F24
Payment of Housing Allowance
1. The payment of a housing allowance is counted as part of an employee's remuneration for purposes of income tax and National Insurance. In order for the net sum to be appropriate, therefore, the amount paid needs to be grossed up.
Provision of free accommodation
2. Increasingly, parishes prefer to provide employees such as a verger or youth worker with accommodation rather than paying a housing allowance. PCCs need to be aware of the situation concerning such provision in relation to "benefit in kind" taxation.
3. As a general principle, the provision of free accommodation is regarded as a benefit in kind upon which the employee is taxed (an Inland Revenue return by PCCs refers employees to form P11D where appropriate). The legislation allows three main classes of exemption, of which one may be relevant in the case of parish employees. It requires two conditions to be met:
- the provision of the house must be for the better performance of the duties of the office; and
- it must be "customary" for living accommodation to be provided for the type of employment concerned.
4. In the case of a parish youth worker, for example, the first condition would not be met if all the youth activities took place elsewhere in the parish, but might be met if meetings were held at the house and the youth worker was expected to be available to receive calls and visitors. Fulfilment of the second condition would mean comparing the youth worker with parish clergy (who customarily receive provided accommodation) rather than with, say, social workers (who do not).
5. A case for exemption should be made to the local tax office and the outcome is dependent on what view is taken by the officer concerned. A member of staff in the Clergy Payments department of the Church Commissioners has experience of a number of previous cases dealt with by the Commissioners, parishes and other denominations and is willing to discuss
individual cases with parishes, particularly where precedents would be helpful. Contact details can be provided by the staff of the Accounts Department in the Diocesan Office.
6. If a particular case is deemed to constitute a benefit in kind, the tax liability is charged on the annual value of the accommodation (rent obtainable or rent paid by the landlord, if higher). There is an additional liability if the cost of providing accommodation exceeds £75,000. PCCs would need to consider whether to leave the employee to pay the tax, or to pay it on the employee's behalf.
