Category: Finance & Accounting

Is the summer party tax-free?

A statutory exemption exists, which allows employers to meet the cost of certain social events for staff without triggering a liability to tax or NICs, providing certain conditions are met.

The legislation refers to ‘an annual party or similar annual function’. Although HMRC do not seem to interpret this to mean that the same event must be held every year, it may be prudent to check the issue in advance where a one-off event is planned.

Conditions

A staff event will qualify as a tax-free benefit if the following conditions are satisfied:

  • the total cost must not exceed £150 per head, per year
  • the event must be primarily for entertaining staff
  • the event must be open to employees generally, or to those at a particular location, if the employer has numerous branches or departments

The ‘cost per head’ of an event is the total cost (including VAT) of providing:

  1. the event, and
  2. any transport or accommodation incidentally provided for persons attending it (whether or not they are the employer’s employees), divided by the number of those persons.

Provided the £150 limit is not exceeded, any number of parties or events may be held during the tax year, for example, there could be three parties held at various times, each costing £50 per head.

The £150 is a limit, not an allowance – if the limit is exceeded by just £1, the whole amount must be reported to HMRC.

If there are two parties, for example, where the combined cost of each exceeds £150, the £150 limit is offset against the most expensive one, leaving the other one as a fully taxable benefit.

Example

ABC Ltd pays for an annual Christmas party costing £150 per head and a summer barbecue costing £75 per head. The Christmas party would be covered by the exemption, but employees would be taxed on summer barbecue costs, as a benefit-in-kind.

Tax treatment for employers

The cost of staff events is tax deductible for the business. The legislation provides a let-out clause, which means that entertaining staff is not treated for tax in the same way as customer entertaining. The expenses will be shown separately in the business accounts – usually as ‘staff welfare’ costs or similar.

There is no monetary limit on the amount that an employer can spend on an annual function. If a staff party costs more than £150 per head, the cost will still be an allowable deduction, but the employees will have a liability to pay tax and National Insurance Contributions (NICs) arising on the benefit-in-kind.

The employer may agree to settle any tax charge arising on behalf of the employees. This may be done using a HMRC PAYE Settlement Agreement (PSA), which means that the benefits do not need to be taxed under PAYE, or included on the employees’ forms P11D. The employer’s tax liability under the PSA must be paid to HMRC by 19 October following the end of the tax year to which the payment relates.

It should also be noted that whilst the £150 exemption is mirrored for Class 1 NIC purposes, (so that if the limit is not exceeded, no liability arises for the employees), Class 1B NICs at the current rate of 13.8%, will be payable by the employer on benefits-in-kind which are subject to a PSA.

The full cost of staff parties and/or events will be disallowed for tax if it is found that the entertainment of staff is in fact incidental to that of entertaining customers.

VAT-registered businesses can claim back input VAT on the costs, but this may be restricted where this includes entertaining customers.

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PAYE settlement agreements

A PAYE Settlement Agreement (PSA) enables the employer to pay the tax and National Insurance instead of the employee on those benefits and expenses included within the PSA. This can be useful to preserve the beneficial nature of the benefit, for example in respect of a Christmas or other function falling outside the associated exemption, or where the effort involved in reporting the benefit on individual employees’ P11Ds is disproportionate to the amount involved.

What can a PSA be used for?

A PSA cannot be used for all benefits – only for those which fall into one of the following three categories:

  • minor benefits and expenses – such as telephone bills, incentive awards outside the scope of the exemption and similar
  • irregular items – such a relocation expenses or the occasional use of a company flat
  • impracticable expenses and benefits in respect of which it is difficult to place a value on or to divide up between individual employees – such as staff entertainment or shared cars

A PSA cannot be used for cash payments or for high-value items such as company cars.

Items falling within the scope of the trivial benefits exemption can simply be ignored for tax and National Insurance purposes – they should not need to be included in a PSA.

Setting up and checking a PSA

To set up a new PSA, the employer should write to HMRC setting out the benefits and expenses to be included within the PSA. Once HMRC have agreed the PSA, they will send two draft copies of form P626. Both copies should be signed and returned to HMRC. HMRC will authorise the PSA and send a form back – this will form the PSA.

A new PSA must be agreed by 6 July following the end of the tax year for which it is to have effect.

A PSA is an enduring agreement. Once it has been set up it remains in place until revoked by either the employer or HMRC. Employers should check that an existing PSAs remain valid.

