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Publish Date

May 26, 2022

Homes for Ukraine: Tax Treatment of Sponsor Payments

A&M Tax Advisor Update

Background

On 18 March 2022, the UK government introduced the “Homes for Ukraine” scheme. The scheme offers those fleeing war in Ukraine refuge in the UK provided they have a sponsor (including UK resident individuals, charities, community groups and businesses) willing to volunteer accommodation. Sponsors who can provide homes or a spare room rent-free in the UK for at least 6 months are able to claim £350 per month from their respective Local Authority. The payments will only be paid under the scheme for up to 12 months in arrears.

Are Sponsor Payments to taxable?

The UK government has confirmed the Homes for Ukraine sponsor payments will not be subject to Income tax, Corporation tax, or National Insurance Contributions. This applies from the date the first payments are made to sponsors.

The payments will be treated as non-taxable income for landlords, any related expenses will not be allowable as tax deductions.

Council Tax 

The Council Tax system does not take ‘relevant Ukrainian persons’ (as defined) into account when calculating the number of people resident in a property.

Second Homes (England & Wales)

If a second (or empty) home is occupied by a relevant Ukrainian person, all adults will receive discount disregards i.e. the property is occupied with no adults liable to council tax. In this instance, 50% of the standard council tax bill would be due.

Second Homes (Scotland)

Persons offering Scottish homes under the Homes for Ukraine scheme are not liable for Scottish council tax. This is on the basis the home is offered as a ‘sole or main residence’. However, if a second home is used by both relevant Ukrainian persons and other (non-exempt) individuals, the property will not be exempt from council tax.

Application of the Annual Tax on Enveloped Dwellings (ATED) and 15% rate of Stamp Duty Land Tax (SDLT) for sponsors under the Homes for Ukraine Scheme

Companies currently qualifying for existing reliefs available from the ATED and the 15% rate of SDLT will continue to be able to claim the relief even if the homes are occupied by ‘relevant Ukrainian persons’.

For further information and any questions about the content covered in this insight, please contact one of our tax experts.

https://www.alvarezandmarsal.com/insights/homes-ukraine-tax-treatment-sponsor-payments