Accommodation Allowance Policy

Paul Roberts & Rob Smith
Approved by F&S on 3rd July 2014

 

1. Background


The PCC employs individuals to assist in Gospel ministry at Christ Church. Such individuals perform functions similar to that of ordained curates and ministers within the Church of England, and therefore it is reasonable to draw parallels between the approach to remuneration and accommodation provision.

This document outlines the policy of the PCC of St. Andrew the Less with regards to the provision of accommodation or accommodation allowance for employed staff and volunteers.

 

1.1 C of E Recommendations for provision of accommodation for curates

The Church of England has some guidance around housing curates, in particular houses should have a separate sitting room and a study (for 1:1s and sermon prep respectively).  This implies that curate houses should be a little larger than the minimum required to house the curate + dependents. 
See http://www.churchofengland.org/clergy-office-holders/pastoralandclosedchurches/pastoral/parsdesign.aspx.
 

It is also customary for the Church of England to pay the Council tax and Water rates when providing curate accommodation.

1.2 Different ways of providing accommodation

Traditionally the Church of England would own sufficient housing within the Parish to house curates.  At Christ Church this is not the case.  We do not own any housing, and housing within our Parish is very expensive.  We therefore have three different ways of providing accommodation:

  1. Provide housing for the curate, either from owned housing stock, or by renting on the market (hereafter referred to as ‘tied accommodation’).
  2. Rent the curate’s house off him/her, and allow the curate to live in his/her house.  This option would be subject to the curate’s house being in a suitable location, and being of a suitable size/layout (hereafter this option is referred to as ‘leaseback’).
  3. If neither options 1 or 2 above are suitable then an accommodation allowance will be provided.

 
2. Policy

 

  • Part time employees would not normally receive tied accommodation or an accommodation allowance if  they work less than 5 days per week
  • Accommodation allowance / tied accommodation should be based on the needs of the person in the post, however there is significant complexity in assessing this “need” in practical manner. Hence the following principles form our policy, and it is accepted that each individual will require assessment on a case by case basis.
  • We would normally seek to provide accommodation or an accommodation allowance for Volunteers who are offered a grant by the Christ Church Cambridge Ministry Support (unless they already have an offer of accommodation).

2. 1 Tied Accommodation

  1. It is our preference to provide tied accommodation because we can ensure that the accommodation provided is suitable for the curate to best perform their duties.
  2. Accommodation should be located within 2 miles of Christ Church, as this maximises the benefit to the church: it allows the use of the employee’s home for pastoral work, and allows the employee to pop over to church when required.
  3. We will provide accommodation as the PCC deem appropriate. This will be based on the nature of the role, the level of pastoral work required at home and needs of the curate to provide for his/her family (e.g. number of children).  Applicants are encouraged to describe their family circumstances in order to help us assess need, however all decisions will be entirely at our discretion.  As a guideline we would normally expect a curate without children to be housed in a 2 bedroom house, whereas as curate with a larger family could be in a house as large as a 4 bedroom house.
  4. Tied accommodation for pre-curates and volunteers  would normally comprise of the provision of a room in a shared house
  5. We will cover the cost of council tax and water rates for the accommodation as is the custom in the Church of England.

2.2 Leaseback accommodation allowance

  1. In the event that tied accommodation is not available / suitable AND that the curate has housing which is suitable (location and size as described in section 2.1), then we may consider a leaseback arrangement.
  2. We pay the Council tax and water rates at the property.
  3. We will pay rent to the curate at a rate linked to the cost to us of providing tied accommodation, based on the current rental market rate (see section 2.4 below).
  4. This arrangement would not normally be offered to pre-curates or volunteers

2.3 Accommodation allowance

  1. In the event that neither leaseback nor tied accommodation is suitable an accommodation allowance will normally be offered
  2. Accommodation allowance is calculated as described in section 2.4.
  3. Accommodation allowance for pre-curates is normally calculated on the assumption that the individual is living in a room in a shared 3 or 4 bedroom house (e.g. such as those suitable for curate accommodation).  In the case of the pre-curate the accommodation allowance is gross-ed up with the intention of providing a take-home pay which will cover the individual’s proportion of the monthly rent.
  4. Accommodation allowance for volunteers is based on the university cost of living estimated for post-graduate students (http://www.manchester.ac.uk/undergraduate/studentfinance/cost-of-living/). This is currently £500/month. As such provision is made as grant, there are no tax or NI liabilities.

2.4 Leaseback / accommodation allowance rate calculation

In both cases the value of the allowance is tied to the cost to the PCC of providing suitable accommodation plus council tax plus water rates.
The first step is to establish what accommodation would be suitable for the curate.  This might be a 2 bedroom house in the case of a curate without children and may be as large as a 4 bedroom house in the case of a curate with a larger family.

