Tax and Benefit in kind

munchings-n-crunchings

Hello,

A friend of mine has some issues with her employer regarding a benefit in kind.

For her job, which is teaching children, she is required to live in a house next door to the main building.
The children, can then walk from the main building, to the teaching room located in her home.
There is no rent payable, and she has a license to occupy the premises. The house is owned by a trust.

Her employer, has changed her tax code, and she didn't think to check why. I've nagged her to phone HMRC, which she did this morning, and apparently, it's for tax payable on the property, and on the fuel.

Doing my own little research, on the CAB website, it states that there are 3 exemptions to tax payable on a benefit in kind, and one of those is if you have to live somewhere in order to do your job, ie caretaker etc. With heating tax, it refers to the same 3 exemptions.

Can anyone advise me, so I can pass the correct information on, and she can tackle her employer. I think it's lack of knowledge on the part of the employer, but it's affecting another persons income if they have it wrong.

Does it sound like she should be tax exempt for the house where she lives??
Any advice would be appreciated

Regards

Munchie

taxing

Hi

First off - her employer will only have changed her tax code at the bidding of HMRC.

The assessable benefit (BIK) will have been notified by the employer to HMRC on a year end form P11D (possibly a P9D if she is a low earner but unlikely I should think).

The employer was REQUIRED by law to give your friend details of the assessable benefits and by 6 July following the tax year in which these arose. Didn't he do that?

The tax exemption is fairly complex but I doubt it applies to your friend. The caretaker part you mention actually says:

"caretakers living on the premises. This only covers those with a genuine full time caretaking job who are on call outside normal working hours (see note). It would not cover a shop employee who is allowed to live in the flat above the shop because the employer thinks this will discourage burglaries of the business premises".

I can't see that living in a house next door to the school is required for the 'better performance' of your friends job unless she has to also be a nanny/supervisor of children staying at the school overnight and is 'on call' for those duties?

The law Lords quote is:
An employee may claim that it is necessary to occupy a particular residence because the employer requires the employee to live there. This is not enough to satisfy the test. It must be shown that the duties of the employment require occupation of the residence. An argument that the employee cannot afford to live elsewhere is not sufficient, see Vertigan v Brady (60TC624)

AND

“if it is asserted that it is essential for the servant to occupy the house in order to perform his duties, it seems to me that the servant must establish affirmatively that for the performance of his duties he must live in that house and no other.”

The full text of exemptions is here:

http://www.hmrc.gov.uk/manuals/eimanual/EIM11342.htm

So, not representative occupation just a jolly nice 'perk'.

Any expenses paid by the employer for the house running which a 'normal' landlord would not pay in a tenancy arrangement, will also be taxable on the employee. The heating bills for instance...Those rules are explained at this link:
http://www.hmrc.gov.uk/manuals/eimanual/EIM11521.htm

You say your friend uses a room in the house as a classroom - if that is set up as a classroom and can't be used for anything else, then the assessable BIK will need to be reduced to reflect not full availability of the property and part of the 'bills' (the 'heat' you mention) assessed on her will also need to be so reduced - and, this, she should certainly take up with her employer.

I am surprised that the employer did not explain the tax position at the outset when hiring your friend?

Your friend might be best to ask to speak to the payroll clerk (possibly the employer's accountants deal with it); certainly the person responsible for dealing with the employer's P11Ds should be able to explain and correct any misunderstandings.

Not an easy subject and an area where full information is vital but I hope the above guidance is helpful.

Regards.