On 6 April 2021, HMRC withdrew the “representative occupier” exemption for the tax treatment of staff accommodation. Previously this had been relied on by many independent schools.
It is therefore important for independent schools to make sure they have reviewed staff accommodation arrangements and are confident that any staff receiving this benefit fall within the remaining statutory exemptions set out in section 99 of the Income Tax (Earnings and Pension) Act 2003.
There are two main types of exemption which remain available:
- Where it is “necessary for the proper performance of the employee’s duties that the employee should reside in it” (section 99(1)); and
- Where it is “provided for the better performance of the duties of the employment, and the employment is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees” (section 99(2)).
HMRC’s most recent guidance on interpreting these exemptions suggests that caretakers would likely fall within the first exemption whereas the second would likely cover the following boarding school roles:
- headteacher
- other teachers with pastoral or other irregular contractual responsibilities outside normal school hours (for example house masters)
- bursar
- matron, nurse and doctor
(The definition of “boarding school” here includes those schools where only some of the pupils are boarders.)
For those schools which have yet to carry out an audit of staff accommodation arrangements, we would strongly recommend completing this exercise over the summer holidays so that any necessary updates to staff terms and conditions can be made in time for new the academic year starting in September.
