Concise Rural Taxation 2017/17 Now Available

Concise Rural Taxation (formerly Taxation for Students of Rural Land Management) is now an annual publication.  This year’s edition is now available. Continue reading “Concise Rural Taxation 2017/17 Now Available”

Measure for Measure

Philip Meade has published a post on his Dispute Resolution blog which serves as an excellent reminder of some of the good practice surveying basics: points which are just as useful to a trainee or newly-qualified surveyor as they are to an experienced arbitrator.  I’m delighted to reproduce it below:

Despite our professional roots in land surveying it is not uncommon as an arbitrator to come across valuation disputes in which the precise location and extent of the original problem is far from c…

Source: Measure for Measure

Budget 2016: Rural and property points

Headline points from the 2016 Budget for the rural economy and property. Get out of sugar, get into tunnelling, run a micro-business on the side, infrastructure needs you, take your capital gains now, incorporation is looking better and better unless you intend to sell your professional services to the public sector, drink whisky and beer not wine. Despite this, old age and death are beginning to look expensive.

A £3.5 bn reduction in public expenditure is not intended to dent George Osborne’s claim that, “We [ie the Conservative Government] are the builders”. Practically this means Continue reading “Budget 2016: Rural and property points”

80% of tied cottage occupiers could face tax on empty bedrooms

Thank you to everybody who responded to my survey on tied housing.  I have now offered the following observations in response to the HMRC consultation’s suggestion that the tax and National Insurance treatment of tied housing as a benefit in kind should be based on its full rental value.

The suggestion that all employer provided accommodation should be taxed on the basis of its full market rental value could therefore have significant implications for [rural] occupiers, many of whom are likely to be at the lower end of the pay range.  This in turn is likely to lead to greater pay pressures on employers at a time when there is no sign of agricultural volatility decreasing and when those same employers are facing the additional costs of extended pension rights etc.
It is also worth highlighting the contrast with Local Housing Allowance (LHA) and Housing Benefit (HB) if the proposal to move to full rental value were to go ahead.  LHA and HB are both restricted according to the number of bedrooms the occupier is deemed to need and LHA is further restricted to the lower level of rent prevailing in the district.  80% of the respondents to my survey would find their entitlement restricted if they were LHA or HB claimants, yet would almost certainly find it impossible to move to alternative accommodation without changing their job.

The online survey was undertaken between Monday 4 January and Tuesday 2 February 2016 using SurveyMonkey. No attempt was made to define a particular population beyond occupiers of employer provided living accommodation generally, with attention drawn to the survey via social media (twitter, LinkedIn, charlescowap.wordpress.com) and direct approaches to contacts in the rural economy. I cannot claim that the survey is representative of a particular group, nor that the results should therefore be treated as compelling. It does however provide a persuasive insight into the housing arrangements for people employed in some sectors of the rural economy.

Key findings:

  • Number of respondents: 25, all of whom live in accommodation provided by employers
  • Twenty pay no rent for their accommodation (80%), while five pay some rent (20%). Nobody claimed to pay full market rent.
  • Size of accommodation ranged from one to six or more bedrooms, Table 1

Table One: Number of bedrooms

Number of bedrooms Number of dwellings
1 2
2 4
3 5
4 8
5 4
6 or more 2
Total 25

 

  • The twenty five dwellings were occupied by a total of 70 people, ranging from single occupiers to couples with one or more children.
  • One respondent worked in education. Most respondents (n=17) worked on rural estates and seven occupiers worked in agriculture. There were no respondents from the forestry, licensed trade, security, other estate or property management or finance and banking sectors.
  • Two respondents paid Income Tax or National Insurance on the value of their accommodation but the majority did not (n=19, 76%). One respondent did not wish to answer this question and a further three did not know.

The data were further analysed as to the suitability of the accommodation for the size of the family unit living there. This was done by reference to the qualifying bedroom criteria for Local Housing Allowance and Housing Benefit.