Impact of a PSA

Where a PSA is in place, the employee does not pay tax on any benefits included within the PSA – instead the employer meets the liability on the employee’s behalf. Also, there is no need to report benefits included in the PSA on the employee’s P11D, or to payroll them.

Instead the employer pays tax on the items included within the PSA grossed up at the employees’ marginal rates of tax. For Scottish taxpayers, the relevant Scottish rate of income tax should be used in the calculation.

As far as National Insurance is concerned, Class 1B contributions, which are employer-only contributions are payable at a rate of 13.8% in place of the Class 1 or Class 1A liability that would otherwise arise. Class 1B contributions are also due on the tax paid under the PSA (as the tax paid on behalf of employees is also a taxable benefit).

Settling the PSA

Form PSA1 should be used to calculate the amount of tax and Class 1B National Insurance due under the PSA. This should be sent to HMRC after the end of the tax year. The tax and Class 1B National Insurance must be paid by 22 October after the end of the tax year where payment is made electronically or by the earlier date of 19 October where payment is made by cheque.

Partner note: ITEPA 2003, s. 703 — 707;Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), regs. 105 – 117; Statement of Practice SP5/96.

Voluntary National Insurance contributions – should you pay?

The payment of National Insurance contributions provides the mechanism by which an individual builds up their entitlement to the state pension and certain contributory benefits. Different classes of contribution provide different benefit entitlements.

Employed earners pay Class 1 contributions where their earnings exceed the lower earnings limit – set at £118 per week (£512 per month, £6,136 per year) for 2019/20. Self-employed earners pay Class 2 and Class 4 contributions, but it is the payment of Class 2 contributions only which provide pension and benefit entitlement. A self-employed earner is liable to pay Class 2 contributions where their earnings from self-employment exceed the small profits threshold, set at £6,365 for 2019/20. Where profits from self-employment are below the small profits threshold, the self-employed earner is not liable to pay Class 2 contributions but is entitled to do so voluntarily. For 2019/20, Class 2 contributions are payable at the rate of £3 per week.

Qualifying year

A year is a qualifying year is contributions have been paid for all 52 weeks of that year. If there are some weeks for which contributions have not been paid, the year is not a qualifying year. However, contributions can be paid voluntarily to make up the shortfall and turn a non-qualifying year into a qualifying year.

How many qualifying years are needed?

An individual needs 35 qualifying years to receive the full single-tier state pension payable to those reaching state pension age on or after 6 April 2016. To receive a reduced single tier state pension, at least 10 qualifying years are needed.

Should voluntary contributions be paid?

Voluntary contributions may be paid to make up the shortfall for a year where Class 1 or Class 2 contributions were not paid for the full 52 weeks or for a year for which there was no liability to either Class 1 or Class 2.

Before paying voluntary contributions, it is necessary to ascertain whether the payment of such contributions would be worthwhile. The starting point is to check your state pension. This can be done online at www.gov.uk/check-state-pension.

If you already have 35 qualifying years (or will do by the time state pension age is reached), there is no benefit in paying voluntary contributions. However, if you have less than 35 years, it may be worthwhile to increase your state pension. Likewise, if by state pension age you will have some qualifying years but less than 10, it may be worthwhile paying sufficient voluntary contributions to secure a minimum pension.

Class 3 contributions

Class 3 contributions are voluntary contributions and can be paid to boost the state pension.

For 2019/20, Class 3 contributions cost £15 per week. Thus, at these rates, to increase the state pension by 1/35th by paying voluntary Class 3 contributions for a year will cost £780. For 2019/20, the single-tier state pension is £168.60 per week, so at 2019/20 rates, each extra qualifying year (up to 35) is worth £4.82 per week.

Class 3 contributions must normally be paid within six years from the end of the tax year to which they relate – although extended time limits in certain cases.

Voluntary Class 2

Where a person is entitled but not liable to pay Class 2 contributions, paying Class 2 contributions voluntary is a cheaper option, at £3 per week for 2019/20 rather than £15 per week.

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Reporting expenses and benefits for 2018/19

Where employees were provided with taxable benefits and expenses in 2018/19, these must be notified to HMRC.

The reporting requirements depend on whether the benefits were payrolled or not.

Benefits not payrolled

Taxable benefits that were not payrolled in 2018/19 must be reported to HMRC on form P11D. There is no need to include benefits covered by an exemption (although take care where provision is made via an optional remuneration arrangement (OpRA)) or those included within a PAYE Settlement Agreement. Paid and reimbursed expenses can be ignored to the extent that they would be deductible if the employee met cost, as these fall within the statutory exemption for paid and reimbursed expenses.

