Rent free house in return for work ?

[Muttsnutts]

Not sure if this in in the right section, as title and due to potential circumstance just putting a few feelers out there with regards to the above question, what are the law/tax implications for letting a general farm worker live in a house rent free close to our farm in return for work. Ideally this would be a casual agreement, suiting an older person or part time basis etc... but as always I’m sure there is things we should be aware of and as being new to this this idea would like some helpful tips......

 

[davieh3350]

Is there a big workshop with the house?

 

[Muttsnutts]

Is there a big workshop with the house?

Just looking for advice for the minute, but in answer to your question yes there could be.

 

[farmerdan7618]

You want a fairly water tight employment contract, bearing in mind there is a tenancy as well as an employment.

Tax situation is not usually an issue as long as you can prove it is job related accommodation - fairly easy with livestock. It's better for you in pretty much every way over a normal rental property.

 

[Robt]

Best to charge rent even if it’s £1 per week. Keeps it legal and safe for both parties

 

[davieh3350]

Interesting...

farmer down the road from me back in the homeland let out an house to someone in exchange for some work.
He doesn’t own the house, it came with the farm he has on a lease.
That’s probably no use to you... but it does get done.

This shed... does it have 3 phase power...

 

[Muttsnutts]

You want a fairly water tight employment contract, bearing in mind there is a tenancy as well as an employment.

Tax situation is not usually an issue as long as you can prove it is job related accommodation - fairly easy with livestock. It's better for you in pretty much every way over a normal rental property.

So basically sounds like a adapted tenancy agreement with contract of employment clause in there, so one would presume normal notice for wanting the property back ect....what we are keen to avoid is any kind of employment contributions tax, pension etc etc... or agricultural tie on the house.

 

[Muttsnutts]

Interesting...

farmer down the road from me back in the homeland let out an house to someone in exchange for some work.
He doesn’t own the house, it came with the farm he has on a lease.
That’s probably no use to you... but it does get done.

This shed... does it have 3 phase power...

No three phase but if u are looking for three phase for yourself at a location you can get 240v to three phase convertors.

 

[Nithsdale]

Interesting...

farmer down the road from me back in the homeland let out an house to someone in exchange for some work.
He doesn’t own the house, it came with the farm he has on a lease.
That’s probably no use to you... but it does get done.

This shed... does it have 3 phase power...

It's done more often than you'd know!

Tenancy includes a cottage but the farm doesn't need a full time worker... tenant sub-lets the cottage, but so that he isn't breaching the tenancy agreement the house is let for free and the person in the cottage works X hours a week/month (usually every other weekend in winter and busy times rest of year) to pay

 

[farmerdan7618]

Best to charge rent even if it’s £1 per week. Keeps it legal and safe for both parties

Actually best for it to be completely free as part of the employment. But get an HR company to do a contract including it.

With job related accommodation, usually no benefit in kind (different rules for company directors) as it is 'to enable performance of duties', as said livestock or security are likely reasons.

 

[Robt]

May be better for employee but not better for employer! Very hard to get them out.
sorry, just seen you said get a contract

 

[davieh3350]

No three phase but if u are looking for three phase for yourself at a location you can get 240v to three phase convertors.

Had a big generator.
some of the motors are 25-30hp

 

[betweenthelines]

Not a fan of these "woolly" arrangements that some are suggesting.

What happens if either party decides it's not working? You'd struggle to evict a tenant if you say he should do 10 hours work a week and he says it should be 6 or 8. Or you evict the tenant 'cos he's no longer fit to work? Or evict his widow?

Also, how would an existing employee feel if someone takes his (much needed) O/T off him?

 

[deleted user 837354]

I would charge a rental fee and form a proper tenancy agreement. Getting rid of a tenant from a house can be very very difficult and will be even worse if it's just on a nod or gentlemens' agreement.

 

[Goweresque]

Would there not be minimum wage issues?

According to the Minimum Wage website, if you provide free accommodation then you are only allowed to add £8.20 per day of accommodation to the wage paid to the employee, (ie £57.40 for a full 7 day week) to make it up to NMW.

