Request a Quote

Request a Quote

Please complete the form below, we’d love to hear from you!

Should I stay or should I go: Accommodation benefits and termination payments next up for review

  • 4th August 2014

Should I stay or should I go: Accommodation benefits and termination payments next up for review

In its third and final report on employee benefits and expenses, the Office of Tax Simplification (OTS) has recommended a number of changes to the tax rules around the taxation of accommodation and termination payments. Although it is unlikely anything will be done before the election in May, the OTS has a good track record of driving through changes in tax law and so this is clearly one to watch.

In broad terms, a taxable benefit arises where an employer provides an employee with living accommodation. Exemptions are provided - notably, where the provision of accommodation is customary and necessary for the better performance of the employee's duties - however these can be difficult to apply. And it can be difficult to calculate the benefit: in some cases, you need to know the property's rateable value in 1973!

The solution put forward by the OTS is for the rules to be rewritten around three key principles:

  • Whether the employee is required to live in the building to protect buildings, people or assets;
  • Whether the employee is regularly required to work outside normal working hours; and
  • Whether the employee is required to live in the accommodation as a result of regulatory requirements.

The new rules should be easier to understand and apply. And they should be fairer. Under the current rules, the Vice Chancellor of a university who occasionally uses the university's accommodation may benefit from exemption in certain circumstances. However, the same may not be true for a low-paid sheltered housing warden.

Most people think they know how termination payments are taxed, or rather not taxed as the general consensus seems to be that no tax is due if the payment is less than £30,000. This may be true in some cases but it is not in all. The rules around the £30k exemption are complicated and over the years many people have fallen foul of them, receiving an unwelcome tax bill as a result.

To clarify the situation, the OTS propose linking the exemption to the rules around statutory redundancy: if you qualify for a statutory redundancy payment then you also qualify for tax relief on any termination payment received. Further, the tax exempt limit could be set at a multiple of the statutory redundancy payment. As employers need to calculate the statutory redundancy amount anyway, this will be easy to apply and understand.

However, this is not all about simplification and there may be winners (e.g. those with a payment in lieu of notice (PILON) clause in their contracts) and losers (employees with less than 2 years services; office holders who don't work under a contract of employment).  As this develops accountants and other advisers will need to work with employees and employers to ensure that the changes are understood and their effects managed.

Finally, this is also as good a time as any for a quick update on the proposed changes to the tax rules around travel and subsistence. Having recognised that the rules in this area have not kept pace with changes in working practices (not least the rise of home working), the Government is consulting with taxpayers and other stakeholders on what the new rules should look like. Much is expected of the new rules as the current situation is complicated and confusing. More should be known at the end of the year when the Government reflects on what it has learned and sets out its proposals for the way forward.

Who writes this?

Stephen Relf

Stephen Relf

Tax Consultant
Find out more about Stephen
  • Very smooth changeover to BW, with good communication at all times. Very efficient in the production of the accounts (as promised) and the Partners are delighted with the advice received to date.

    Paul Atkinson, Practice Manager
    Netherfield House Surgery, Northumberland
  • BW Medical Accountants have a good working knowledge of General Practice and are keenly aware of the challenges Practices face within the changing environment of the NHS.  Benfield Park have been very impressed by the way BW Medical continue to deliver the range of services they provide from Accounts to Tax and NHS Pension advice. 

    We have found Practice consultation and engagement from BW Medical specifically helpful to shape the future of the Practice.

    Jonathan McCutcheon, Practice Manager
    Benfield Park Medical Group, Newcastle
  • We had no hesitation in moving to BW Medical Accountants.  For any business your accountant is integral, and for us one of the most important factors to this relationship is to have a personal and trusting approach, which BW have undoubtedly achieved. 

    The service we receive and the interest they show in our practice assures us that they have a genuine interest in us and commitment to us.  More importantly they are always helpful and polite to answer even the dumbest of questions!  They give us confidence and reassurance knowing that they are always very up-to-date with all the numerous changes within general practice and we would have no hesitation in recommending them to other practices seeking a professional and personal accountancy service.

    Jackie Rotherham, Practice Manager
    The James Street Family Practice, Lincolnshire
  • We moved to BW Medical Accountants in 2013 and we are delighted that we have.  Having been in the same business for over 20 years it is important to have a relationship with the accountancy team but most importantly you need to have trust.  We made the decision to move our business to BW Medical Accountants and having worked with the Team especially Tina we are very satisfied.  Tina going through the accounts brought to our attention many things that I was not aware of in the past.  The first years' experience can only be described as excellent.

    Customer service is first and foremost with BW and this shines through as each and every one of them are approachable, helpful and most importantly understand and know the business.  General practice is complex and is going to get more complex in the coming years.  We need Accountants who truly understand our business. We as a practice and as individuals would certainly recommend BW Medical Accountants.

    Gloria Middleton, Managing Partner
    Westbourne Medical Group, Sunderland
  • We changed to BW Medical Accountants during this financial year and I would say we have just had the most transparent and understandable end of year meeting and the best planning advice I have ever had in 16 years of practice.

    Dr H Jervis, Partner
    Temple Sowerby Medical Practice, Cumbria

Newsletter Signup

Loading...