2.4.1 Accommodation allowance

  1. Search the current rental market for properties within 2 miles of Christ Church which fit the criteria (e.g. a 4 bed house).
  2. Take the typical rent of a property we would rent for tied accommodation from the property list, note the council tax band for this property.
  3. Look up the council tax / water rates for the property
  4. Add rent+council tax+water to determine the cost to Christ Church in the provision of accommodation
  5. Compute the accommodation gross equivalent pay (deduct 13% to cover employer’s NI costs) – i.e. divide by 1.13
  6. Determine the total remuneration of the curate by adding the stipend to the accommodation gross equivalent pay
  7. If the total remuneration is less than or equal to 1.5 x UK national median wage(currently £40326pa = £3361pm*) then it is paid, if it exceeds 1.5 x UK national median wage, then the accommodation allowance should be reduced so that the total remuneration is 1.5 x UK national median wage

The total remuneration is capped in order that curate total remuneration doesn’t significantly eclipse the income levels of the members of Christ Church.

2.4.2 Leaseback accommodation

  1. Determine the accommodation gross equivalent pay as described in step 5 above (ie don’t apply the cap in step 7)
  2. Determine the council tax + water rates cost of the house that the curate intends to occupy.
  3. Subtract 2 from 1 to give the accommodation gross equivalent pay excluding council tax and water
  4. The accommodation gross equivalent pay excluding council tax and water will be the rental rate at which the PCC will lease the curate’s house off him/her for.
  5. In addition council tax + water will be paid directly for the property that the curate occupies.

3. Notes – CONFIDENTIAL

Circulation to F&S, Wardens and E&RS only
 

3.1 Review schedule

As this policy is heavily dependent on the economics of the local housing market, and individual circumstances; the provision of an accommodation allowance, leaseback arrangement or tied housing provision should be reviewed annually for each staff member.

Such a review needs to consider the external housing market (as described in section 3.3), but also individual circumstances.  In general, where the market value of the provision differs by less than 5% of the amount currently paid, no change will be made.

It is the intention of the policy that should Cambridge rental prices drop, then accommodation allowance / leaseback amounts should also drop. However, any reduction would have to be reviewed against current employment legislation. At the time of writing it would be require a change in contract (i.e. voluntary consent from the individual concerned) to reduce a payment.
 
3.2 Tax implications of Tied Accommodation, Leaseback and Accommodation allowance

The HMRC considers accommodation that is provided “for the better performance of their duties and because it is customary for their role**” not to be a taxable benefit.  This means that no income tax or National Insurance payments are due (either by employee or employer). At current rates, this removes a tax liability of ~46% for basic rate tax payers (25% income tax, 8% NI, 13% employers NI).

In addition, the council tax and water is not taxable for employees in exempt accommodation***. 

It does not matter whether the accommodation is owned by church, or rented by church. What is important is that it is specified by church (not the employee), and that any rent liability is met by church, not the employee.

In contrast, providing an accommodation allowance would normally be considered a taxable benefit (i.e. equivalent to earned income) for tax purposes.

The leaseback approach allows a curate to act as landlord, rent his/her property to the PCC and then be given the right to be a tenant in their own property as part of their role. This approach is used within the Church of England, and HMRC have confirmed that it is valid.

The tax advantages of the leaseback approach are that:
The curate will pay income tax only on the profit that he/she makes on rent (he/she can deduct mortgage interest payment and other landlord related expenses from the rent received)
If the curate’s house is owned in joint names, then the curate is only liable for taxation on their proportion of the profit they make. For example if a curate is married and her husband owns half their house, then she would only pay income tax on half of the profit.
Both the curate and the PCC have no NI liability (NI is only due on earned income).  This saves the PCC 13%.

3.3 Cambridge rents (March 2014)

 
 

Figure 1 Two mile radius around Christ church, showing 4 bed properties, from Zoopla


There were:

  • 39 4 bed properties were available to rent within 2 miles of Christchurch
  • The median rent was £1900/month.
  • The 25%-ile rent was approximately (£1775/month
  • From examination of the housing stock £1750/ month is considered an appropriate rent benchmark
  • Council tax band E (£1848 pa). Water rates estimated at £500 pa.
  • 51 3 bed properties were available to rent within 2 miles of Christchurch
  • The median rent was £1300/month.
  • The 35%-ile rent was £1200/month
  • From examination of the housing stock £1200/ month is considered an appropriate rent benchmark
  • Council tax band D (£1512 pa) Water rates estimated at £500 pa.
  • 124 2 bed properties were available to rent within 2 miles of Christchurch
  • The median rent was £1200/month.
  • The 26%-ile rent was £1000/month.
  • From examination of the housing stock £1000/ month is considered an appropriate rent benchmark
  • Council tax band C (£1344 pa) Water rates estimated at £500 pa

