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HMRC internal manual

Employment Income Manual

Tax treatment of working rule agreements: lodging allowances

Lodging allowances (sometimes known as accommodation, overnight or subsistence allowances) under working rule agreements are payable free of tax only if the operative has completed an application form. The form certifies that whilst incurring extra expenses on lodging away, he or she is also responsible for maintaining dependants at his or her permanent home address. Under certain agreements, the operative must also have been recruited by an approved method (see EIM50625).

If an employer is not in possession of a completed lodging allowance application form, it should tax any lodging allowances paid under a working rule agreement unless the procedures described on this page apply. Completed forms should be retained by employers for production at any future compliance review.

Single employees often have no qualifying dependants (see EIM71308 for a definition of dependants) and cannot therefore complete the application form. Nevertheless, such persons may still be able to qualify for tax-free lodging allowances under additional procedures (see EIM71310).