Many employers think that they do not need to understand the rules on accommodation benefits because there is no "company flat". However, the benefit in kind rules are much more far reaching than that and some employers are completely unaware that an accommodation benefit charge needs to be considered which can be "interesting" to say the least when HMRC do a PAYE or Benefits and Expenses review.

With this in mind, we look this month at the different types of "living accommodation" that may be provided by employers and highlight the particular problem areas around each scenario. For the avoidance of doubt we are not including hotel or other B&B type arrangements within this article as both tend to fall within different rules.

General Points

Accommodation is one of the few Benefits in Kind that is applicable to all employees where a taxable benefit arises, i.e. it is also reportable and taxable on "P9D employees"  - those earning at a rate of £8,500 pa. This is probably a mute point nowadays but it is important to make the distinction nonetheless as some employers still do try to manipulate the rules around this.

It is also fair to say that many employers moan and groan when they are faced with looking at the accommodation benefit rules as they are more complex than for most other Benefits In Kind -  many different ways to calculate the tax charge depending on the specific circumstances, a number of "traps" that may trigger additional charges on related expenses and also a number of exemptions which are not always easy to understand, especially in terms of current HMRC practice.

This article does not seek to resolve all of these problems for employers but we hope that it serves at least as a useful signpost for those employers who may be "in denial" at the moment.

Accommodation Benefits - Overview

The different scenarios in which accommodation benefits may need to be considered mainly fall into five categories as summarised below. Of course there can be other situations that are slightly more obscure than those mentioned, and there can also be some crossover between the five we have included but these are the ones, by and large, that crop up in many organisations year in and year out.


Type of accommodation When Provided Taxable? Points to Watch

Short-term e.g. < 1 week

On short-term business trips instead of staying in a hotel, for example, in a location where the employer typically does a lot of business and may rent, or own, a property for general use by visiting staff

No, provided the employee is on a qualifying business journey that requires an overnight stay then this should qualify as business travel and subsistence the same as a hotel would

Non business use (e.g. at weekends) is a taxable benefit.
It is not just actual non business use of the accommodation that is the problem however - periods where the accommodation is "available" for private use will also trigger a tax charge in many cases.Such a charge is more likely where the employer has little or no procedures in place to monitor use of the property or to restrict access to the property or keys

Use of such property by Non Executive Directors when attending Board meetings. Where the location of the Board meetings is a Permanent Workplace for the Non Exec, the provision of accommodation at that location is a taxable benefit

Longer term e.g. < 2 years

Where an employee is working at another workplace on a specific project, again, instead of staying in a hotel

No, provided the location qualifies as a Temporary Workplace for tax purposes then this should qualify as business related travel and subsistence the same as a hotel would

If the location does not, or ceases to, qualify as a Temporary Workplace, the accommodation becomes a taxable benefit, as does any associated travel and meal costs

The main issue is whether the location does in fact qualify as a Temporary Workplace. Typically this means that the employee is not attending the workplace for a period of more than 2 years but see our  previous article for further clarity on this and other conditions

Meal costs can also be an issue. Typically, employees staying away from home longer term tend to eat in rather than at restaurants. Tax relief on food costs should be allowable, the same as restaurant costs, but HMRC may challenge this where supporting receipts are not available or where supermarket costs are not restricted to necessary meals


Temporary accommodation for a relocating employee

This is usually rented accommodation as a short-term measure for an employee who has relocated to a new work location and needs somewhere to stay whilst looking for somewhere more permanent in the new locality

Costs of this nature should fall within the definition of qualifying expenses for staff relocations and, as such, are exempt from tax subject to a limit of £8k covering all qualifying expenses for that employee's move

Where the £8k limit is exceeded for the relocation, the accommodation will be treated as a taxable benefit under normal rules


Accommodation provided for too long can be an issue as HMRC may challenge that it falls outside the scope of the relocation exemption. There is no statutory definition of what is meant by "temporary" for this purpose but, generally, HMRC are happy to accept any period not exceeding 6 months as qualifying under the relocation rules.

Issues can also arise where the employee ultimately does not satisfy all the conditions for the relocation exemption to apply, e.g. because his family home remains in the old location. In such situations, provision of temporary accommodation, and potentially all other related expenses, would become taxable

Job related accommodation

This is where accommodation is provided by the employer with a condition that the employee MUST stay in the specific accommodation, usually to be able to do the job properly

Such accommodation is typically owned outright by the employer, e.g. as part of the business premises, but it is not unknown for such accommodation to be rented by the employer


This type of accommodation can be completely exempt from tax subject to satisfying certain conditions, i.e.

  • the accommodation is necessary for the proper performance of the employee's duties. OR
  • the accommodation is provided for the better performance of the employee's duties AND it is the type of employment where it is customary for accommodation to be provided. OR
  • The employee needs accommodation provided due to security measures if there is a threat to his personal safety

The provision of such accommodation has come under great scrutiny by HMRC in recent years with many targeted campaigns in certain sectors.


Situations that could lead to an HMRC challenge that the accommodation is taxable include:

  • It is no longer customary for ALL employees doing the same job across the UK (irrespective of employer) to be provided with accommodation
  • It is still customary for all employees to be provided with accommodation but the 'better performance' condition is not met
  • Where it cannot be demonstrated that the particular accommodation is essential for the proper performance of duties as opposed to any other property

It is also often (wrongly) assumed that all costs associated with the exempt accommodation are equally exempt from tax. This is not the case for costs normally the responsibility of the employee, e.g. heat and light, furnishings, etc.

Accommodation as a perk of employment

Usually for senior employees or owners of the business as a "free" benefit

Such accommodation is usually owned outright by the employer or rented by the employer from a third party


Yes, a taxable benefit will always arise where such accommodation is provided

How the benefit charge arises will depend on a number of factors including whether the property is owned or rented, the value of the property, the Gross Rateable Value, any rent paid by the employee, etc etc

Calculating the BIK charge - the rules are fairly complicated and there are a few easy mistakes to make

Improvements to owned properties - in most cases these must be added in to the value of the property when calculating the BIK. Many employers miss this out by mistake

Mixed use, i.e. there is some business use of the property - this can cause complications in how to split the costs between BIK and non taxable and it is crucial to get the method right and agreeing this with HMRC

Other costs associated with the property - many employers fail to report the additional taxable benefits arising indirectly from the employee living in the property, e.g. heat/light, insurance, TV, Council Tax, etc. The NI position can also often be troublesome depending on the payment arrangements



The next time your organisation is completing forms P11D at year-end, or your accountant or advisors ask whether there may be accommodation type benefits to consider, do think about this carefully before dismissing it. As we highlight above, an accommodation benefit in kind charge can be triggered in a number of different ways, some of which are not always obvious.

The cost involved in providing accommodation to employees is rarely cheap and it follows therefore that any tax issues arising in this area can also be significant as well so it certainly pays to be careful by way of setting things up in the most tax efficient way possible and in terms of getting the tax reporting correct at year-end where a tax charge is unavoidable.

Accommodation is one of the more complex employee benefits and this article is only a very brief overview of the subject. If you need any specific information or advice that is not covered here, then by all means get in touch, we would be happy to "accommodate" you !!


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