Accomodation provided for club stewards
With the majority of clubs facing a difficult financial situation we are frequently asked whether it is a good idea to charge the steward rent for the occupation of the steward’s house or flat. Our advice to all clubs is that the charging to rent to the steward should be avoided as it not only creates a tenancy situation but a tax liability for both the club and the steward.
When dealing with employees who benefit from free accommodation, it is important that any form of tenancy is avoided, consequently no money should either be received or deducted by the club from such employees that could be viewed as being rent. The club must, ensure that all employees who benefit from living accommodation do so as ‘service occupiers’. An employee, who occupies the club’s property for the better performance of his or her duties, is contractually required to do so and pays no rent, is a service occupier and has no security of tenure. Such occupation ceases on termination of employment even if the termination is subsequently deemed to be unfair.
The steward tax position is that any rent will be paid from his post tax income. For example, taking into account income tax of 20% and employee’s national insurance of 11% the steward would have to earn a gross salary of £6,957 to pay an annual rent of £4,800 or £400 per month.
Once the club receives the rental income for the steward’s accommodation it will be treated as non mutual income and taxed at 21% resulting in a corporation tax liability for the club of £1,008. In addition employer national insurance currently at 12.8% will be payable on the stewards gross salary resulting in a further charge of £890.
Adding together the corporation tax, income tax and employee and employer national insurance contributions the total tax liability is £4,055, whereas no liability to tax existed when the accommodation is provided rent free. The provision of rent free accommodation required for the ‘better performance of the employee’s duties’ is one of the few and most valuable tax free benefits that remain. If saving are being sort, for the majority of clubs the most tax efficient method is a reduction in the steward’s gross wage or a salary sacrifice.
The only exception to the above is in respect of charges to the steward for gas, electricity and other services paid for and provided by the club, the risk of tenancy will not apply to monies which are either deducted or charged in respect of the provision of these services. Clubs and stewards have been shocked to discover that the supply of free heating and lighting is regarded by the HMRC as a taxable benefit. The correct position is that the club should charge the Steward a ‘contribution towards accommodation expenses’ or include in its annual return to HMRC a declaration that it supplies free heat, light and other services to the steward.