Obtaining and keeping good staff within the equine sector is always a challenge. The provision of suitable accommodation plays a vital role in attracting and retaining skilled workers.
New build/conversion
If the owner of the business already lives on-site and requires an extra dwelling for a worker, the National Planning Policy Framework (NPPF) recognises the importance of rural workers need to live near their place of work. While it generally discourages isolated homes in the countryside, there is a specific exception for rural worker dwellings. The key points being:
• Essential Need: The NPPF allows for the development of a dwelling if there is an essential need for them to live permanently at or near their place of work.
• Justification Required: Any planning application must be justified. This means demonstrating that the occupant of the dwelling is genuinely required for the purposes of the equine business.
• Occupancy Conditions: The dwelling must serve the needs of the business, ensuring that the worker can effectively carry out their duties. It is not intended for general residential use, but specifically to support the functioning of the equine business.
• Balancing Act: While the NPPF aims to protect the countryside, it also recognises the practical realities of rural work. The provision of suitable accommodation for essential workers contributes to the sustainability of these industries.
To prove eligibility for the additional dwelling, the business must undergo an equestrian appraisal. This appraisal involves two key tests:
1. Functional Test: The functional test assesses whether there is a genuine need for another staff member to live on-site, within sight and sound of the equine yard. For example, this could be necessary for animal safety or security.
2. Financial Test: The financial test evaluates the long-term viability of the business. It ensures that the business can sustain the additional worker, considering factors like projected profits, and the ability to pay at least the National Minimum Wage.
In summary, the numbers must make sense, and the business must demonstrate both functional need, and financial viability to secure planning permission.
VAT implications
VAT rules can be complicated; understanding the specific context, whether it is a new build, conversion, or employee accommodation—will help you navigate the maze more effectively. The VAT rate can be 0%, 5% or 20% depending on the starting position, and proposed use of the dwelling.
Equine businesses often provide accommodation for employees who need to be available at all times. If accommodation is lived in rent-free, the VAT on the costs can be reclaimed in full. However, if the employee role is connected to exempt supplies, the input VAT should be apportioned appropriately according to the partial exemption rules.
Always consult with VAT advisors to ensure compliance and to optimise your VAT position.
Benefit in kind (BIK) implications
Employers must usually submit an annual P11D form to declare BIK provided to employees, this includes employer provided accommodation. To achieve tax-free BIK for equine employees, certain conditions must be met:
• Proper and better performance- The employee’s duties must align with the “proper and better performance” of their role.
• Customary provisions- Sud farming and other horse care are considered customary provisions. If the employee’s duties relate to these activities, they may qualify for tax-free BIK.
Recent cases show that HMRC scrutinizes these conditions, so it’s essential to review eligibility carefully.
It is also important to watch any accommodation offset. There is a limit to the amount an employee’s wage can be deducted to allow for accommodation; this needs to be reviewed to ensure you remain within the national minimum wage requirements.
If you would like to discuss any of the above further, please contact Lucie Hammond.