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As an employer providing accommodation for your employees, you have certain tax, National Insurance and reporting obligations.

What鈥檚 included

As well as the costs of the accommodation itself, this includes:

• Council Tax
• water and sewerage charges
• heating, lighting and cleaning
• repair, maintenance and decoration
• furniture for daily use
• staff for upkeep of accommodation, for example gardeners and cleaners

You do not have to report or pay anything to HM Revenue and Customs (HMRC) on the cost of certain types of accommodation.

If it鈥檚 domestic or personal

Accommodation is exempt if both:

• you鈥檙e an employer who鈥檚 an individual, for example a sole trader
• you鈥檙e providing it for someone because they鈥檙e a close relative - even if they happen to work in your business

It will not be exempt if either:

• you鈥檙e a company or partnership
• you鈥檇 be providing the same sort of accommodation to an employee who was not a family member

If it鈥檚 provided by a local council

Accommodation is exempt if a local council provides it on the same terms that it provides housing to non-employees.

If it鈥檚 necessary or usually provided for the job

Accommodation at the place of work is exempt if:

• your employees cannot do their work properly without it, for example agricultural workers living on farms
• an employer is usually expected to provide accommodation for people doing that type of work (for example a manager living above a pub, or a vicar looking after a parish)

If you provide the accommodation to company directors, they have to be either full-time or work for a non-profit or charity organisation and hold less than 5% of the shares.

If it鈥檚 needed for security

If you need to provide accommodation to protect an employee because the type of work they do means there鈥檚 a special threat to their security, this is exempt.

Other charges and costs

If the accommodation you provide is exempt, you do not have to report Council Tax, water and sewerage charges to HMRC, or pay National Insurance and tax.

If the accommodation you provide is not exempt, you must report it to HM Revenue and Customs (HMRC).

Accommodation

This includes any accommodation you provide, even if the employee does not actually use it (see technical guidance for details).

You must:

• report on form P11D
• pay Class 1A National Insurance on the value of the benefit

You can get tax relief if you provide accommodation for an employee at their temporary workplace for up to 24 months. You鈥檒l still need to report this.

If you provide accommodation because of coronavirus (COVID-19)

If you provide accommodation for an employee at their permanent workplace because of COVID-19, you must also report on form P11D.

If you鈥檝e agreed to pay back your employee鈥檚 subsistence and lodging expenses because they cannot return home, you can either:

• report on form P11D
• report through a PAYE Settlement Agreement if you wish to pay tax and National Insurance contributions on your employee鈥檚 behalf

Council Tax, water and sewerage charges

If your employee covers the cost and you reimburse them, you must:

• add the amount you reimburse to their earnings
• deduct and pay Class 1 National Insurance and PAYE tax through payroll

If you cover the costs directly, you must:

• report on form P11D
• deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll

Furniture, heating, lighting, maintenance

This covers:

• heating, lighting, cleaning
• repair, maintenance, decoration
• furniture for daily use
• staff for upkeep, for example gardeners, cleaners

You do not need to report furniture, heating, lighting and maintenance costs if the accommodation is for a close relative and it is not related to their job.

Do not deduct costs for any structural alterations or repairs that you legally have to make as a landlord.

If your employee covers the cost and you reimburse them, you must:

• add the amount you reimburse to their earnings
• deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll

If your employee arranges the supplier contracts but you cover the costs, you must:

• report on form P11D
• deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll

If you arrange the supplier contracts and cover the costs directly, you must:

• report on form P11D
• pay Class 1A National Insurance on the full costs

To work out the value of living accommodation follow these steps:

1. Use the greater of the 鈥榓nnual value鈥� (as shown in the table below) or the rent you pay.

2. If you provide the accommodation only part of the year use that proportion.

3. Deduct any rent you get from your employee.

4. If the accommodation is shared or only partly used for business use that proportion.

The annual value to use depends on where the property is.

Properties over 拢75,000

You must add an additional charge to the standard value.

To start with you have to calculate the 鈥榗ost of the accommodation鈥�:

1. Add anything you spent on improvements to the original buying price.

2. Deduct any reimbursements by employees from these amounts.

If you held an interest in the property 6 years before your employee occupied it and they first occupied it after March 1983, use the value of the property at the time your employee moved in, rather than the original buying price.

To calculate the additional charge do the following:

1. Deduct 拢75,000 from the cost of the accommodation.

2. Multiply what鈥檚 left by the official rate of interest - if you only provide the accommodation for part of the year, use that proportion.

3. Deduct any rent you get from the employee.

Salary sacrifice arrangements

If the cost of the accommodation is less than the amount of salary given up, report the salary amount instead.

Calculate the cost of the accommodation in the same way as normal, but do not deduct any rent or payment you get from the employee.

These rules do not apply to arrangements made before 6 April 2017 - check when the rules will change.

The following guides contain more detailed information about: