Utilities, council tax and other bills in accommodation

Produced by Tolley

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Utilities, council tax and other bills in accommodation
  • Council tax and utility bills ― exemptions
  • Exemptions applicable to council tax or utility bills
  • Council tax and utility bills ― reporting requirements
  • Employer reimburses employee
  • Employer pays employee’s bill directly
  • Employer has contract with supplier and pays them directly
  • Gas and electricity bills
  • Cap on expenses connected with living accommodation ― application to benefit of gas and electricity where accommodation is exempt
  • Calculation of net earnings
  • More...

Utilities, council tax and other bills in accommodation

The payment of an employee’s council tax or utility or other bills is usually linked to the provision of living accommodation to the employee.

Whether or not the payment of council tax or utility bills is treated as a taxable benefit depends on whether the reason for the provision makes it an exempt benefit under specific legislation.

Payments in respect of gas and electricity made by an employer in relation to employer-provided accommodation are always taxable. However, how and why the benefit is provided to the employee determines both the value of the benefit and reporting requirements.

Council tax and utility bills ― exemptions

Whether or not the payment of council tax or utility bills on behalf of the employee constitutes a taxable benefit depends on why the amounts have been paid.

If the payment of council tax does not fall into one of the exemptions below then the full amount is taxable. The section on ‘reporting requirements’ below sets out how it should be reported and taxed.

Exemptions applicable to council tax or utility bills

They payment of council tax or utility bills (specifically council tax, water charges or sewerage charges) is not taxable if it is provided in connection with living accommodation which is exempt from tax either as job-related accommodation or due to a security threat; this is confirmed by HMRC guidance at EIM11332. Broadly, there are two exemptions:

  1. job-related accommodation ― where either the accommodation is necessary for the proper performance of the duties, or it is both customary to provide the accommodation and it is provided for the better performance of duties

  2. accommodation provided due to a security threat

ITEPA 2003, s 314

The specifics of these exemption exemptions applying to the provision of living accommodation are discussed in the Living accommodatio

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