Tax on rent paid to employer

Jo_King

This is a bit of a complicated question, and I can't seem to work it out from the HMRC website.

I currently live where I work - it is a work requirement, and most staff live on site. As such, we pay rent to our employer. I've been doing this for the six years I've been in this job.

I've since been told that this rent (because it's paid to the employer), should be paid before tax and not after it. We've always paid our rent out of our net pay, not our gross pay.

So, am I likely to be entitled to a refund of the tax on the rent I've paid over the last six years? And if I am, how do I go about getting a refund? What evidence are they likely to need?

Thanks for any help. I'm usually pretty good with this stuff, but my brain isn't co-operating!

agrinnall

I think this is the HMRC page that explains the situation:

http://www.hmrc.gov.uk/paye/exb/a-z/l/accommodation.htm

It gives a quite straightforward guide to the circumstances in which accommodation can be provided free of tax and NICs. If you fall into one of those then you should be OK going forward.

Whether you can reclaim what's already been paid I'm afraid I don't know. If nobody else can help I think you'll need to ring HMRC and ask - because it's a bit of an esoteric question you might have to leave it with them to find an answer.

Mikeyorks

I think this is the more likely start point? And it is complex.

http://www.hmrc.gov.uk/manuals/eimanual/EIM11309.htm

The OP needs to qualify a little more detail (police / prison services etc) as it's quite a minefield without more specifics. One of our resident accountants may be better placed - if they've stumbled across it outside of the local vicar!

Dal_Whinnie

A further point is whether the OP is entitled to a deduction in respect of the rent. To be able to do so it has to be incurred wholly, exclusively and necessarily in the performance of his duties. There have been some cases around this area but on the basis that the OP also uses the property for personal use then it would fail to meet that test.

My view is that the rent should be paid to his employer out of net income but it does raise the question (if any of the circumstances highlighted by agrinall apply) why the employer does not provide free accommodation and reduce the employees salary accordingly. Providing this basis is correctly set up it would save the OP tax and Ni and also save the employer NI. If a pension contribution is paid by the employer based on gross salary this would need to be adjusted to take account of the amendment to salary.

Jo_King

Thanks for your responses. I think I definitely qualify. I have to live here, in order to fulfil the requirements of the job (on call, very irregular hours), plus it also fulfils the 'customary' requirement.

It seems that the system is being changed so that the 'rent' component of our payments is now tax free. I just can't work out if that means I'm due back the last six years of tax paid.

Dal_Whinnie

Jo_King wrote: »

Thanks for your responses. I think I definitely qualify. I have to live here, in order to fulfil the requirements of the job (on call, very irregular hours), plus it also fulfils the 'customary' requirement.

It seems that the system is being changed so that the 'rent' component of our payments is now tax free. I just can't work out if that means I'm due back the last six years of tax paid.

So it appears that, if your employer provided you with free (or subsidised) accommodation you would meet the conditions for it to be tax free. However, in my view, that does not entitle you to claim tax relief on rent that you pay for accommodation.

What I don't altogether understand is what is changing. Has either your gross pay or rent due actually changed or is your employer just processing it differently? If the latter what is the basis for them making a change? Have they got HMRC approval?