If you provide free accommodation to employees the deemed benefit is taxable, and you will have to pay Class 1A NIC based on the value of the benefit provided.
What’s exempt?
You will not have to report the cost to HMRC if any of the following apply:
- If it is domestic or personal. Accommodation is exempt if you are an employer who is an individual, for example a sole trader, and you are providing it for someone because they are a close relative - even if they happen to work in your business.
It will not be exempt if either you are a company or partnership or you would be providing the same sort of accommodation to an employee who was not a family member.
- If it’s 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’s 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; or 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’s needed for security. If you need to provide accommodation to protect an employee because the type of work they do means there’s a special threat to their security, this is exempt.
If the supply of accommodation is not exempt
If the supply of accommodation is not exempt employers will need to submit a P11D form disclosing the value of the benefit provided. These could include the following as well as the direct cost of the accommodation itself:
- Council tax
- Water and sewage charges
- Heating, lighting and cleaning
- Repairs, maintenance and decoration
- Furniture for daily use
- Staff for upkeep of accommodation, for example gardeners and cleaner