A representative occupier is defined as an employee:

• Who resides in a house provided rent free by the employer
• Who, as a term of the contract of employment, is required to reside in that particular house and is not allowed to reside anywhere else
• Whose occupation of the house is for the purpose of the employer, the nature of the employment being such that the employee is reasonably required to reside in it for the better and more effectual performance of the duties

The representative occupier ESC is a longstanding practice with roots in pre-1977 legislation. It should not be confused with the statutory exemption that most employers in the agricultural sector rely on, namely where living accommodation provided for an employee is not taxable if it is ‘necessary for the proper performance of the duties’, or is ‘for the better performance of the duties’ and is ‘customary’ in that type of employment.

HMRC acknowledge that agricultural workers who live on farms or estates will usually qualify for the statutory exemption, however, with the withdrawal of the ESC, employers (and employees) will have to ensure that they meet the statutory tests mentioned above for the type of employment, rather than relying on the ESC, and the job role having historically required occupation of the house for the ‘better and more effectual performance’. The distinction between the two is not obvious, and for front line agricultural workers may not necessarily be an issue, but could nevertheless in some cases be important.

What should employers do?

It’s a good opportunity to review contracts of employment and roles currently performed by employees who currently reside in employer provided accommodation, to ensure that the terms of the statutory exemption are met, and if unsure, to seek guidance from your professional advisers.

Bruce Masson - Larking Gowen

The views expressed are the author’s and not ICAEW’s.