Are there any tax implications resulting from occupation of a UK property by a shareholder/director in UK?
If the property could be occupied by the shareholder or his family this could lead to additional issues.
The main problem with using a company is that HMRC may seek to assess the occupation of the property as a benefit in kind under the employment income provisions. These provisions apply where “living accommodation is provided for a person…by reason of his employment”. The amount charged is the annual value of the property plus notional rent based on a percentage of the amount by which the cost of the property exceeds £75,000.
There is no doubt that occupation of the UK property would incur a benefit in kind tax charge if the shareholder is a director / employee and is UK resident.
This is because any accommodation provided by the company for a director / employee or his family is treated as provided by reason of the employment. As defined in Section 721(4) and (5) ITEPA 2003, family covers the employee’s:
- children and their spouses
- dependants and guests.
Note that even if the shareholder is not a director or employee HM Revenue and Customs may still assess the occupation of the property as a benefit in kind.
This is because the term ” director” is defined as including any member of the company if the affairs of the company are managed by the members themselves and “any person in accordance with those directions or instructions the directors of the company… are accustomed to act”. These are also known as “Shadow directors” and are deemed to be employees for this benefit in kind charge.
Therefore if a shareholder is UK resident and can be said to manage the affairs of the company or give instructions to directors he is within the benefit in kind charge on occupation by himself or his family.
If the family member occupying the property was themselves a shadow director a potential benefit in kind charge could arise on them directly due to their UK residence.
If the Director / shareholder was non resident then it is less straightforward.