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HMRC internal manual

Employment Income Manual

Tax treatment of working rule agreements: site-based staff employees: qualifying conditions: condition 4

Lodging allowances

As regards payments of lodging allowances:

  • payments may be made weekly or monthly, but otherwise must be subject to similar rules and conditions to those applying to payments to operatives
  • the rates of allowances may exceed by a reasonable amount the rates payable to operatives under the relevant working rule agreement. In practice, an increase of up to 20% may be regarded as reasonable. Exceptionally, a higher increase may be agreed where an employer shows that increased costs arise because the site is in a high-cost area. Any excess over the agreed rate of allowances is taxable.
  • where reimbursement is made of actual expenditure, the payments may be made without deduction of tax, but the vouchers, etc., should be retained by the employer for production to HMRC compliance officers, on request
  • under the taxation procedures agreed for operatives, claimants of lodging allowances are usually required to complete a certificate stating that they are incurring additional expenses by staying temporarily away from home and that they have continuing financial commitments at their permanent home and dependants whom they maintain there (see EIM71307) or, for single employees, that they have continuing financial commitments for the maintenance of a permanent residence (see EIM71310)
  • these requirements apply equally to site-based staff employees. Thus, for example, if a lodging allowance certificate cannot be completed satisfactorily (for example in the case of a single man), the allowance must be taxed on payment unless, exceptionally, the site- based staff employee qualifies for tax-free lodging allowances under the zoning arrangements (see EIM71309).