Employer provided living accommodation - CIOT comments
In its response the CIOT has asked HMRC to clarify the interaction of this new legislation with the existing legislation in Part 7A, ITEPA 2003 (Employment income provided through third parties, aka ‚ disguised remuneration‚ ), as the testimonial committee could be regarded as a ‚ third party‚ and the sporting testimonial legislation only applies if the income is not otherwise taxable as earnings.
Where there is a contractual right or a customary expectation that a sporting testimonial will be received the income is taxable as general earnings. HMRC‚ s reference to ‚ customary expectation‚ , a term not used in the draft legislation, has created considerable doubt as to when sporting testimonials may qualify for exemption. We understand that this is intended to refer to situations where it is customary for the employer to give an employee a testimonial, rather than the widely accepted practice within many sports for a sportsman or sportswoman‚ s fan and supporters to organise a testimonial for that sportsperson. However, we have asked HMRC to put its interpretation of customary beyond doubt in its guidance.
We recommended, when responding to the original government consultation, that a full exemption for sporting testimonials be implemented for testimonials arising from a sportsman or sportswoman‚ s permanent termination of their professional career through illness or injury. At present, the draft legislation does not provide for a full exemption in such circumstances. We have therefore urged the government to reconsider this point and introduce an exemption similar to the existing exemption in Section 406, ITEPA 2003 for employer payment on account of injury or disability.
Legislation is expected to be included in Finance Bill 2016 in March 2016 and to have effect from 6 April 2017 for sporting testimonials granted after 25 November 2015. The existing practice contained in EIM64120, which is based on case law precedent, will continue until 5 April 2017 and for any post 5 April 2017 testimonials agreed prior to 25 November 2015.