Homes for Ukraine Scheme – a new Government scheme which offers a lifeline for those who have been forced to flee their country.
What is the Homes for Ukraine Scheme?
Homes for Ukraine Scheme is a government-led initiative which allows homeowners & landlords to welcome Ukrainian refugees and their immediate families into their homes or other properties they own.
Rather than charging rent and claiming the usual expenses the Government will compensate the individual sponsors with £350 per month per residential address, for a minimum of 6 months and a maximum of 12 months.
The Homes for Ukraine sponsorship payments, made by local authorities are exempt from income tax and corporation tax. Neither are they chargeable to National Insurance Contributions.
Anyone offering accommodation can expect an inspection and eligibility checks. Properties will need to have adequate bathroom and kitchen facilities and comply with fire and health & safety regulations.
People arriving in the UK under the scheme will be given 3 years immigration permission which gives them the right to apply for benefits, schooling and healthcare during that period of time.
At the end of the arranged period, you can continue to offer the accommodation and rent it to the individuals privately. Beyond the initial 6 months, if you do not wish to continue, you should offer at least 1 months’ notice.
If you would like to become a sponsor, you can apply online using the following the link to the Government website: –
www.gov.uk/register-interest-homes-ukraine
However, before going ahead, there are a number of legal and financial issues you should consider. For example: –
- Houses of Multiple Occupation – allowing several unrelated families to stay in a single property may give rise to the need to register as a House in Multiple Occupation.
- Home insurance – Sharing your main home with unrelated parties may invalidate your standard home insurance policy. It may affect your right to claim or it may increase your premiums
- Rent a room – Homeowners will lose the £7,500 per year tax break as the Homes for Ukraine Scheme payment is in lieu of rent
- Mortgage terms – allowing somebody to move in rent free may break the terms of your mortgage
- Health & safety – Gas, electric & other certifications will be required.
Finance firms do not want to put anyone off helping Ukrainian refugees and many have made special exceptions. We recommend getting in contact with your providers to let them know of your intentions of becoming a sponsor. In addition, you should also contact your local council and ensure they are aware of your change in circumstances.
In practice
This means that Homes for Ukraine sponsorship payments made by local authorities are exempt from income tax and corporation tax. Neither are they chargeable to National Insurance contributions.
It is important to remember, however, that as sponsorship payments are not taxable, the consequence is that tax relief is disallowed for expenses that might otherwise have been set off against taxable income. This covers, for example, expenses incurred by landlords in relation to the property.
Furnished holiday lettings
The rules for properties used as furnished holiday lets (FHLs) benefit from bespoke tax rules and the rules are currently unchanged.
To qualify as a FHL the home must pass the availability (i.e., available as a FHL for at least 210 days) and the occupancy test (i.e., let commercially for at least 105 days in the year). That means the conditions are unlikely to be met if the home is handed over to refuges from the Ukraine.
A written statement from the Treasury in March indicated that there was, at that stage, no intention to relax this requirement. We continue to monitor the position here and will advise of any developments.
Companies
For those who hold property through a company, the position with regard to relief from the Annual Tax on Enveloped Dwellings (known as ATED), and the higher 15% rate of Stamp Duty Land Tax (SDLT) is also important.
Companies which already qualified for such relief for dwellings used in a property development, or property trading business, or because let on a commercial basis, will still be able to claim the reliefs while the dwellings are used in the Homes for Ukraine scheme.
Furthermore, a company purchasing a property for a purpose that would otherwise be relievable from the 15% rate of SDLT, will still be able to benefit from the relief, even if the property is temporarily used for the Homes for Ukraine scheme. If a dwelling does not currently qualify for relief from ATED before inclusion in the scheme, ATED relief will, nonetheless, be available from the point of occupation where the whole dwelling is used for the scheme.
The provisions on ATED were effective from 1 April 2022 and from 31 March 2022 for SDLT.
Working with you
We are always happy to help you navigate the complex rules on property tax. If you have any queries in respect of the above or on how to manage your rental business, please do not hesitate to contact us.