Carter Jonas
Carter Jonas

Taxing question over farm accommodation

Agricultural workers living in a home that goes with their job have been put on notice that they could soon face paying income tax on its rental value.

The Office of Tax Simplification (OTS) will be pressing the next Government of whatever political persuasion to implement its proposals that where a home is provided as a custom rather than as a requirement of employment it should be seen as a taxable benefit based on its open market rental value.

This is a stark warning of what may be to come as the drive continues towards raising tax revenues without raising general income tax rates that would be more widely unpopular.

Company car drivers have long known the personal cost of having a car provided by their employer and this view of taxable perks has been greatly expanded by HMRC to include things such as mobile phones, too.

Many farmers and their staff probably thought the provision of homes would remain under the radar but this is clearly no longer the case.

There will be exceptions – the OTS is proposing that where the employee is required to live in accommodation to enable the protection of buildings, people, or assets; where the employee is required to work long hours; or where residence is a result of regulatory requirements these should continue to bring exemption.

Workers on arable holdings may have difficulty arguing their presence is essential as easily as those who work with livestock and have milking or animal welfare duties. In remote areas, it might be argued that security of assets is good enough reason for housing provision but you can be sure there will be a stringent assessment of any argument put forward in support.

The OTS is proposing that the benefit value is based on open market rent and that this should be reassessed every five years. The good news is that where tax exemption is agreed, that will also apply to ancillary services such as heat, light, and repairs but will not embrace council tax or water and sewage charges.

Employees might want to consider whether or not there will be a benefit in staying in farm accommodation while employers replacing staff who leave may want to withdraw free accommodation as part of the package unless they are sure its provision will not affect the employee’s tax liability or bring demands for higher wages together with an impact on their own payroll systems through operating P11D returns.

At the moment this is only a proposal but it is likely to become reality and so employers should talk to staff living in tied accommodation and discuss the possible impact so they can plan ahead.

Simon PallettFRICS

Chairman

Simon is a Partner, based in Winchester, who advises clients throughout southern England on a wide range of rural property, valuation and management issues. His expertise includes farm and estate mana...

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