3.4 Specific recommendations for curates in ‘typical’ circumstances

Although the official policy gives the PCC full discretion to determine the type of accommodation provided, for ‘typical’ circumstances the following provision is expected:

  • For curates without children we plan to provide a 2 bed property, as long as it has an area suitable for pastoral use (i.e. like a second sitting room).
  • For curates with one child we plan to provide 3 bedrooms
  • For curates with two or more children we plan to provide 4 bedrooms

Of course, circumstances may not fall neatly into the ‘typical’ categories described above, and it may be the case that more modest accommodation would be suitable for a particular church staff individual. For example, some staff who have office provision at church and have no particular need to undertake pastoral work at home may not require the additional space anticipated in this policy.

3.5 Accommodation allowance benchmarking

Tarita (considered equivalent to a Y4 curate) currently receives £595/month in accommodation allowance. As a Y4 and above curate, her stipend is £22,670pa = £1889.17/month.

Tarita has one child, consequently we would provide her with a 3 bedroom house.

If this were taken as an accommodation allowance Tarita would get:
(£1250+(£1512+£500)/12)/1.13 = £1254/month as her accommodation gross equivalent pay

If this were taken under a leaseback scheme Tarita would get:
£1254-(£1512+£500)/12 = £1087/month, assuming that the council tax + water cost at her property was £1512+£500 per year.


Richard (considered equivalent to a Y4 and above curate) currently receives £758/month in accommodation allowance. As a 5/6 part time Y4 curate, his stipend is £18,892pa = £1574/month.

Richard has three children, and consequently we would provide him with a 4 bedroom house.

If this were taken as an accommodation allowance Richard would get:
(£1750+(£1848+£500)/12)/1.13 = £1722/month as his accommodation gross equivalent pay

Note that Richard’s total remuneration is just below the £3361pm cap.

If this were taken under a leaseback scheme Richard would get:
£1722-(£1848+£500)/12 = £1526/month, assuming that the council tax + water cost at his property was £1848+£500 per year.

Jon is a Y3 curate, his stipend is £22,899pa= £1908/month.    
Jon has three children, and consequently we would provide him with a 4 bedroom house.

Ignoring the remuneration cap, If this were taken as an accommodation allowance Jon would get:
(£1750+(£1848+£500)/12)/1.13 = £1722/month as his accommodation gross equivalent pay

Note that Jon’s total remuneration would be £1908pm+£1722pm=£3630pm. This is above the £3361pm cap, hence we reduce his accommodation allowance to £1453pm.

If this were taken under a leaseback scheme Jon would get:
£1722-(£1848+£500)/12 = £1526/month, assuming that the council tax + water cost at his property was £1848+£500 per year.

Scott is a pre-curate, in his second year ‘curate -2 years’.  Scott currently receives £595/month in accommodation allowance.  Scott does not have any children.
We would house Scott in a room in a 4 bedroom house, and cover the full cost of his rent.  The rental cost sis £1750/4 = £437/month. As Scott will pay NI and Income Tax on this, this amount is ‘grossed up’ to £437/0.68 = £642/month

Scott’s stipend is £16755pa = £1396/month.

Note that Scott’s total remuneration is below the £3361pm cap.


Muriel is an apprentice. She receives £490/month in accommodation allowance. She does not receive a stipend, but does receive a tax-free grant on £4750pa. Her accommodation allowance is not taxable because it forms part of a grant. Note that her accommodation allowance is (necessarily) paid by the Trust.  Following the university cost of living estimate, we would increase her accommodation allowance £500/month.  This would be added to her grant and paid in two instalments during the year.
 


Notes

*  Median wage info available from the office for national statistics: http://www.ons.gov.uk/ons/rel/ashe/annual-survey-of-hours-and-earnings/2013-provisional-results/stb-ashe-statistical-bulletin-2013.html 

** Exempt accommodation is defined:  (http://www.hmrc.gov.uk/payerti/exb/a-z/l/accommodation.htm#1 )

*** Council tax and water is not a taxable benefit for employees in exempt accommodation (http://www.hmrc.gov.uk/payerti/exb/a-z/l/accommodation.htm#3, http://www.hmrc.gov.uk/guidance/480.pdf ch 21.2).  There is s statutory exemption for council tax and water for ministers of religion: http://www.hmrc.gov.uk/manuals/eimanual/eim60013.htm