Accommodation provided to an employee will be treated as a taxable benefit in kind unless it qualifies for one of the exemptions from this charge, and these exemptions include:

• Section 99(1) ITEPA 2003 – ‘it is necessary for the proper performance of the employee's duties that the employee should reside in it.’
• Section 99(2) ITEPA 2003 – 
  ‘(a)     it is provided for the better performance of the duties of the employment, and
  (b)     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.’
• Employees who qualify as Representative Occupiers who are in qualifying posts which existed before 6 April 1977 and which qualify under an Extra Statutory Concession which is due to be withdrawn from April 2021.

HMRC employment manuals give further guidance. EIM11341 explains that ‘The following types of employee may be accepted as being within the exemption’ of Section 99(1): 

• 'Agricultural workers who live on farms or agricultural estates. We accept that all of this type of employee qualify for exemption, although some will qualify under Section 99(2) ITEPA 2003 or as former representative occupier posts rather than under Section 99(1).’

However, you should also be aware that EIM11342 continues to include a further potential limitation to the availability of this relief: 

The test is only satisfied where the employee can demonstrate that occupation of the particular property (as opposed to any other property) is essential to the proper performance of the duties of the employment.

Note the 2 potential restrictions highlighted in these sections:

• Who live on farms or agricultural estates and 
• The particular property

Many employees live very close to the farm where they work but they may live in a hamlet or village adjacent to a farm rather than ‘on the farm’ itself.  

If taxpayers move an employee from one house to another (with no change in responsibilities or duties), they do restrict the availability of this relief because the employee is no longer occupying ‘the particular property’ even though there have been good commercial reasons for doing this e.g. a more suitable house becomes available.

EIM 11342 continues to explain why HMRC considers that this additional restriction applies:

Support for this view can be derived from Langley and Others v Appleby (53TC1), in which Fox J said at page 21 “if it is asserted that it is essential for the servant to occupy the house in order to perform his duties, it seems to me that the servant must establish affirmatively that for the performance of his duties he must live in that house and no other.” The words “that house and no other” emphasise the strict nature of the test.

An employee may claim that it is necessary to occupy a particular residence because the employer requires the employee to live there. This is not enough to satisfy the test. It must be shown that the duties of the employment require occupation of the residence. An argument that the employee cannot afford to live elsewhere is not sufficient, see Vertigan v Brady (60TC624).

The withdrawal of the concession for representative occupiers from April 2021 may mean employers and HMRC are considering the reliefs available to farm and estate workers again in more detail. Every farm business and every situation is different and needs to be considered on its own merits and HMRC manuals are guidance and not law, but they are the guidance that HMRC follow and it is well worth bearing this in mind when advising clients and reviewing the housing arrangements they have with staff.