  • Of the 25 households, twenty would have had their entitlement to benefit restricted due to an excessive number of bedrooms. This would have affected 58 of the 70 people covered by the survey. Examples of those excluded included:
  • 10 out of 11 couples in the survey occupying property of two or more bedrooms;
  • Two couples with children over 16 occupying houses with more than four bedrooms;
  • Two couples with one child under 16 occupying houses with more than three bedrooms.

One respondent who had lived in employer provided accommodation offered the following observations in response to the survey:

“Having lived in service accommodation for many years I’d comment:

1 In accepting a position where I was required to live in service accommodation to meet my contractual obligations I had no choice in the location (edge of pig farm)type of housing, nearby education, or standard of maintenance and external environment

2 There is an implicit and unpaid expectation that there will be a significant and unpaid additional labour contribution – unlocking for out of hours lorries and loading/unloading, telephone, attending sick animals

3 Additional taxation of such housing as a benefit could break that relationship and would require an employer to pay more for out of hours service

4 We never thought of service accommodation as a benefit, but a liability, knowing that when job terminated we would have to move so saved and invested every penny to buy a flat first, then a house, for long term security” (Mr John Stones, former director Nuffield Farming Scholarships)

Implications

Questions 9 and 10 of the HMRC Consultation, Employer Provided Living Accommodation, Call for Evidence (January 2016) ask what proportion of employees provided with accommodation pay rent, how much rent do they pay, how is the value paid as rent calculated before going on to suggest that a move to market rental value would provide a simplification to the tax system.

The findings of this survey suggest that very few occupiers in the rural economy pay any rent at all, and that a move to full market rental value could have disproportionate effects on occupiers who have little or no choice over the size of the accommodation provided for them. A move to market rental value as the basis of taxable benefit is likely to lead to upward pressure on pay in order to compensate for the extra cost, and with this consequences for employer costs including increased National Insurance contributions.

 

 

Accommodation provided by employers: some taxing questions

The government is seeking evidence on the taxation of employer provided living accommodation.  An explanatory document has been issued and the deadline for responses is 3 February.  It is worth reading for its clear explanation and examples of just how complicated the taxation of employer provided living accommodation has become over the last forty years or so.  It can be found at this link: Government consultation on employer provided living accommodation.

One particular question of the 16 caught my attention.  It’s number 10, and it asks:

Do you agree that using market rental value would provide a simplification to the tax rules on provided living accommodation? How could such a system work and what would be the impacts on both employers and employees?

I wonder what the effect of this might be on rural employees who live in houses which might be considerably larger or more expensive than they would otherwise choose, or indeed than they may be able to afford?  I have devised a simple survey which will allow some data to be collated if we can gather enough responses.  Some of the questions ask how many people of different ages live in the accommodation.  This will allow comparison with the maximum size of accommodation that would be acceptable for Local Housing Allowance purposes.  Please complete the survey by the end of January and this will allow the responses to be collated in time for the government’s deadline.

This link: Accommodation Survey will take you to the survey.  Thank you for your help which could be most valuable in providing evidence for the government’s review.

Inheritance Tax Residence Exemption: Even more smoke and mirrors from the 2015 Summer Budget

The fanfare for this Summer’s July Budget trumpeted the arrival of a £1 million IHT exemption for the family home.  The detail is not so clear cut.  Chancellor George Osborne has introduced a new residence exemption from IHT.  It works like this. Continue reading “Inheritance Tax Residence Exemption: Even more smoke and mirrors from the 2015 Summer Budget”

Summer Budget 2015: Rural Points – More smoke and mirrors

The Inheritance Tax changes will be the headline grabbing feature for many rural property owners.  But is all what it seems?  A few other budget points also need attention if you’re interested in rural property and farming.

Business-wise the decision to set the Annual Investment Allowance at £200,000 permanently from January 2016 is important, and relatively welcome. Continue reading “Summer Budget 2015: Rural Points – More smoke and mirrors”