The value that must be reported on the P11D depends on whether the benefit is provided via an OpRA, such as a salary sacrifice scheme. Where the benefit is provided other than via an OpRA, the taxable amount is the cash equivalent value. Where specific rules apply to determine the cash equivalent value for a particular benefit, such as those applying to company cars, employment-related loans, living accommodation, etc., those rules should be used. Where there is no specific rule, the general rule – cost to the employer less any amount made good by the employee – applies.

Where provision is made via an OpRA, and the benefit is not one to which the alternative valuation rules do not apply, namely:

  • payments into pension schemes
  • employer provided pension advice
  • childcare vouchers, workplace nurseries and directly contracted employer-provided childcare
  • bicycles and cycling safety equipment, including cycle to work schemes
  • low emission cars (Co2 emissions 75g/km or less)

the taxable amount is the relevant amount. This is the higher of the cash equivalent under the usual rules and the salary foregone or cash alternative offered. The taxable amount is the cash equivalent value where the benefit falls outside the alternative valuation rules.

Payrolled benefits

Payrolled benefits should not be included on the P11D but must be taken into account in calculating the Class 1A National Insurance liability on form P11D(b).

P11D(b)

Form P11D(b) must be filed regardless of whether benefits are payrolled or notified to HMRC on form P11D. The P11D(b) is the Class 1A return, as well as the employer’s declaration that all required P11Ds have been submitted.

Paper or online

There are various ways in which forms P11D and P11D(b) can be filed. The simplest is to use HMRC’s online end of year expenses and benefits service or HMRC’s PAYE Online for employers service. Forms can also be filed using commercial software packages.

There is no requirement to file P11Ds and P11D(b)s online – paper forms can be filed if preferred.

Deadline

Regardless of the submission methods, forms P11D and P11D(b) for 2018/19 must reach HMRC by 6 July 2019. Employees must be given a copy of their P11D (or details of the information contained therein) by the same date. Details of payrolled benefits must be notified to employees by the earlier date of 31 May 2019.

Class 1A National Insurance must be paid by 22 July where paid electronically, or by 19 July where payment is made by cheque.

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Family companies – optimal salary for 2019/20

For personal and family companies it can be beneficial to extract some profits in the form of a salary. Where the individual does not have the 35 qualifying years necessary to qualify for the full single-tier state pension, paying a salary which is equal to or above the lower earnings limit for National Insurance purposes will ensure that the year is a qualifying year.

New tax rates and allowances came into effect from 6 April 2019, applying for the 2019/20 tax year. These have an impact on the optimal salary calculation for family and personal companies. As in previous years, the optimal salary level will depend on whether or not the National Insurance employment allowance is available.

It should be remembered that directors have an annual earnings period for National Insurance purposes.

Employment allowance unavailable

Companies in which the sole employee is also a director are not able to benefit from the employment allowance. This means that most personal companies are not eligible for the allowance. Where the allowance is not available or has been utilised elsewhere, the optimal salary for 2019/20 is equal to the primary and secondary threshold set at £8,632 (equivalent to £719 per month and £166 per week).

At this level, assuming that the director’s personal allowance (set at £12,500) is available, there is no tax or employer’s or employee’s National Insurance to pay. However, as the salary is above the lower earnings limit of £6,136 (£512 per month, £118 per week), it will provide a qualifying year for state pension and contributory benefit purposes.

The salary is deductible in computing the company’s taxable profits for corporation tax purposes, saving corporation tax of 19%.

Employment allowance is available

It is beneficial to pay a salary equal to the personal allowance (assuming that this is not used elsewhere) where the employment allowance (set at £3,000 for 2019/20) is available to shelter the employer’s National Insurance that would otherwise arise to the extent that the salary exceeds £8,632.

Although employee’s National Insurance is payable to the extent that the salary exceeds the primary threshold of £8,632, this is more than offset by the corporation tax deduction on the higher salary.

For 2019/20, a salary equal to the personal allowance of £12,500 exceeds the primary threshold by £3,868. Therefore, employee’s National Insurance of £464.16 (£3,868 @ 12%) is payable on a salary of £12,500. However, as salary payments are deductible for corporation tax purposes, the additional salary of £3,868 saves corporation tax of £734.92 (£3,868 @ 19%). This exceeds the employee’s National Insurance payable by £270.46.

