Robinson Reed Layton have won a battle with HM Revenue & Customs which means good news for gamekeepers and their employers.
James Bailey, the Tax Partner at Robinson Reed Layton, explains:
“Any shooting man knows that it is common for the ‘keeper on a shoot to be provided with accommodation by his employer, but what is less generally known is that if this was rent free there has been a risk that HM Revenue & Customs would treat it as a taxable perk and charge the ‘keeper to income tax on the “annual value” of living there – and charge the employer national insurance at 12.8% on the same amount.
“In order not to be taxable on a free cottage, an employee has to pass one of two tests. Either it must be “necessary” for him to live there to do his job, or it must be “customary” to provide accommodation to the type of employee concerned.
“The “necessary” test is a very strict one, because HMRC take it to mean that the employee needs to live “in this house and in no other”, which if you think about it sets the bar almost impossibly high.
“The “customary” test is potentially much easier. Once HMRC agree that it is “customary” to provide accommodation to that sort of employee, all you have to prove to get the exemption is that living there helps him to do his job better.
“The problem was that gamekeepers and ghillies were not included on the list published by HMRC of jobs where it is “customary” to provide accommodation.
“We have just concluded a long argument with HMRC concerning one of our clients, and we now have their agreement in writing that it is “customary” to provide a ‘keeper (and, in our case, a ghillie) with free accommodation.
“This means that all that is needed to claim the exemption from tax is to show that the location of the cottage helps the ‘keeper to do his job better – by being on the spot for call-outs at night for example – and this test is not an onerous one because you don’t have to jump that “in this house and no other” hurdle. Our ghillie’s cottage was over 4 miles from his river, but HMRC nevertheless accepted that its location helped him to do his job better and agreed he was exempt from tax.
“Any employer providing a ‘keeper with a free cottage should apply to HMRC to confirm they agree the exemption applies – HMRC have not updated their list to include ‘keepers, but if there is a problem we can refer them to the agreement in our case, which is binding on HMRC for all ‘keepers and ghillies.
“For those employers who do charge their ‘keepers rent, this victory opens up some interesting tax planning possibilities that could save both the ‘keeper and the estate some fairly serious cash.
“We have a number of country estates and farmers as clients, and I am delighted we have been able to produce a little good news for them in these difficult times – and as a shooting man myself, I expect to be put on the best pegs in future by way of a thank-you!”
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