Chancellor Alistair Darling has earmarked £150 million cash to improve accommodation for employees in the armed forces.
This money will be used to upgrade and rebuild the accommodation of 600 service men and women, and their families.
This year’s Budget also contained a measure that is designed to stop attempts to avoid tax on the benefit of living accommodation where this is provided to employees by reason of their employment through a lease premium.
Where an employee is provided with accommodation there is a tax charge on the benefit to that employee. Where rent is paid by the person at whose cost the accommodation is provided the tax charge is based on the actual rent paid (less any amount made good by the employee) where that is more than the annual value. However, some arrangements have been entered into that involve upfront payments, described as a lease premium, and payment of a very small rent in order to try to avoid paying tax.
The new legislation, to be introduced in the Finance Bill 2009, will ensure that where a lease premium is paid for a lease of ten years or less it will be subject to the same tax treatment as if the lease premiums were actual rent paid.
The new rules will not apply to leases on property that is mainly used for business purposes and shared between the employer and employee.