Recent tax appeals commission ruling

The taxpayer in this case had been provided with accommodation as a condition of his employment contract. Given the nature of the employment the taxpayer was required to live nearby the location of his employment.

Benefit-in-kind charge

A charge to tax known as a ‘benefit-in-kind’ arises where an employer provides the following non-cash benefits to its employees:

1. Living or other accommodation,
2. Entertainment,
3. Domestic or other services, or
4. Other benefits or facilities of whatever nature

Given the broad nature of the above categories, the provision of benefits to employees are likely to be caught under a charge to tax unless an exemption to the charge can be availed of.

Circumstances of the case

• The taxpayer was provided with accommodation located a short distance away from his place of work
• The employment contract provided that tax would be deducted in respect of any benefit-in-kind charge arising from the accommodation
• The taxpayer received Revenue correspondence in August 2016 to state that a benefit-in-kind charge was to be applied on the accommodation, on the basis that there was no requirement for the duties being carried out by the taxpayer to live in employer provided accommodation
• Revenue further stated that the ‘better performance test’ was not met as the role held by the taxpayer did not require live in accommodation
• The better performance test as provided in a Revenue Tax and Duty Manual considers the following:
  • Is the employee required to be on call outside normal hours, and
  • Is the employee frequently called out, and
  • Is the accommodation provided so that the employee may have quick access to the place of employment?
• The accommodation being provided to the taxpayer was not located on the business premises but was located on a road in the employers’ vicinity
• It was not possible for the employee to live in the place of employment, which is why he was located in the accommodation as located as close as possible to his place of work.
• The taxpayer noted how his duties had expanded beyond those originally set out in his employment contract, and the employer’s HR contact had backed this claim in correspondence to Revenue made on the taxpayer’s behalf
• In addition, it was noted that the tax arising from the accommodation had been withheld from the taxpayer but had not been paid to Revenue as a result of an ‘administrative oversight’
• The argument was made on the taxpayer’s behalf that the performance of the ‘on call’ duties could not be properly performed from a location other than the provided accommodation, thereby arguing that the accommodation was part of the business premises of the employer

On the basis of the above, the taxpayer believed he met the conditions of the “better performance test” in order to exclude the accommodation from a charge to benefit-in-kind.

Tax appeals commission determination

Revenue submitted that the taxpayer had not met the level of the burden of proof required to demonstrate that living at the accommodation and nowhere else was required in order to properly perform his employment duties.

Revenue further stated that the accommodation was a matter of convenience rather than necessity for employment purposes and was not part of the place of the employer’s business, and therefore, the accommodation could not fall within the business premises definition.

In reaching a determination, the Appeal Commissioner determined that the accommodation was not part of the business premises as no trade was carried out at the accommodation and the taxpayer did not demonstrate the requirement to reside in the provided accommodation, and not elsewhere, to enable him properly to perform his duties.

The TAC found in favour of Revenue, noting that the taxpayer had known the accommodation had been potentially subject to a charge to benefit-in-kind on signing the employment contract in 2014, and that the taxpayer had known the benefit-in-kind charge hadn’t been applied to their employment due to an administrative oversight back in 2014.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client team below:

June 2021