So, if the employment allowance is available, paying a salary equal to the personal allowance of £12,500 allows more profits to be retained (to the tune of £270.46) than paying a salary equal to the primary threshold of £8,632.

If the director has a higher personal allowance, for example, where he or she receives the marriage allowance, the optimal salary is one equal to that higher personal allowance.

Director is under 21

Where the director is under the age of 21, the optimal salary is one equal to the personal allowance of £12,500 (assuming that this is not used elsewhere) regardless of whether the employment allowance is available. No employer National Insurance is payable on the earnings of employees or directors under the age of 21 until their earnings exceeds the upper secondary threshold for under 21’s set at £50,000 for 2019/20. Employee contributions are, however, payable as normal

Any benefit in paying a salary above the personal allowance?

Once the personal allowance is reached it is not worthwhile paying a higher salary as further salary payments will be taxed and the combined tax and National Insurance hit will outweigh the corporation tax savings.

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Are you paying the minimum wage?

The National Living Wage (NLW) and National Minimum Wage (NMW) increased from 1 April 2019. From that date, the NLW, payable to workers aged 25 and over, is set at £8.21 per hour. Workers under the age of 25 and over school leaving age must be paid the NMW appropriate for their age. From 1 April 2019, this is £7.70 per hour for workers aged 21 to 24, £6.15 per hour for workers aged 18 to 20 and £4.35 for workers above school leaving age and under 18. A separate rate of £3.90 per hour applies to apprentices under 19 and to apprentices over 19 and in the first year of their apprenticeship.

Who is entitled to the minimum wage?

Workers over the school leaving age are entitled to the minimum wage. This is the last Friday in June of the school year in which they turn 16. Once a worker reaches the age of 25, they are entitled to the NLW.

Payment of the minimum wage is not limited to full-time employees. Workers for NLW and NMW purposes also include:

  • part-time workers
  • casual labourers
  • agency workers
  • workers and homeworkers paid by the number of items that they make
  • apprentices
  • trainees
  • workers on probation
  • disabled workers
  • agricultural workers
  • foreign workers
  • seafarers
  • offshore workers

However, company directors without a contract of service fall outside the minimum wage legislation, as do the self-employed, volunteers and voluntary workers, workers on a government employment programme or pre-apprenticeship scheme or certain EU programmes, members of the armed services, family members living in the employer’s home, non-family members living in the employer’s home who are not charged for meals or accommodation and treated as a family member (for example, an au pair), higher and further education students on placements of up to one year, people on a Jobcentre Plus Work trial for six weeks, share fishermen and those working and living in a religious community.

It is important to identify which workers fall within the scope of the minimum wage legislation and pay them accordingly.

What is included in the minimum wage?

Certain items are not taken into account in determining whether a worker has been paid at or above the relevant minimum wage for his or her age. These include payments for the employer’s own use or benefit, items that the worker has bought for the job and which have not been reimbursed, such as tools, a uniform and suchlike, tips and service charges and any extra pay for working unsocial hours on a shift.

However, income tax and National Insurance are taken into account in the minimum wage calculation as are advances of wages or loans, repayment of overpaid wages, items provided for the employee which are not needed for the job, such as meal and penalty charges for a worker’s misconduct.

Accommodation

Accommodation provided by the employer is taken into account when calculating the minimum wage. The legislation provides for an accommodation offset, set at £52.85 per week/£7.55 per day from 1 April 2019.

If the employer charges more than this for accommodation, the excess is taken off the worker’s pay which counts for minimum wage purposes. Where there is no charge for the accommodation, the offset rate is added to the worker’s pay.

Failure to pay minimum wage

It is a criminal offence not to pay the National Minimum Wage or National Living Wage to which a worker is entitled. Employers who pay below the minimum wage should pay arrears immediately. Penalties may also be charged.

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SDLT and first-time buyers

Stamp duty land tax (SDLT) is payable where you buy a property in England or Northern Ireland and the amount paid is more than a certain amount. SDLT does not apply in Scotland, where Land and Buildings Transaction Tax (LBTT) applies instead, nor in Wales, where Land Transaction Tax (LTT) is payable.

As far as residential property is concerned, the rates depend on whether a person is a first-time buyer or not and whether the property is a second or subsequent property. The current residential threshold is £125,000. However, a 3% supplement applies to second and subsequent homes where the purchase price is more than £40,000. Relief is available for first time buyers.

