Providing accommodation to employees – mind the tax!

Accommodation for staff has always been an issue (particularly in remote areas of the region), however over recent trading periods, and due to the Covid-19 pandemic, it has become even more so. With staff not returning from furlough or their homes in Europe, the quest for employees has become topical for many in the leisure and tourism sector.

What do employers need to be aware of?

Whilst the Kickstarter scheme and apprenticeship schemes are helpful for many businesses, if people do not have anywhere to live, the problem of staffing can become more about housing than anything else. Questions about how a business could potentially utilise some of the current spare cash balances in purchasing property for staff, converting redundant buildings or renting can be complex to answer. These are often significant investments or business decisions therefore it is worth thinking carefully about how these potential changes are structured.

As an employer providing accommodation to employees, there are certain taxes and administrative requirements you need to be aware of, including the Annual Tax on Enveloped Dwellings (ATED). The ATED was introduced primarily to prevent housing being purchased in London for special purposes and is something to watch out for, particularly where property values are high.

Benefits in kind on staff using the property, whether it is rented or purchased, can be difficult to deal with. If an employee is provided with board and lodging in the unused loft space of a hotel, the benefit would be limited to the cost of light and heat, whereas the rental of a house for multiple occupation or independent living accommodation would be dealt with differently.

We can help

Rules on accommodation for employees can be complicated and we would be happy to discuss any scenarios you are facing to ensure the most effective financial outcome. We can also assist with VAT issues that might apply on the conversion of old buildings or the building of new ones. Please contact myself or your local PKF Francis Clark advisor should you have any queries.