I work for a Ltd company. We've purchased a property adjacent to our head office and are leasing it out to a member of staff who is paying the market rate for property of that size and in that area.
I'm having to work through the ridiculous BIK calculations for accomodation benefits and I've been trying to find a Gross Rating Value for the property. After hours of phone calls I eventually got through to somebody at the water board who confirmed that the only information that they had relating even vaguely to a 'Gross Rating Value', was something just called a 'Rating Value' on their system.
This value was £77. Whilst this number is great for my BIK calculations (as it seems ludicrous to make somebody pay tax on something for which they are already paying a fair market rate), it seems extremely low. Does anybody have any experience with this calculation and is this figure even possibly the correct one!?
I was expecting it to be low relative to most properties, because it's a relatively rural property with no access to public sewers. The property has no water meter and was built well before 1989.
Thank you in advance for your advice.
Kind Regards,
Andy
Replies (16)
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Isn't the "annual value" of
Isn't the "annual value" of living accommodation defined as the rent which might reasonably be expected to be obtained on letting the property?
As the employee is paying the market rent there is no basic charge - although there would be an additional charge if the property cost more than £75K.
Accommodation
This is a two part calculation:
1. Standard value plus
2. Additional charge (for properties over £75K)
In your case the standard value is the greater of £77 or what ever it costs your company to provide the accommodation.
The additional charge is
((Property purchase price + improvements - £75K) x official rate) - rent paid by your employee.
£77 does sound a bit low, but
£77 does sound a bit low, but not massively. I had heard that there was a "rule of thumb" of £100 per bedroom. However, unless it is a veritable mansion, the difference will be largely academic in terms of tax.
Do not forget that if the property was originally purchased for more than £75,000 and was first made available to the employee concerned more than 6 years after that initial purchase you use the market value when first made available to the employee, in place of cost, in the second part of the calculation.
Rateable value
Is the one quoted on your water bill. £77 is probably correct.
The cost of providing the accommodation can also include things like mortgage interest.
- not just rents or leasing payments paid by the employer
http://www.hmrc.gov.uk/manuals/eimanual/EIM11429.htm
GRV
on old properties, provided there hasn't been a general revaluation in the area was originally available from water board and council because rates and water rates were both based on it. It is usually very low. The change to Council Tax meant that they didn't need to keep the records anymore
Benefit?
Having worked out the benefit as outlined above, the last step is to deduct the rent paid by the employee. If this is at market rates, the benefit probably disappears.
I'm a bit rusty on the rules but I think is should be
Standard value (assuming 50% occupation)
Higher of £77 x 0.5 or cost to employer 0.5 x £35,000 = £17,500
- Is the interest figure correct £35K on a £150K mortgage seems high)
Less rent from employee (£3,000?)
Standard value £14,500
Additional charge (assuming 50% occupation)
Property value £150,000 x 0.5 less £75K = £Nil
Go and see an accountant. Because you are getting the most appalling advice here.
The cost of providing the living accommodation does not include mortgage interest. It comprises the cost of originally acquiring the property, plus the cost of improvements. It actually says so in the link that has been provided purporting to support the assertion that mortgage interest should be included.
Provided the refurbishment costs do not exceed £14,938 then there is no benefit. I can see nothing in the legislation to provide for apportionment of the benefit other than between employees.
Fair enough - as I pointed out I am a bit rusty in this area
Portia, I'm happy to stand corrected but is not the basis of any benfit basically the cost to the provider in providing said benefit?
Hence why rail emplyees etc get to travel free; perhaps I misunderstood but I assumed direct finance costs were part of the cost to the employer!
My reading of the legislation is that a benefit only arises on the accommodation provided to the employee. In this case that is only half the property. The legislation allows for a 'just and reasonable' split.