When employers send employees on temporary work assignments — whether UK-to-UK relocations or international secondments to the UK — housing costs are among the most significant expenses involved. HMRC has specific rules governing when employer-provided accommodation and housing allowances are tax-free, when they become taxable benefits in kind, and what records are needed to support claims. Getting this right matters both for the employee's tax position and for the employer's compliance obligations.
The Taxable Benefit Trap
Employer-provided accommodation is generally a taxable benefit in kind (BIK) — meaning it is subject to income tax and NIC. However, specific HMRC exemptions apply for temporary workplace assignments. If the employer or employee fails to correctly apply these exemptions, a significant unexpected tax bill can result. This guide explains when accommodation is tax-free and when it isn't.
HMRC's Temporary Workplace Rules
Under HMRC rules, a workplace is "temporary" if the employee is not expected to be there for more than 24 months and the employee retains a permanent workplace elsewhere. If the temporary workplace rule applies:
- Travel costs between the employee's home and the temporary workplace are deductible / reimbursable tax-free
- Subsistence (meals and accommodation) costs at the temporary location may be reimbursable tax-free under HMRC's benchmark scale rates or under a bespoke dispensation agreement
Critical rule: if the employee moves to the temporary location and there is no intention to return to their original location within 24 months, HMRC may deem it a permanent relocation — different tax rules apply.
HMRC Scale Rates for Accommodation (2026)
| Scenario | HMRC Treatment | Record Keeping |
|---|---|---|
| Employer provides serviced apartment (temporary assignment <24 months) | Tax-free under temporary workplace rules | Assignment letter confirming duration; employer pays directly |
| Cash housing allowance (temporary assignment) | Potentially tax-free if receipts provided and within reasonable amounts | Receipts for accommodation costs; HMRC dispensation agreement recommended |
| Accommodation allowance with no receipts | Taxable benefit in kind | Employer must report on P11D; employee pays tax |
| Employer-provided accommodation (non-temporary / no temporary workplace) | Taxable benefit in kind (annual value > £8,500 p.a.) | Report on P11D; complex valuation rules apply |
HMRC Benchmark Scale Rates
Where an employee is on a temporary assignment and is away from home, HMRC's benchmark scale rates for subsistence (meals and incidentals, not accommodation) can be paid tax-free without receipts:
- 5+ hours away from home and work: £5 meal allowance (tax-free)
- 10+ hours away: £10 meal allowance
- Away from home overnight: £25 incidental overnight expense allowance (per night)
These scale rates cover meals and incidentals only — not accommodation. For accommodation reimbursement, actual costs (with receipts) are required, or a bespoke HMRC dispensation agreement should be obtained.
The 24-Month Rule: A Common Trap
If an employee is initially assigned for 12 months, and at month 11 the assignment is extended past 24 months from the original start date, HMRC deems the location to have become a permanent workplace from the point the extension was agreed — not from month 24. Tax-free travel and accommodation claims must stop from that point. Employers should track assignment durations carefully and revisit temporary workplace status before extending.
Relocation Expenses vs. Temporary Assignment
If an employee permanently relocates for work (rather than a temporary assignment), different rules apply. Employers can pay up to £8,000 in qualifying relocation expenses tax-free (removal costs, temporary accommodation costs during the move, travel costs, and certain other costs). Anything above £8,000 is a taxable benefit in kind.
Employer Compliance Checklist
1) Issue a formal assignment letter stating the expected duration and that the employee retains their permanent workplace. 2) Obtain a PAYE Settlement Agreement or dispensation agreement from HMRC if making regular accommodation allowance payments. 3) Track the 24-month clock for all assignees actively. 4) Ensure accommodation costs are documented with receipts. 5) Consult a qualified tax adviser (ATT/CTA) before establishing a corporate housing policy — the rules are complex and fact-specific.