Employers who provide their employees with free or subsidised accommodation need to be aware of the Benefit-in-Kind implications, explains Nikki Johns
If you provide free or subsidised accommodation for your employees, this is classified as a Benefit-in-Kind which means that your employees must pay PAYE, USC, and PRSI on the value of the benefit while you must include the value of the benefit in your payroll submissions to Revenue.
How to calculate Benefit-in-Kind on free or subsidised accommodation
The first step to calculating the Benefit-in-Kind value of the accommodation that you provide for your employees is to assess the annual market value of the rent (ie the rent a landlord would charge an unconnected tenant). You must keep evidence to show that the market value you apply is reasonable (e.g. a statement from an estate agent). The annual market value of the rent must be reviewed annually.
You then add on any related expenses that you are paying for your employees (such as light and heat). If the property is furnished, this must also be included. The value of furniture is calculated as 5% of its value when it was first provided as a benefit to an employee.
Accommodation that is exempt from BIK
Where an employee is required to live in on a business premises, such as care staff in residential homes or onsite caretakers, this accommodation is exempt from BIK.
Due to the Covid-19 pandemic, special rules are in place for situations where accommodation is provided due to health and safety concerns or self-isolation requirements. Information on how to deal with this, along with an overview of other changes relating to Covid-19 is available on the Revenue website.
Keeping up with the rapid pace of change this year has been difficult for many payroll operators. If you need help to understand recent changes, or would like our team to calculate Benefit-in-Kind and/or operate your payroll on your behalf, why not check out our payroll services page or contact our CEO Sarah Daly to find out more about how we can help you.