Farmworker housing tax rules update on the cards

If farm employees are provided a house or cottage as part of their employment package it should continue to be tax exempt, farm leaders will tell HMRC.

The government is seeking views on tax arrangements surrounding the provision of employer-provided living accommodation, on the grounds that some of the rules are 40-years-old and it would “like to understand how well understood the rules are”.

Housing provided to farmworkers by their employer is typically a tax-free benefit, because they qualify for an exemption if it is either necessary for them to do their job or customary to be provided with it in their particular role.

The HMRC document, which is open to responses until 3 February, is based on the findings of a 2014 report from the Office of Tax Simplification (OTS) which found across all industries there was a lack of clarity about what constitutes living accommodation, in addition to when and how exemptions should apply.

See also: Check farmworkers contracts for accommodation tax changes

The OTS also suggested that exemptions were outdated with newer professions not represented, while it was hard to see why exemptions for some occupations still existed.

Some of the exemptions also appeared arbitrary and could result in different tax treatment for employees in very similar jobs, which created complexity and unfairness, it added.

HMRC has consequently put out a “call for evidence” to see if there is a case for making changes “to deliver simplification in this area”.

Stephen Rudd, agricultural partner with Larking Gowen, pointed out the document was not exclusively aimed at the agricultural sector, but it was clear that the rural community was the most likely to be affected by any changes, which would include both traditional tied cottages and accommodation provided for seasonal workers.

“The current reliefs are massively important in a hard-pressed sector and generally benefit the less well off – farmworkers who have to live on site, retirees and the widowed. We will be responding to the consultation to that effect,” he said.

George Dunn, chief executive of the Tenant Farmers Association, said the provision of living accommodation to employees within the agricultural industry had been a long-running and necessary practice.

“The current reliefs are massively important in a hard-pressed sector and generally benefit the less well off – farmworkers who have to live on site, retirees and the widowed. We will be responding to the consultation to that effect”
Stephen Rudd, Larking Gowen

“Having farmworkers living on or near to their place of employment is needed for security, animal husbandry and good estate and farm management.

“ Of course, from time to time it is necessary for the tax rules to be reviewed, simplified and updated, but we would urge the government not to change the fundamental principles which could have far-reaching implications for the farming community.”

Country Land and Business Association (CLA)  chief taxation adviser Louise Speke agreed the tax relief that employees received on provision of employee accommodation was fair and important.

“Accommodating staff is vital for a number of farming roles, from livestock management to management of high-tech equipment used in food production.

“The OTS has been conducting a review of the processes around tax-free employee accommodation, which is necessary as some of the rules and terminology are now out of date.

“The CLA has put forward a number of proposals on how the system should be updated to reflect the needs and operations of modern rural businesses.”

Call for evidence

Michael Parker, head of tax at the NFU, said during a conversation with HMRC on the topic it had been stressed to him that this was only a call for evidence and no decision had been taken to change the rules or remove any exemptions.

The OTS report did not suggest that exemptions should be removed, but more that they should be fairer and more consistent.

But the NFU was seeking a meeting with HMRC to stress that any changes that restricted the extent to which exemptions applied to agriculture would make life difficult for farm businesses – adding cost and making it harder to recruit.

“Our concern is that agricultural workers have always been exempt because it is necessary for them to perform their jobs, or alternatively, because it is customary to provide these sort of job holders with accommodation.

“While there are fewer farmworkers now, it doesn’t mean that need has gone away. In fact, a lot of accommodation has some kind of tie on it as the local authority has deemed it a requirement for that business.”