Agricultural Brief - Representative Occupier Concession to be withdrawn

08 June 2020

As you may already be aware, from next year, the long-standing HMRC concession enabling living accommodation to be provided to “representative occupiers” free from tax and NIC will be withdrawn.

We note that there are other statutory exemptions that will continue to be available, and for which many of those affected might qualify, details of which we set out below. If you currently provide free accommodation to your farm workers as “representative occupiers”, steps should be taken early in anticipation of the upcoming changes.

The current position

HMRC’s historic extra statutory concession allowed a “representative occupier” to be provided with living accommodation free of tax where: 

  1. they live in a house provided by the employer on a rent-free basis
  2. they must, under their contract of employment, reside at that house and are prohibited from living anywhere else; and
  3. the nature of their job reasonably requires that they occupy the property to achieve “better and more effectual performance of their duties”.

HMRC will, however, withdraw this concession, in its entirety, with effect from 6 April 2021. Consequently, additional tax charges could arise, both for you and your employees, unless one of the statutory exemptions set out below applies.

What next?

Before the changes take effect, there is time to consider whether workers you currently classify as “representative occupiers” might be entitled to an alternative exemption and if not, allow you to take action to change the arrangements where appropriate. 

Continuing exemptions

Even after the existing concession is withdrawn, it will still be possible for employers to provide employees with living accommodation as a tax-free benefit if it meets the conditions to be treated as either “necessary for the proper performance of the duties” or it is “one of the kinds of employment in the case of which it is customary for employers to provide living accommodation”.

Broadly speaking, HMRC accept that agricultural workers who live on farms and agricultural estates will usually be within their definition of accommodation that is “necessary for proper performance of the duties”.

A second exemption may be available for certain workers where which it is customary to be given living accommodation as part of the job, and the occupation of a property is to facilitate the better performance of their duties. For example, for racehorse trainers, HMRC accept that it is “customary” for such workers to be provided with living accommodation and in such cases, the “customary and better performance” exemption should be available.

It should be noted that a further exemption may be available where living accommodation is provided for retired agricultural workers and their spouses, widows or widowers. The operation of this exemption, as well as the other two exemptions mentioned above can be very strict, and can vary from individual case to individual case. It is strongly recommended that advice be taken before relying on any of the exemptions, and with almost a year before the change takes effect, there is plenty of time to review existing arrangements and make any changes needed.

What should you do now?

It would be advisable to review all of your current agreements with workers who receive free accommodation as part of their job to identify whether any are classified as a “representative occupier”.

Once you have identified any workers who are “representative occupiers” relying on existing the concession that will be withdrawn, we would recommend you contact your advisers. We can assist with any contractual changes that may be necessary to document the basis on which accommodation is to be provided to your worker going forward. We can also help you to prepare for and protect against any potential tax charges that could be payable post-April 2021 if the statutory exemptions do not apply.

This article is from the spring / summer 2020 issue of Agricultural Brief, our newsletter for farmers, landowners and others involved in agriculture. To download the latest issue, please visit the newsletter section of our website. 

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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at June 2020.