A Chinese restaurant which provided a residential property for use as accommodation for employees as part of their contracts of employment has persuaded the First-tier Tribunal that the house was a business asset for the purposes of ‘taper relief’ for Capital Gains Tax (CGT).

Although taper relief has now been abolished, the concept of a business asset is important for claiming reliefs against CGT and Inheritance Tax, and for deductions from profits assessable to Income Tax and Corporation Tax.

It remains to be seen whether this decision will be used to justify tax deductions against other capital taxes.

It is of course important to document an employee’s right to use accommodation correctly, especially if an employee is required to live in the accommodation in order to better perform the duties of his job.

If an employee does not need to live in to better perform his job duties but is provided accommodation for his convenience, the employer should still put a written tenancy agreement in place.

A good written tenancy agreement for staff ensures that both parties know what is expected of them, and that the employee knows exactly what his rights are when it comes to the accommodation.

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