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HMRC internal manual

Employment Income Manual

Employment income: benefits in kind treated as earnings under Section 62 ITEPA 2003: the pecuniary liability principle: employer pays employee's council tax

Section 62(3)(a) ITEPA 2003

Normally council tax is payable by the person living in the premises in respect of which it is levied. If that person is an employee and the employer pays the council tax on his or her behalf the employer is discharging the employee’s debt and the payment counts as earnings within Section 62 ITEPA 2003 (see EIM00580). However, where council tax is paid or reimbursed in respect of exempt provided accommodation, see EIM11331.

The liability to council tax on some dwellings falls on the owner of the premises, rather than the people living in the premises. These are;

  • dwellings that are not the main home of the people living there
  • residential care homes, nursing homes, mental nursing homes and hostels
  • dwellings in which domestic servants live and that are also occasionally occupied by their employers
  • dwellings occupied by a number of people who do not form a single household
  • buildings occupied by a religious community devoted to prayer, contemplation, education or the relief of suffering
  • most dwellings occupied by ministers of religion (see EIM60013).

Where an employer pays council tax as owner of such premises, no charge under the pecuniary liability principle will arise on employees who live in the premises. This is because the employer is paying its own liability, not a liability of the employees.