This is day 12 of our Tax & Accounting at Christmas Special, as we analyse the tax and accounting treatments of all things Christmassy and open a door in our Christmas Advent calendar to count down each working day until the Christmas holidays in the UK. 

The Innkeeper

In the story of the Nativity, a young couple found lodging in a stable as all the local hotels were all full.

If you are travelling on business, you will receive tax relief for the cost of accommodation, however it may be cheaper to rent an apartment.

What are the tax implications for employees, directors and the self- employed when accommodation is provided for them by the business?


Expenses are likely to be included in travel and subsistence in the profit and loss account. Any associated customer entertaining should be split out separately as it will be disallowable for tax.


Accommodation costs will be allowable for the business if they are incurred wholly and exclusively  for business purposes, whether it is a company, sole trader or partnership.

Directors' accommodation:

When a director or any member of his family is provided with free or subsidised living accommodation by his employer there will be a taxable benefit assessed on the director, unless accommodation is provided:

  • During the course of a Qualifying business journey.
  • On secondment to a temporary workplace.
  • During the course of relocation  (and it is covered by the exemption).
  • For job-related purposes and the director passes the qualifying conditions.
  • By concession, where the director is unpaid or working in a professional capacity.
  • Accommodation can be a hotel, or a rented apartment or house. HMRC accepts that it may be cheaper to rent accommodation in some circumstances.
  • See Directors: Accommodation & hotels and Accommodation benefit 

Self-employed accommodation:

Accommodation costs can be tax deductible under section 34 ITTOIA 2005 when the cost is incurred:

  • Wholly and exclusively for the purposes of the trade or profession, or
  • If there is mixed business and private use it may be possible to claim an identifiable proportion of an expense (although in terms of accommodation this may be a very rare thing).

In Tim Healy v HMRC [2015] TC04425 an actor was unsuccessful in claiming tax relief for renting a flat when working away from home. His admission that the purpose of renting that flat was to provide spare rooms to accommodate his family meant that the expense was not "wholly and exclusively incurred" for the purpose of his business. It may have been possible to claim a proportion of the rental cost if the primary purpose of the rental was for business. This is a tricky area of tax and will be decided on a case-by-case basis, according to the evidence. The law sets no limit as to how long one can be away from home to obtain tax relief. It may be one night, or as in this case even nine months.

See Accommodation costs (self-employed)

Employees' tax

  • No benefit in kind arises when accommodation is provided in relation to a temporary workplace
  • To qualify the cost must be incurred wholly exclusively and necessarily in performance of the individual’s duties.
  • HMRC may challenge where the costs are “excessive” to the business need.
  • From 15 April 2018 allowances paid to Armed Forces personnel to cover rent or maintenance for accommodation secured privately are exempt from tax and NIC.


  • If the cost is wholly business related the VAT will be recoverable.

Links to our guides:

Directors: Accommodation & hotels
When can a company pay for director’s accommodation without it being a benefit in kind?

Accommodation benefit
A guide to the tax treatment of providing accommodation for employees.

Accommodation costs (self-employed)
What expenses can the self-employed claim for accommodation costs?

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