National Minimum Wage and Living Wage: accommodation

Accommodation provided by an employer can affect the National Minimum Wage and National Living Wage: offset rates, accommodation charges.

www.gov.uk

So depending on the hours worked and the nominal hourly rate, in most scenarios you'd end up paying the tenant some wages as well as giving him a free house.

For example, if the house was worth £400/month on the open market, and you expected the tenant to do 40 hours work per month at £10/hr to pay off his 'debt', then NMW rules would say that for his 40 hours he should be receiving 40 x £8.72 = £348.80 in wages, less 30 days accommodation provided at £8.20 per day = £246. Thus the employer would have to pay £102.80 per month on top of the house to make it legal under NMW rules.

As far as I can see you'd need to have a contract of employment, and a separate tenancy agreement, otherwise you'd almost certainly be breaching NMW law, and possibly without a contract of employment there would be all manner of employers liability insurance issues as well.

 

[Muttsnutts]

Would there not be minimum wage issues?

According to the Minimum Wage website, if you provide free accommodation then you are only allowed to add £8.20 per day of accommodation to the wage paid to the employee, (ie £57.40 for a full 7 day week) to make it up to NMW.

National Minimum Wage and Living Wage: accommodation

Accommodation provided by an employer can affect the National Minimum Wage and National Living Wage: offset rates, accommodation charges.

www.gov.uk

So depending on the hours worked and the nominal hourly rate, in most scenarios you'd end up paying the tenant some wages as well as giving him a free house.

For example, if the house was worth £400/month on the open market, and you expected the tenant to do 40 hours work per month at £10/hr to pay off his 'debt', then NMW rules would say that for his 40 hours he should be receiving 40 x £8.72 = £348.80 in wages, less 30 days accommodation provided at £8.20 per day = £246. Thus the employer would have to pay £102.80 per month on top of the house to make it legal under NMW rules.

As far as I can see you'd need to have a contract of employment, and a separate tenancy agreement, otherwise you'd almost certainly be breaching NMW law, and possibly without a contract of employment there would be all manner of employers liability insurance issues as well.

Interesting point here, that’s the kind of scenario we want to avoid...doesn’t look a clear cut from digging a bit deeper......

 

[farmerdan7618]

Would there not be minimum wage issues?

According to the Minimum Wage website, if you provide free accommodation then you are only allowed to add £8.20 per day of accommodation to the wage paid to the employee, (ie £57.40 for a full 7 day week) to make it up to NMW.

National Minimum Wage and Living Wage: accommodation

Accommodation provided by an employer can affect the National Minimum Wage and National Living Wage: offset rates, accommodation charges.

www.gov.uk

So depending on the hours worked and the nominal hourly rate, in most scenarios you'd end up paying the tenant some wages as well as giving him a free house.

For example, if the house was worth £400/month on the open market, and you expected the tenant to do 40 hours work per month at £10/hr to pay off his 'debt', then NMW rules would say that for his 40 hours he should be receiving 40 x £8.72 = £348.80 in wages, less 30 days accommodation provided at £8.20 per day = £246. Thus the employer would have to pay £102.80 per month on top of the house to make it legal under NMW rules.

As far as I can see you'd need to have a contract of employment, and a separate tenancy agreement, otherwise you'd almost certainly be breaching NMW law, and possibly without a contract of employment there would be all manner of employers liability insurance issues as well.

Yes, they still need to be paid the minimum wage as a base. Reality is that someone good enough that you are giving them job related accommodation will be worth much more than minimum wage.

If it's a minimum wage employee, then just let the house on the open market and don't blur the lines with employment as well.

 

[farmerdan7618]

Also, to anyone doing this type of thing, take advice. The lines between a house used as part of the trade and investment property are very small, and the effects on IHT in particular can be very large.

 

[Muttsnutts]

So the general consensus is they have to have an employment contract as well as a tenancy agreement ? And there is no way of just a contract for free housing in return for x amount of hours worked ?

 

[farmerdan7618]

So the general consensus is they have to have an employment contract as well as a tenancy agreement ? And there is no way of just a contract for free housing in return for x amount of hours worked ?

Can be covered in one document, but every hour worked must be paid at minimum wage or above.