Homes for Ukraine Scheme: payments not taxable

The government has announced exemptions from income tax, corporation tax, and national insurance contributions, as well as exemptions from the annual tax on enveloped dwellings (ATED) and the 15% stamp duty land tax rate.

The government aims to include legislation in the Finance Bill 2022-23 to ensure that the Homes for Ukraine Sponsorship Payment is exempt from income tax and corporation tax, as well as from national insurance contributions (NIC).

Local governments will make the payment to sponsors under the Homes for Ukraine Scheme. Landlords will not be able to claim a tax deduction for relevant expenses because the payments would be classified as non-taxable income.

Legislation has also been implemented to ensure that the payments are disregarded for the purposes of calculating tax credits. The payments will not affect welfare entitlement or council tax savings, according to the Homes for Ukraine scheme: frequently asked questions homepage.

Companies that currently qualify for relief from the annual tax on enveloped dwellings (ATED) and relief from the 15 percent stamp duty land tax (SDLT) higher rate charge will be able to continue to claim relief while the dwellings are being used under the Homes for Ukraine Scheme, on the basis that: the dwelling is either used in a property development business, a property trading businesses, or it is rented out commercially.

For context, if the chargeable consideration exceeds £500,000 and is acquired by a non-natural person (e.g., a body corporate, a partnership in which one or more members is a body corporate, or a collective investment scheme), a 15% SDLT is imposed. ATED may also then be applied to the property.

Depending on how the dwelling is utilised, there are exemptions from both costs. However, in the case of SDLT, this relief may be withdrawn if the criteria cease to be met in the three years following the acquisition.

Companies acquiring property that would otherwise qualify for relief from the 15% SDLT rate, can claim relief if the property is to be temporarily used under the Homes for Ukraine Scheme.

If the property has not previously qualified for relief as a dwelling used in a property development or property trading business or let on a commercial basis, ATED relief for use of the property under the Homes for Ukraine Scheme can be claimed.

The legislation will have effect from 1 April 2022 for ATED and from 31 March 2022 for SDLT. From those dates, HMRC will not collect any tax that may have been due following a change in the use of the dwelling to be part of the Homes for Ukraine Scheme.