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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employer-financed retirement benefits schemes: excluded benefits: living accommodation and related benefits: accommodation

Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2007 S.I. 2007 No.3537

The provision of living accommodation can be an excluded benefit in certain circumstances.

Accommodation provided by Local Authority

Where S98 ITEPA would have excluded the accommodation from being a taxable benefit had the employee remained in employment, its provision will be an excluded benefit. Generally, this is where the accommodation has been provided on terms that are no more favourable than those under which provision to non-employees in similar circumstances are made (see EIM11367)

See EIM15024 where provision is to a member of the employee’s family.

Accommodation provided for the performance of duties

[Note: Improved property is not within this exclusion. Living accommodation is improved property if during the 5 year period prior to retirement or death or subsequently it has had works carried out that:

  • materially improve it i.e. the works result in an increase of 20% or more in market value and,
  • are not carried out wholly for the purpose of complying with statutory requirements or similar.]
  1. Provided to Employees

Where S99 ITEPA (and earlier enactments) operated to exclude this as a taxable benefit, the provision will be an excluded benefit where

  • an employee continuously occupied the accommodation or similar accommodation (see below) for a period of 5 years immediately prior to retirement, and
  • the individual continues to occupy the same or similar accommodation after retirement.
  1. Provided to Members of Employees’ Families

When the employee dies before retirement, the provision is an excluded benefit where:

  • the employee had occupied that or similar accommodation at any time in the 5 years preceding death, and
  • at any time in these 5 years, S99 ITEPA (or an earlier enactment) operated to exclude the accommodation as a taxable benefit.

When the employee dies after retirement, the provision will be an excluded benefit provided that:

  • the employee had occupied the accommodation (or similar) during the 5 years immediately preceding retirement, and
  • throughout that 5 year period, S99 ITEPA (or an earlier enactment) operated to exclude it from being a taxable benefit, and
  • the employee continued to occupy the accommodation (or similar) after retirement.

For further details on the operation of S99 ITEPA see EIM11341).

Similar accommodation

Accommodation will be similar accommodation unless, at the time the employee (or member of the employee’s family) starts to occupy the accommodation, the market value of the new accommodation exceeds that of the previous accommodation by more than 20%.

If the accommodation is not capable of being sold separately e.g. because it forms part of a larger premise then the value should be based on the accommodation as if the other factors did not exist. A commonsense approach should be adopted in determining the accommodation to be valued. For example, if household staff are given a room in a stately home as accommodation then a reasonable comparison might be a one bedroomed apartment/house in the location.

Accommodation provided for Ministers of Religion

Where accommodation had been provided to the employee when employed as a minister of religion and S99 ITEPA (or a previous enactment) operated to exclude it as a taxable benefit, the provision of accommodation may be an excluded benefit.

This will be the case where the employee had been employed as a minister of a religious denomination:

  • for 5 years immediately preceding the employee’s retirement, or
  • where the employee retired after a period of ill health, immediately preceding the period of ill health.

See EIM15024 where provision is to a member of the employee’s family.

Where the employee has died, the provision of the accommodation will also be an excluded benefit where the employee had been employed as a minister of a religious denomination. Where the employee died before retirement, they must have been in such employment immediately preceding their death

Accommodation provided as a result of security threat

Where S100 ITEPA (or a previous enactment) operated to prevent the provision of accommodation from being a taxable benefit at any time before the employee’s retirement or death, then the provision will be an excluded benefit when the employment has terminated provided the conditions at S100 (a) to (c) ITEPA continue to be satisfied. These conditions are that:

  • there is a special threat to the security of the employee
  • special security arrangements are in force, and
  • the employee resides in the accommodation as part of those arrangements.

For a note of practical considerations see EIM11362.

See EIM15024 where provision is to a member of the employee’s family.