Susan Ball

Written by: Susan Ball

Susan Ball

Partner

Works of art – don’t monkey around when it comes to employer perks

Research revealed recently that councils throughout the UK are hoarding nearly £1.9bn of artworks, around 70 per cent of which are hidden from public view. Councils are not the only organisations with costly art work so what do you do if you can’t publicly put them on display?

Care is needed if you are placing it in accommodation provided to employees although it may be tempting to do so for insurance purposes. Government data indicates that approximately 220,000 employees reside in employer-provided accommodation. This encompasses everyone, from those in the service industry to those in the banking and finance sector, professional sportspeople and publicans. So what should you do if that involves a Monet, a Damien Hirst or Banksy on the wall? 

Employer-provided living accommodation is a benefit in kind and is liable to tax and employer Class 1A National Insurance contributions. A benefit in kind can arise both in respect of the living accommodation itself and the associated benefits (such as utilities, furniture, assets and other services met by the employer). The current rules setting out how and when employer provided accommodation should be taxed have been in place for a long time, and some parts are over 40 years old. The government issued a call for evidence which closed in 2016 since then we have heard very little other than some HMRC activity in education and the rules have remained the same. 

Sometimes, and normally in exceptional circumstances, no benefit in kind arises including (but not limited to) occasions where occupation of the property is necessary for the proper performance of the employee’s duties of employment, or where it is customary for employees to be provided with living accommodation for the better performance of their duties, or where occupation is attributable to the employee’s attendance at a temporary workplace. 

Where a benefit in kind does arise, the employee will normally pay tax on the benefit at their marginal tax rate, and the employer will pay Class 1A employer National Insurance Contributions (NIC). 

However, where assets such as furniture or a painting is hanging on the wall for the use of a director or employee the taxable benefit should be calculated based on 20 per cent of the market value at the time it was first used as a benefit. If this involves expensive art work or antiques provided in job-related living accommodation the chargeable benefit may be added to other associated costs and capped at 10 per cent limit of the employee’s net emoluments which is good news if you have a Banksy on the wall!  Let’s not forget that earlier this year Banksy’s work of art depicting British Members of Parliament as chimpanzees sold for £9.88m - the highest price a Banksy painting has ever sold for.

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