First time buyer rates

Since 22 November 2017, first time buyers buying a residential property do not pay any SDLT if the purchase price is less than £300,000. Where the purchase price is between £300,000 and £500,000, first-time buyers pays SDLT at the rate of 5% on the excess over £300,000. First-time buyers buying a property for more than £500,000 do not get any relief – instead they pay the normal residential rates.

Case study 1

Kieran buys his first flat for £200,000. As the consideration is less than £300,000 and he is a first-time buyer, no SDLT is payable.

Without the relief he would have paid SDLT of £1,500.

Case study 2

Orla is a first-time buyer. She buys a two-bedroom cottage costing £420,000. She benefits from first-time buyer relief, paying SDLT at 5% on the excess over £300,000. She must therefore pay SDLT of £6,000 (5% (£420,000 – £300,000)).

Without the relief, she would pay SDLT of £11,000. She saves £5,000 as a result of the relief for first-time buyers.

Case study 3

Connor and Daniel are first time buyers. They buy a flat in London for £700,000.

As the purchase price is more than £500,000, they do not benefit from first-time buyer relief. Consequently, SDLT is calculated at the normal residential rates as follows:

On first £125,000 @ 0% £0
On next £125,000 @ 2% £2,500
On next £450,000 @ 5% £22,500
SDLT payable £25,000

Shared ownership schemes

Changes announced in the 2018 Budget with retrospective effect extended the availability of first-time buyer relief to first-time buyers buying a property through a qualifying shared ownership scheme. Relief is available to the first share purchased as long as the market value of the shared ownership property is less than £500,000. No SDLT is payable where the first-time buyer pays less than £300,000 for their share, with SDLT being payable at the rate of 5% on the excess over £300,000 where their share costs between £300,000 and £500,000.

First-time buyers who purchased a property through a shared ownership scheme between 22 November 2017 and 29 October 2018 who did not benefit from the relief can claim a refund. Where the transaction was completed before 29 October 2018, those affected have until 28 October 2019 to file an amended SDLT return.

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Putting property in joint name – beware a potential SDLT charge

There are a number of scenarios in which a couple may decide to put a property which was previously in sole name into joint names. This may happen when the couple start to live together, get married or enter a civil partnership. Alternatively, it may occur if the couple take advantage of the capital gains tax no gain/no loss rule for spouses and civil partners to transfer ownership of an investment property into joint name prior to sale to reduce the capital gains tax bill.

While most people are aware that stamp duty land tax is payable when they purchase a property, they may be unaware of the potential charge that may arise if they put a property in joint names – it all depends on the value of the consideration, if any.

It should be noted that Land and Buildings Transaction Tax (LBTT) applies to properties in Scotland Land Transaction Tax to properties in Wales.

What counts as consideration?

The problem is that the definition of ‘consideration’ extends to more than just money – it also includes taking over a debt, the release of a debt and the provision of goods, works and services. So, while there may be no transfer of money when a couple put a property in joint names, if they also put the mortgage in joint names, depending on the amount of the mortgage taken on, they may trigger an SDLT charge.

Case study 1

Following their marriage, Lily moves into Karl’s house. They decide to put the property in joint names as well as the mortgage of £200,000. There is no transfer of money, but Lily assumes responsibility for half the mortgage. Lily is a first-time buyer having previously rented.

The valuable consideration is the share of the mortgage taken on by Lily, i.e. £100,000. As this is less than the first-time buyer threshold of £300,000, there is no SDLT to pay.

Case study 2

Anna has several investment properties in her sole name. She is planning on selling a property and expects to realise a chargeable gain of £30,000. As her wife Petra has not used her annual exempt amount, she transfers 50% of the property into Petra’s name to make use of this. There is a £50,000 mortgage on the property, which remains in Anna’s sole name.

There is no valuable consideration and no SDLT to pay.

Case study 3

Following their marriage, Helen moves into her new husband Michael’s home. The property is worth £700,000 and has a mortgage of £400,000. Helen gives Michael £100,000 from the sale of her previous home, which he uses to reduce the mortgage. They then transfer the remaining mortgage of £300,000 into joint name,

Helen had assumed that there would be no SDLT to pay as the £100,000 she had given Michael is less than the SDLT threshold of £125,000. However, the consideration also includes the share of the mortgage taken on of £150,000, so the total consideration is £250,000. As a result, SDLT of £2,500 (on the slice from £125,000 to £250,000 at 2%) is payable.

