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I've been offered a flat in London instead of a pay rise. I feel like I'm getting a great deal, but I just want to run this by people in case there's something I'm missing here.

Quick background. I own a home, but am relocating (of my own choosing). Therefore I will still have my main residence as the place I own. The town flat will be considered as mon-fri accommodation.

My thinking is as follows:

For every £1,000 I'm paid (Yes, I'm English) I receive around £700 of it, after tax. Therefore, if the flat was rented through the company, there will be no earnings tax to be paid, right?

What am I missing, can anyone tell me information that I or my boss might not have considered with this deal?

  • Do you pay rent and get reimbursed for it or do you have no involvement in payment whatsoever? – karancan Jun 24 '14 at 22:30
  • The plan is for me to have no involvement. The property will be listed to be used by everyone. However I will be a semi perminant resident.. while my other colleagues will only be there while they have meetings in the capital. – David Sigley Jun 25 '14 at 14:46
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I am not an expert in these matters, but the flat could be considered a benefit in kind. As such, you may be subject to tax on the value of the property. The Citizen's Advice Bureau have a good breakdown on what benefits are tax free here. In particular, check out the section on "Common benefits in kind". It lists what exceptions are made for property. If your company is also helping you to relocate, you can claim up to £8000 in relocation expenses tax free.

I can't really be more comprehensive, but this should be a good starting point.

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It's unlikely to be allowed as a tax-free benefit because it's not necessary for you to live in that flat to perform your duties. There are rules to work out the value of the benefit if your employer owns the property that they provide to you, but if they're renting it then the value is likely to be simply the amount of rent paid. You'd pay income tax on that amount, but not National Insurance, so as a basic rate taxpayer you'd save £9 for every £100 of rent. Your employer would pay National Insurance as if they'd paid the amount to you as salary, so I can't see that they're any better off.

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  • My house is roughly 300 miles from London, therefore if I was to work there Mon-Fri surely it can be argued as necessary? Though reading the literature from the first post, I'm not a shareholder or director of the company.. so it might not matter anyway? – David Sigley Jun 25 '14 at 10:03
  • I suspect that by "necessary", they mean that you could either move to London (and claim relocation expenses), or make your own accommodation arrangements, rather than be supplied with accommodation by your employer. – Steve Melnikoff Jun 25 '14 at 11:29
  • Fair enough. I'll check into it. Thank you for your help! – David Sigley Jun 25 '14 at 14:44
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    They're pretty strict on what counts as necessary, it generally needs to be necessary for you to live in that specific property. It is necessary for a lighthouse keeper to live in the lighthouse, it's only necessary for you to be within commuting distance of London. At least, I suspect that's how HMRC will see it. – stevemegson Jun 26 '14 at 13:43

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