provided accommodation have not. Their main findings were that:

• there is a lack of clarity about what constitutes living accommodation, and when and how the exemptions apply;
• the exemptions are outdated: newer professions are not represented while it is hard to see why exemptions for some occupations still exist;
• as well as being outdated the exemptions appear arbitrary and can result in different tax treatment for employees in very similar jobs which creates complexity and unfairness; and
• calculating the value of the benefit is inherently difficult – requiring different systems depending on whether the accommodation was owned or rented by the employer and, if the accommodation is owned, there are a number of other variables which affect the taxable value of the accommodation.

However, the OTS acknowledged that there was no easy solution and that simplification would best be achieved by reviewing the policy and all exemptions through public consultation. The government believes that the tax system should be fair, easy to understand (for both employers and employees) and simple to administer, but recognises that the complexity within the current rules means that this may not be the case for employer provided accommodation.

This call for evidence is therefore being published in response to the findings of the OTS and is intended to help the government understand:

• the complexities employers currently face;
• who receives accommodation benefit and on what terms;
• what, if any, simplification could be delivered; and
• who may be impacted if steps were taken to make the system simpler and the treatment of employees in similar circumstances fairer.

The government will use the information gathered from this call for evidence when considering whether there is a case for making changes to deliver simplification in this area.

Closing date for comments is 3 February 2016.

CIPP comment The Policy Team will be reviewing this call for evidence and will issue a survey if appropriate in due course.