The whole picture

It is important to look at the whole picture when putting property in joint names – sharing the mortgage may trigger an unexpected SDLT bill.

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Simplified deductions where your business is based at home

Many small businesses are run from home. Where a business is run from home, household costs will be incurred which are attributable to the business. These may include additional costs of gas and electricity to provide heat and light to the home office or workshop and to power the computer or equipment, the costs of additional cleaning, and suchlike.

Expenses which are wholly and exclusively incurred for the purposes of the business can be deducted in working out the profits of the business. This will inevitably involve a certain amount of record keeping in order to identify what those expenses are. As far as household bills are concerned, it is permissible to deduct a proportion of the total household expenses in computing the business profits, with the apportionment being made on a ‘just and reasonable’ basis.

Claim simplified expenses instead

Businesses can save themselves the hassle of working out the proportion of household costs that relate to the business by instead using HMRC’s simplified expenses to claim a deduction for the costs of working from home. The deduction is a set amount per month, depending on the number of hours worked at home on the business each month. The hours include not only hours worked by the proprietor, but also hours worked in the home by any staff.

The monthly deduction is shown in the table below.

Hours of business use per month Monthly flat rate deduction
25 to 50 £10
51 to 100 £18
101 or more £26

The simplified expenses do not cover telephone and internet costs, in respect of which a separate deduction can be claimed.

Example

Luke is self-employed as a graphic designer. He runs his business from his house.

He normally works at home for 120 hours a month, except in August when he works 20 hours and December when he works 60 hours. He is able to claim a deduction for the year of £288 (being 10 months @ £26, one month @ £10 and one month @ £18).

Actual or simplified?

While claiming a deduction based on simplified expenses is a lot less hassle, it may not necessarily give the greatest deduction. Where the trader thinks the time spent working out a deduction based on actual costs is worthwhile, only they can decide.

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What makes a property a residence?

Capital gains tax private residence relief is available where a property is occupied as the taxpayer’s only or main residence. The question of what constitutes ‘occupation as a residence’ was considered recently by the Tribunal, with perhaps surprising results.

Quality not quantity

There is no minimum period of residence that is needed for private residence relief to be in point; rather it is necessary to look at the quality of the occupation. The term ‘residence’ is not defined in the legislation is relation to private residence relief, and thus takes its ordinary everyday meaning, i.e. the place where a person lives – their home.

Need to cook, eat, sleep and do laundry

In Hezi Yechiel TC06829 the Tribunal considered whether the taxpayer occupied the property in question as his main home. He had purchased it 2007 intending to make it a home for himself and his then fiancée. The property required a significant amount of work and planning permission was sought to extend the property. The taxpayer got married in 2008, but the couple separated in early 2011 having never lived in the property. Mr Yechiel moved into the property in April 2011. It was advertised for rent or sale in October 2011 and sold in August 2012. Mr Yechiel moved in with his parents, who lived 15 minutes away, in December 2011.

A builder who had been engaged by Mr Yechiel to work on the property had ‘kitted up’ a bedroom and kitchen. Mr Yechiel slept in the property every night from April 2011 to July 2011 and was present at the property every morning during that period. He brought a bed and a side table for the property. While he used the kitchen for basics, he did not cook there – he mainly ate at his parents, having a takeaway if he ate at the property. His mother did his laundry.

While the Tribunal accepted that Mr Yechiel occupied the property, they found that his occupation lacked the sufficient quality to constitute residence – it did not have the necessary degree of permanence. Mr Yechiels intentions were of importance, and he had no clear plan – he moved into the property as he needed somewhere to live, with the intention of living there for a period of time.

The Tribunal considered not only his intention, but also what he did and did not do in the property. He slept there, but spent a considerable part of the day at his parents’ home. He did not cook at the property and his laundry was done by his mother.

The Tribunal considered ‘that to have a quality of residence, the occupation of the house should constitute not only sleeping, but also periods of ‘’living’’, being cooking, eating a meal sitting down, and generally spending some periods of leisure there’. They found that Mr Yechiel’s occupation lacked sufficient quality to be considered a period of residence, and as such he was not entitled to private residence relief and lettings relief.

The moral of the story

Merely sleeping at a property is not enough to qualify it as a ‘residence’ – you must also do your laundry and cook there to satisfy the Tribunal.