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Armed forces accommodation allowance exemption

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The government has laid two sets of regulations giving effect to the income tax exemption and Class 1 NICs disregard for the new accommodation allowances paid to armed forces personnel for renting or maintaining accommodation in the private market, under the MOD’s ‘future accommodation model’.

The government announced this change at Autumn Budget 2017, introducing legislation in Finance Bill 2018 to take effect once the MOD had finalised the detail of its plans for the future accommodation model. The model is to be piloted in a handful of locations from September 2019.

The Income Tax (Accommodation Allowances of Armed Forces) Regulations, SI 2019/1007, specify the following types of payments are to be included in the definition of ‘accommodation allowance’:

  • payment toward rental costs and mortgage costs, including payments towards living accommodation, situations where there is an obligation for service personnel to pay two rents due to school commitments, and allowances to cover the cost of living in different areas in the UK;
  • payments to compensate service personnel for the difference in their rate of council tax to the UK average; and
  • costs incurred in the course of sourcing and signing a tenancy agreement related to accommodation provided under the future accommodation model.

The Social Security (Contributions) (Amendment No 2) Regulations, SI 2019/1009, provide for the corresponding NICs disregard.

Both sets of regulations come into force on 2 July 2019.

Issue: 1447
Categories: News